How to Make an Offer to Buy a Home

Image shows a realtor talking to prospective home buyer outside of a large modern home, with a sign outside that read "home for sale." Headline reads, "Some Factors to Consider When Making an Offer on a Home," with text that reads, "Check the temperature of the marketplace; Compare with other home sales; Check the square-foot cost averages; Ask for the home's history and days on market report; Do research and find out how much the seller paid""
Photo:

The Balance / Ran Zheng

Knowing how much to offer on a house is one of the most challenging parts of the homebuying process. Your real estate agent may be reluctant to name a price for you, but you can utilize your agent's expertise to figure out a price to offer when buying a home.

To find out how much you should offer, gather information about the local market. Here are a few steps that can help. These steps won't give you a complete picture individually, but when each is used in conjunction with the others, it will help you decide which price is best.

Key Takeaways

  • Whether you’re buying in a buyer’s market or a seller’s market will influence the amount you offer on a home. 
  • Finding out how much the seller paid for the home may provide useful information depending on the circumstances. 
  • Recent homes that have sold that are similar to the seller's in size, age, style, and location can also help you decide how much to offer.

Check the Market 

Check the temperature of the marketplace. It is the market hot, cold, or neutral? If you're making an offer in a buyer's market, you will have less competition for the home. Sellers will be more likely to be receptive to any offer because there are fewer buyers. If you're buying in a seller's market, sellers might not consider any offer that is less than the list price. In fact, sellers could very well receive multiple offers, which means your offer should be as attractive as possible to win acceptance.

Find Out How Much the Seller Paid

It might not seem like the price the seller paid for the home is important. That depends on the circumstances, though. If the seller purchased a few years ago in a depressed market and housing prices haven't increased, the asking price should be closer to the seller's purchase price. You may not be able to figure out the condition of the home when the seller bought it, or whether there were extenuating circumstances. Still, you can adjust for increases due to appreciation and remodeling improvements.

Note

You can include a letter with your offer to explain who you are and why you're the right person to buy the home. It can separate you from other bidders and might push your offer to the top of the list.

Examine Comparable Sales

Another step to take to determine how much to offer is to look at similar homes that have recently sold in your area. When looking at comparable sales, use only the properties similar in lot size, square footage, style, age, and location to the home you want to buy. Use the data from the most recently sold sales, and don't look beyond six months because appraisers won't.

Local assessors' offices, newspapers, and real estate agents can be excellent sources of information. Websites may or may not be, depending on the accuracy of the information. Your real estate agent can also help you get a sense of the local market.

Analyze List Price to Sales Price Ratios

The list price to sales price ratio is the relationship between how much sellers list their homes for and how much they sell for. To do your own analysis, ask your agent for a trend report covering the last six months. Look up the prices of the homes as they were listed and compare them to the prices that have sold. How much is the gap? Are homes selling over list price or under? If under list price, by which percentage? If many homes are selling at 2% under list price, for example, that percentage could indicate the price the seller may accept.

Check Square-Foot Cost Averages

Smaller homes are priced higher per square foot and larger homes are priced less per square foot. You can't take the average square-foot cost and multiply it by the square footage of the home you want to buy to come up with a reasonable price to offer. You can check trends to determine if the square-foot cost averages are on the rise or decline and use that information to your advantage.

Ask for the Home's History and Days on Market

Sometimes agents take listings off the market and resubmit them as a new listing. Find out if the home was an expired listing and then relisted. The days on market information is important because if homes have been on the market longer than 30 days, the sellers might be more motivated to wheel and deal.

In closing, try not to become emotionally attached to the home before your offer to purchase is accepted. Prepare yourself for a counteroffer, and keep several other homes in mind in case your offer is rejected. That said, with research and the help of your real estate agent, you can put in a strong offer that will appeal to sellers.

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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. U.S. Department of Housing and Urban Development. "The Valuation Process," Page 12 of PDF.

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