What to Offer Below List Price for a Home

It pays to be fair when you make an offer on a property.
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What sellers consider a fair offer differs according to many factors, including the condition of the local real estate market and the reasons why they are selling. Even if the seller doesn’t accept the first offer you make, a reasonable offer usually gets negotiations rolling. How far below list price you should go hinges on several factors.

Similar Property Values

Asking a real estate agent to do a competitive market analysis on similar homes in the area that recently sold -- often called the "comps" for short -- will give you an idea of what the home is worth. Even if the comps indicate that the home is overpriced, however, it doesn't usually make sense to offer less than 95 percent of the list price if a home has been on the market less than a month. The seller is still feeling out the market. The longer the home has been on the market, however, the lower the seller may be willing to go. If a home has been on the market for 60 days or more, 10 percent -- or even more -- below the asking price may be a realistic offer, especially if the comps justify your offer and you believe the house is overpriced. At the very least, the seller may come back with a counter-offer that gets you closer to what you want to pay.

Seller Motivation

Job transfers, a growing family’s need to move up to a bigger house, or avoiding foreclosure are some of the reasons homeowners may want to sell a property quickly, and for less than the list price. A buyer can benefit by finding out how long a home has been on the market and if the price has already been reduced. Sellers who are extremely motivated sometimes reduce a home’s list price more than once to attract potential home buyers. Often your real estate agent knows if the seller is motivated to sell -- or if he's not.

Loan Pre-approval or Cash Sale

You may be able to negotiate a lower purchase price on a home you want to buy if you make an offer after a lender has preapproved you for a mortgage loan -- or, even better, if you can offer cash. In these circumstances, the seller doesn’t have to worry that you won’t be approved for the loan. Pre-approval or a cash sale can also speed the time to closing, if the seller wants to move quickly. In most cases, as long as the house you want to buy appraises for the purchase price and neither your employment nor your finances have changed since getting pre-approved, your lender should close the loan.

Buyer Competition

Negotiating a lower price often depends on whether other buyers are interested in the same property. The fewer houses on the market, the more likely multiple buyers may be interested. A home that is in good condition and priced right from the start usually generates a lot of interest. If this is the case, it might not pay to waste time making a lower offer, especially if you really want the house. In fact, having more than one interested buyer can actually drive up the price.

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