How Much to Offer on a House: A Data-Driven Guide for 2024

Determining how much to offer on a house requires a strategic analysis of local market conditions, the property’s history, and comparable sales data. In a strong seller's market, offering at or above the list price is often necessary to compete, while in a buyer's market, an offer 8-10% below asking may be a reasonable starting point for negotiation. The key is to base your offer on objective data, not emotion, to avoid overpaying or missing out on your dream home.

How Do Market Conditions Dictate Your Offer Strategy?

The single most important factor in deciding your offer price is whether you are in a buyer's market or a seller's market. This distinction sets the entire negotiation tone.

• In a Seller's Market: Characterized by low inventory and high demand, this market favors sellers. Since 2022, many regions across the U.S. have experienced a seller's market. In this scenario, sellers often receive multiple offers. To be competitive, you should be prepared to offer the full list price or even above. Other buyers may submit all-cash offers (an offer to purchase without a mortgage contingency) or waive certain contingencies, like a home inspection, to make their offer more attractive.
• In a Buyer's Market: When housing inventory is high and homes stay on the market longer, buyers have more leverage. Here, sellers are typically more motivated and willing to negotiate. Based on our experience assessment, an initial offer around 8-10% below the asking price can be a strategic starting point that is often seen as worthy of a counteroffer rather than an outright rejection.

What is a "Lowball Offer" and When Does It Make Sense?

A lowball offer—a purchase proposal significantly below the seller’s asking price—can be risky. If perceived as insulting, it may cause the seller to disregard you entirely. However, there are specific circumstances where it may be a calculated gamble.

The primary indicator is the days on market (DOM), which is the number of days a property has been listed for sale. This information is readily available on most real estate listings through the Multiple Listing Service (MLS), a database used by real estate professionals. A property that has been on the market for several months, especially one with prior price reductions, indicates a motivated seller. In this case, the seller has less leverage, making a lower offer more justifiable.

How Can Comparable Sales Justify Your Offer Price?

The most objective way to determine a home’s fair market value is through a Comparative Market Analysis (CMA). A CMA is a report prepared by a real estate agent that compares the subject property to similar homes (called "comps") that have recently sold in the same area.

Your real estate agent can provide a CMA that details the original list price and final sale price of these comparable properties. For example, if similar homes in the neighborhood consistently sold for $10,000 under their asking price, it is reasonable to base your offer on that data. The CMA provides a data-driven foundation for your offer, demonstrating to the seller that your price is grounded in market reality, not just a desire for a deal.

Should You Pay Over Asking Price for Your Dream Home?

This is a deeply personal decision that balances financial pragmatism with emotional attachment. Before engaging in a bidding war (a situation where multiple buyers compete by submitting increasingly higher offers), ask yourself a critical question: Is this the only house that meets your needs?

If you have strong emotional ties to the property and foresee long-term satisfaction, offering above asking might be a worthwhile investment. However, if you can easily imagine being happy in other homes, it may be prudent to avoid overextending your budget. Remember, the purchase price is just one cost. You must also account for closing costs (fees associated with finalizing a real estate transaction), property taxes, and ongoing maintenance.

To determine your final offer amount:

1. Analyze the market: Identify if it favors buyers or sellers.
2. Review the property history: Check the DOM for negotiating leverage.
3. Study the comps: Use the CMA to establish a fair price range.
4. Assess your motivation: Decide how much premium you’re willing to pay for a specific home.

Ultimately, a well-researched offer protects your financial interests while increasing your chances of a successful purchase.