How do I know how much to offer on a house?

Deciding how much to offer on a home is one of the most important steps in the buying process. The right number depends on several factors, and the best offer balances price with terms that work for both you and the seller.

Comparative market analysis (CMA)

Your agent will prepare a CMA that looks at recently sold homes similar to the one you want to buy. These are called comparables or comps. The CMA focuses on homes that sold in the last 30 to 90 days in the same neighborhood with similar square footage, bedrooms, bathrooms, lot size, and condition. Pending sales and expired listings are also reviewed for context. The CMA gives you a data-driven price range, not a single number.

Factors that influence your offer

• Comparable sales. What have similar homes actually sold for recently? Sold prices matter more than list prices.
• Competition. How many other buyers are interested? Multiple offers may mean offering above list price. A home that has been sitting may mean room to negotiate.
• Property condition. Does the home need repairs, updates, or major system replacements? Factor the estimated cost into your offer.
• Days on market. A home listed for two weeks is in a different position than one listed for 90 days. Market time tells you how much leverage you have.
• Price changes. Has the seller reduced the price already? Multiple price drops can signal a motivated seller.
• Seller situation. Is the seller relocating, downsizing, or already under contract on another home? Motivated sellers may accept a lower offer for the right terms.
• Inspection and appraisal risk. If you plan to ask for repairs after inspection, or if the home might not appraise for the offer price, factor those risks into your number.
• Financing. Your loan type and down payment affect how the seller views your offer. Conventional loans with larger down payments are generally seen as stronger.

Price and terms work together

The highest price does not always win. Sellers also care about the terms: how much earnest money you are putting down, whether you have financing in place, how long your option period is, and whether you are asking for contingencies that create risk. A slightly lower offer with strong terms (pre-approved, quick close, reasonable contingencies) can beat a higher offer with more risk.

List price is not market value

Many buyers assume the list price is what the home is worth. It is not. The list price is the seller's asking price. It may be above market value, below market value, or right at it. The only way to know market value is to compare the home to what has actually sold. Your agent's CMA is the right tool for this, not the list price on a website.

There is no universal percentage rule

You may hear advice to offer 5 percent below list or 10 percent above. These rules of thumb do not apply in every market or every situation. In a competitive market for a well-priced home, offering above list may be necessary. In a slower market or for a home that needs work, offering below list may be appropriate. Let the data guide you, not a rule of thumb.