Is It Too Low? What Is Reasonable to Offer Below Asking Price?
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Valerie Kalfrin, Contributing AuthorClose
Valerie Kalfrin Contributing AuthorValerie Kalfrin is a multiple award-winning journalist, film and fiction fan, and creative storyteller with a knack for detailed, engaging stories.
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Taryn Tacher, Senior EditorClose
Taryn Tacher Senior EditorTaryn Tacher is the senior editorial operations manager and senior editor for HomeLight's Resource Centers. With eight years of editorial and operations experience, she previously managed editorial operations at Contently and content partnerships at Conde Nast. Taryn holds a bachelor's from the University of Florida College of Journalism, and she's written for GQ, Teen Vogue, Glamour, Allure, and Variety.
Determining the right offer for a house can often feel like a delicate dance. While buyers aim to secure their dream home without overstretching their budget, sellers want the best possible return on their investment. So, what is reasonable to offer below asking price? The answer isn’t always straightforward, as it depends on the current real estate market, the property condition, and the seller’s urgency.
We’ll discuss what’s reasonable to offer to ensure you strike a balance between securing a great deal and not offending the seller with a lowball offer.
Work With a Top Agent to Nail Down Your Offer
Most people only buy one or a few homes in their lifetime, but experienced agents help buyers all the time. When it comes to making a solid offer on your dream home, who you work with matters.
Should I offer less than asking price?
Making an offer on a house is as much of an art form as it is a strategic move. You want to make an offer that will save you money (of course), but you also want your offer to appeal to the sellers.
So, how do you even come up with an offer that is both reasonable and non-offensive?
First, you need to determine how much house you can afford. HomeLight’s Home Affordability Calculator gives you an idea of what your mortgage payment would look like depending on your income, credit score, and monthly debt.
Of course, this is just an estimate — you’re still going to want to get pre-approved for a mortgage. Pre-approval will give you a better estimate of the size of the loan you’ll qualify for, and it can function as documentation to show sellers that you’re likely to be approved for a mortgage.
Let’s look at different circumstances where offering lower than the asking price would be acceptable.
When it’s reasonable to offer 20% or more below the asking price
One of the most significant factors that will benefit you when offering below asking is if it’s an active buyer’s market. In a buyer’s market, there are fewer qualified buyers than houses for sale, which gives buyers some leverage. Not only that, if a property has been on the market for a while, the seller is more likely to accept a lower offer to close the deal.
The condition of the home is also another big negotiating point. “It depends on how bad the repairs or the damage is,” says Mary Riley, a top real estate agent in South Carolina. “When you have a seasoned agent, sometimes you can work it out, but you must have good negotiating skills to make that happen.”
Some significant repairs that might spur a price reduction include:
- The roof needs replacing.
- There are foundation problems.
- The home’s systems (electrical, plumbing, HVAC) need to be upgraded or brought up to code.
- The house is severely run down and needs extensive work.
It’s also acceptable to offer 20% or more below asking when the house has been priced significantly higher than what other homes in the neighborhood have sold for. If comparable homes have sold for much lower than the list price of the house you’re interested in, that could work in your favor.
When it’s reasonable to offer 11% to 19% below the asking price
Asking for 11% to 19% is acceptable when the house needs updating, but nothing too serious. Maybe the kitchen appliances are outdated, or the flooring needs to be replaced. Improvements like these can be excellent for negotiation — especially when comparable homes have been updated — and the money you stand to save on the home can be put toward those costs.
You can also make an offer in this range when you know the homeowner needs to sell fast. Typically, sellers are in a time crunch when facing deployment, divorce, work relocation, or financial hardship.
When it’s reasonable to offer 5% to 10% below the asking price
If the house is in good condition but needs some cosmetic updates, you may want to offer 5% to 10% below the asking price. Maybe the home has undergone minor improvements like new flooring, fresh paint, or fresh landscaping, but other homes in the area have new appliances, updated bathrooms, or a finished basement. You could argue that comparable houses have additional features but have sold for or are listed for the same price, which may encourage the seller to reconsider their original price.
Or, if the house has been on the market for several weeks, but there hasn’t been much interest, there’s a good chance you’ll get away with offering below asking price.
“Typically, a listing agent will list the house as $10,000 over the market value because they already think the buyer will want to negotiate. The buyer’s agent knows this and will make a lower offer,” says Riley. “The most important thing when making an offer is to have your agent do a comparative market analysis to see where the price of the home is compared to the market value and if it’s priced accordingly.”
When it’s reasonable to offer 1% to 4% below the asking price
Offering 1% to 4% below asking may not seem like a lot of savings when spending hundreds of thousands of dollars, but the reduced price will make your mortgage payments less every month.
You may want to offer below 5% when you’re paying with cash or when the market is more balanced.
When you should offer more than the asking price
While homebuyers are typically looking to save some money, making an offer above asking price is sometimes necessary.
In a seller’s market, when inventory is low and sellers receive multiple offers, you may need to offer more than the asking price to beat the competition.
When the market isn’t as hot, some buyers are still willing to pay more than the asking price if they love the home. At this point, the buyers are making an emotional decision rather than a financial one.
“Sometimes buyers will pay more for a home because of the quality of life they’re looking for,” Riley shares.
Weigh all the factors to determine a reasonable offer
Buying a house is one of the most expensive purchases you’ll make in your life, and if there’s a chance you could save big, why wouldn’t you make a lower offer than asking price? The trick to getting those savings is to know what is reasonable to offer below the asking price.
You’ll need to pay attention to the state of the market, the condition of the home, the length of time it has been on the market, and the comps in the area to determine the right offer. By working with a top real estate agent who knows their local market, you will have an expert with the insight and negotiation skills to get you the best deal on the home of your dreams.
Reasonable offer FAQ
The answer often lies in analyzing recent comparables (or “comps”) in the area, understanding the current market conditions (buyer’s vs. seller’s market), and assessing the property’s condition and the duration it’s been on the market.
Every seller is different, and while some might be open to any offer as a starting point for negotiations, others might perceive an extremely low offer as a lack of serious interest in the property. Always approach the process tactfully and have justifications ready for any offer.
Beyond just the price, sellers might look at factors like the earnest money deposit, the flexibility of the move-in date, or the waiving of certain contingencies. By offering favorable terms in these areas, a buyer can make a below-asking-price offer more appealing.
Generally, sellers might be more receptive to lower offers in a buyer’s market, where supply exceeds demand. However, it’s still crucial to base the offer on solid research, not just market conditions.
While it’s hard to know for sure, clues might include how long the property has been on the market, whether there have been any price reductions, and the seller’s circumstances, such as if they’ve already purchased a new home and are keen to sell quickly. An experienced real estate agent can also provide insights based on their interactions with the listing agent.
Header Image Source: (iriana88w / Depositphotos)
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