How much below asking price should you offer on a house? Or is it something you shouldn't try at all? The not-so-simple answer: It all depends on the market you're in and other factors you should weigh before you low ball with abandon.
Every home buyer wants to score a deal, after all. But set your offer too low, and you could risk offending the sellers and having them write you off completely. As such, it's all about striking the right balance. Here are some questions to ask yourself to help you figure out that happy medium.
Are you in a buyer's or seller's market?
Typically your ability to present a lower offer will depend on current market conditions—meaning if it's a buyer's or seller's market.
So before you make any offer, determine what type of market you're in. Traditionally, buyer's markets come with a lot of flexibility on price, because available inventory is high and houses tend to sit on the market for longer. Here, sellers tend to be more willing to negotiate because offers are few and far between.
In a buyer's market, 10% below asking price is at least see as worthy of a counteroffer.
In a seller's market, on the other hand, it's much harder to go below asking price at all, because inventory is low, and multiple buyers tend to be interested in the same properties. So, in this case, it's best not to lowball at all, and offer list price.
How long has the listing been active?
You need to pay attention to the property history. It doesn't make sense to submit lowball offer $50,000 below asking price if the property is only been on the market for two days. A whole year on the market, with price reductions? Go ahead and roll the dice. The longer a house has been on the market, the less of an upper hand the seller has in negotiation.
Fortunately, info on how long a house has been on the market can be easily found on most listings—or if not, any good real estate agent will have access to this information through the multiple listing service. Ask them to pull it up for you, and use it as a reference as you draw up your offer.
How does the price compare to similar homes in the area?
Once you have a general sense of how much wiggle room you have to work with, it's time to look more specifically at recent sales in your desired neighborhood. Ask for comparative market analysis (also called a comp or CMA), which will show you the list and sale prices for similar homes that have sold in the last few months. Use that as your guide.
How badly do you want the home?
Last but not least, ask yourself: How would you feel if your offer got rejected? If you think that you'll regret missing out on the home, it may be worth it to consider offering exactly what they're asking for—or a bit more—to seal the deal that the home will be yours.
However, if you think you'll be able to move onto the next property without issue, there's no harm in trying to score a deal.
This last piece of advice may be the most subjective of all, but it's true. Remember, submitting a low offer is always a risk. Ultimately, it's up to you to determine how much of a gamble you're willing to take on the house.