negotiate offer below asking price

Home Buying

How Much to Offer on a House Below Asking Price

July 11, 2018 | by Andrew Schmeerbauch

At A Glance

Your initial offer on a new home is one of the most important factors affecting whether you’ll be moving in over the next month, or re-starting your search. You may be tempted to offer below asking price, but before you do, consider the market and the home’s condition.

negotiate offer below asking price

Updated July 18th, 2019

Making an offer on a home can be fast-paced and nerve-wracking. This is especially true in a seller’s market, where homes may only be on the market a day or two. The right offering price can be the difference between you moving into your dream home and having to continue your grueling house-hunting quest.

This pricing sweet spot can vary based on the market and the condition of the home. But, if you do some prep work and find a great real estate agent in advance, you’ll have a leg up on other buyers and give yourself some peace of mind.

Making an Offer on a House: A General Overview

After you’ve found your dream home, you’ll craft a competitive offer as soon as possible and submit to the seller. The seller can then negotiate with one or multiple buyers, or accept an offer. Your agent may hear from the listing agent that a seller prefers your offer of closing in a month and a traditional mortgage, but another offer has come in higher (although their terms not as favorable.) You may then have the opportunity to increase your offer and beat out the other buyer.

After a seller accepts an offer, both parties sign a purchase agreement and enter the contingency period where you complete an inspection and negotiate specifics like closing costs, repairs needed, and exact closing date.

Should I offer less than the asking price?

Whether to your offer should be higher or lower than asking price depends on a few factors. For starters, if you’re in a seller’s market — in which demand is high and supply is low — offering less than the asking price is a good way to get your offer denied. In fact, buyers often offer more than the asking price to close the deal. The exception would be if you were offering perks to the seller for the lower price — like a super speedy closing, not asking for any repairs following an inspection, etc.

But, if you’re in a buyer’s market, feel free to offer below asking price by a reasonable amount. Your agent can help you determine how to offer the least amount, while still getting your offer accepted. The seller may counter with a price between your offer and their full asking price and you can negotiation from there.

What Is Considered a Lowball Offer?

While it’s common to offer below asking price in certain markets, beware of offering too low and submitting a lowball offer. This can backfire, as the seller may be offended and reject your offer altogether, without even countering. They may not see you as a serious buyer and opt for someone they feel is more willing to negotiate a fair price.

Whether an offer is considered lowball depends on the market, the list price and the home. For the same home, a lower offer may be considered reasonable in a buyer’s market, but the same offer may be considered lowball in a seller’s market. Your offer should consider the market value of the home — not just the list price.

If you determine that the list price is too high based on other comparable homes in the area or the condition of the home, you may offer based on market value. In general, lowballing is when the proposer has no justification for a lower priced proposal.

3 Tips for Getting a Good Price When Buying a House

1. Find a Top Real Estate Agent

Negotiating on price is where a real estate is worth their weight in gold — especially if it’s not in your wheelhouse. There’s no substitute for their experience in the industry, their intuition, and their familiarity with your local market.

Make sure to work with an experienced, local agent to steer you to the right offering price, but also help you negotiate afterward. A good agent will be honest with you and help you win the home without paying too much.

2. Do Your Homework

When determining your price, look closely at specifics to the home. If the home has been on the market a while, the seller may be more willing to accept a lower price. Your real estate agent can often get more information from the listing agent — like whether the seller has already purchased a home and is carrying two mortgages, if they’re moving out of state and want to move on with life, or how motivated they are to sell quickly.

Look carefully over the disclosure statement the seller is often required to provide and the results of your inspection. If major defects are present, consider those in your offer. This is especially true if something came to light that the seller wasn’t aware of when they put their home on the market. (Did we mention getting one of those? Because you absolutely should!) Plus, make sure you have the money available to make the repairs after you close.

Your agent can also find comparable homes in the area to determine if the home is listed at or around market value. If the listing price seems to be too high, you can tone down your offer.

3. Don’t Play Games

The bottom line is that if you can’t afford a certain price range, don’t look at them. You may think you can somehow beat the game by offering a lowball price or nitpicking the home, but this rarely, if ever, works.

Instead, seek a win-win for both yourself and the seller. The seller may have other “wins” than price — like quick closing, a cash offer, or selling “as is.” Your agent can help uncover these motivations to use for negotiations, so use one.

Clever partners with full-service realtors across the country who are experts at getting buyers into their dream homes for the best price. Plus, when you work with a Clever Partner Agent, you’re eligible for a $1,000 rebate — or up to 1% for homes over $500,000 — to help cover your closing costs (in 40 qualifying states).

Get in touch to learn more and connect with a top-rated, local buyer’s agent for a no-obligation consultation.

Top FAQs About Making an Offer On a House

1. Do you need an agent to make an offer on a house?

You do not need a buyer’s agent to make an offer on a home. However, many buyers prefer to use one since the seller usually pays for their commission at closing. To make an offer without an agent, complete a home purchase offer form available at your state’s realtor’s association and submit it to the listing agent or the seller themselves if it’s for sale by owner (FSBO). This form lays out specifics of your offer and paves the way for negotiations with the seller. If signed this offer becomes a binding purchase agreement.

2. How can I buy a house without a down payment?

Both USDA and VA loans require no down payment when purchasing a new home. USDA loans assist in rural development and are offered to low-to-middle-income families for homes outside of urban areas and major cities. VA loans are offered to veterans and have no mortgage insurance requirement. Options for down payments as low as 3% include Fannie Mae’s conventional 97 mortgages and FHA loans. First-time home buyer down-payment assistance programs may also help you fund your down payment.

3. Is making an offer on a house legally binding?

An offer is legal after both parties have signed. It is common for some negotiation to occur prior to the seller signing off on your purchase offer. Once signed by the seller, the offer becomes a legally binding purchase agreement. However, contingencies are typically built into the contract by the buyer, allowing them to back out of the sale. These may be reasons like poor results of a home inspection with the seller unwilling to fix the defects, being unable to sell their own home prior to closing, or other “outs.”

4. Can a seller back out of an accepted offer on a house?

A seller can back out of an accepted offer during the usual five-day attorney review period, or if they have added a contingency or addendum to the contract that allows them to do. This may allow them to void the contract if they cannot find a new home to purchase before closing, etc. without consequence. A seller may also be entitled to back out of the sale if the buyer doesn’t live up to their end of the contract, like securing a mortgage by a certain time, or demanding certain repairs paid for by the seller.

5. What if my house doesn't appraise for the purchase price?

If your home appraisal comes back from your lender as less than the purchase price, your loan will probably not be approved as is, depending on your loan-to-value (LTV) ratio. Most banks require an 80% LTV, so you must pay 20% in a down payment. If the appraisal comes back low, you may need to increase your down payment to meet this ratio. You could also renegotiate a lower purchase price with the seller, cancel the contract based on a contingency in the contract, or dispute the appraised value and order a second in hopes of it coming back higher.

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