How Much to Offer on a House: 6 Tips for Getting Your Dream Home (2024)

When deciding how much to offer on a house, you might feel like you’re walking a tightrope. Offer too little, and you could lose out on a great home. Offer too much, and you might accidentally overpay. But by preparing your finances and researching the market in your area, you can make an offer that’s just right.

1. Figure out how much you can afford

You won’t be able to offer more than you can afford, so it’s important to determine your budget upfront. Some financial experts use a rule of thumb that says your home should cost no more than two or three times your annual household income.

So if you and a partner earn a combined $150,000 a year, then you should look at homes listed at $300,000 to $450,000.

It’s a good idea to estimate the monthly payment and make sure it fits comfortably within your budget. As a general rule, your monthly mortgage payment — including the principal and interest, property taxes, and homeowners insurance — should come out to no more than 30% of your monthly pre-tax income. But you might need to spend less if you have debts.

Tip: A mortgage pre-approval will help you determine how much a bank will lend you. The lender will check your credit, income, employment history, debts, and assets. After crunching the numbers, they’ll hand you a pre-approval letter that tells you how much you can borrow. Use our mortgage calculator to determine your monthly payment including principal, interest, taxes, and insurance.

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2. Understand how the market looks

Real estate conditions can change in every market and throughout the year, so understanding current market conditions in your area can help you figure out how much to offer.

• Buyer’s market: This happens when real estate inventory is high, but there’s a shortage of interested home buyers. In this type of market, home prices drop and buyers have the upper hand to negotiate low prices and seller concessions.
• Seller’s market: The opposite is true in this type of real estate market. Inventory is tight and homes sell faster, so buyers must offer more to secure a property.

Buying is difficult right now, but shopping for a good mortgage rate doesn’t need to be. You can compare loan options from our partner lenders and in just a few minutes.

3. Research how much comparable homes have sold for

Before making an offer, your real estate agent will check “comps,” or comparable listings in your neighborhood, to guide your offer and help you negotiate.

For example, let’s say you’re interested in a three-bedroom, two-bathroom house that measures 1,600 square feet. It’s listed at $450,000. If you find several similar homes nearby that are priced at $375,000, you can make the case the home is only worth that amount in the current market.

When checking comps, consider:

• Timeline: Check the selling price of homes that have sold within the last three months.
• Proximity: Homes within a half-mile to one-mile radius will provide a good estimate for the selling price in your area.
• Square footage: Ideally, you should compare homes within 10% of your prospective home’s square footage.
• Number of comps: Your real estate agent should try to find between five and 10 homes to compare to help you calculate your offer.

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4. Get a sense of the property's condition

You’ll also want to know whether the home needs repairs and whether you can cover the cost of them. When touring the property, look for obvious damage and ask the seller about when the major systems and roof will need to be replaced.

You can also include an inspection contingency in your offer letter. This clause gives you a way to back out of the deal if you’re not satisfied with the home inspection.

Find out: How to Conduct a Property History Search Before You Buy

5. Check how long the listing has been up

The home listing should include the number of days it’s been on the market. This is a good number to check because a seller may be more motivated to move if their listing has been on the market for more than a few months.

You may have room to offer a lower price, negotiate for the seller to pay for some of your closing costs, or ask them to pay for repairs. But this depends on the local real estate market. Sellers might reject a lower price when they have an advantage.

Keep Reading: How to Buy a House: Step-by-Step Guide

6. Decide where your offer should fall

Once you know how much you can afford and have a good understanding of the market in your area, it’s time to figure out how to make an offer on the house. Consider this guidance when making your offer:

When it makes sense to offer less than the listing price on a house

• It’s a buyer’s market. Because inventory exceeds demand, the seller may have trouble finding a buyer and could be willing to accept a lower offer.
• The home has been on the market for a long time. The seller might be motivated to accept a lower offer if the home has been sitting on the market for several months.
• The home needs a lot of repairs. You can calculate the cost of repairs and use that information to offer a lower price. But this might not work if the seller has multiple offers.

When it makes sense to offer the listing price on a house

• Your offer may be competitive. If you suspect other buyers are offering less than the full listing price, then your offer becomes the best one.
• To leave room for seller concessions. The seller may be willing to pay for repairs or your closing costs if you leave room for negotiating.
• The price aligns with the market value of the home. If you feel the asking price is spot-on and you don’t want to haggle, there’s nothing wrong with a full-price offer.

When it makes sense to offer more than the listing price on a house

• It’s a seller’s market. The seller may have multiple offers, and offering more than the listing price can make yours stand out.
• You know the home is underpriced. The seller may purposely list their house for 5% to 10% below market value to attract more buyers and start a bidding war. This allows you to increase your offer without worrying about overpaying.
• You’re competing with cash buyers. Sellers often love cash offers because they can get to the closing table quicker. Offering more than the asking price can make your offer more lucrative.