What to Offer on a House: Below, At List, or Above?

Have you found “the one” in a home yet? As you prepare to move forward with the top property of your choice, you know what comes next: making an offer. When you choose your top home, making the offer holds as much value. Though making an offer on a home does not guarantee acceptance and your possession of the home, it is a required next step in possibly securing the home of your dreams.

If you’re a first-time homebuyer, prepare to know that your first offer will probably not be your last. You need to think and strategize with your realtor on making the best offer possible, all while meeting your financial goals. This poses the question, what should you offer on a house? Should you make an offer below the asking price, at asking, or above asking? Whether it’s your first time making an offer or have made several already, making an offer itself can still be stressful. We want to guide you through this step carefully so that if and when your offer is not accepted, you get a better idea of what offer makes sense and are prepared to make another one. By the end of this blog, you will be fully prepared to make a reasonable offer and even might win your dream home.

Why Do I Have to Make an Offer?

Making an offer on a house sounds unusual though, doesn’t it? An offer implies that you bid on the home instead of going straight into a transaction. So why do buyers need to make an offer in the first place, what is the purpose?

According to Investopedia, an offer “is a clear proposal to sell or buy a specific product or service under specific conditions.” Because buying real estate is not as simple as buying clothes at your local mall, real estate offers exist to protect you as a buyer and ensure that all terms of your offer are clearly understood and acknowledged by the sellers.

Real estate offers are made in a manner that all parties communicate via a binding contract. For example, if your offer has contingencies that are required to be met to move forward in the process, such as an appraisal contingency that requires the house to be appraised at a certain price point, then clearly stating that in the offer makes it binding should the seller accept it. A complete offer holds both you and the seller accountable for any conditions that were discussed and agreed upon. Offer processes and purchase contracts may vary by state, so reach out to your agent to learn more about the guidelines and requirements.

How Do I Make an Offer on a House?

To make an offer, you would have your real estate agent act on your behalf to put forward an offer to the seller or seller’s agent. Choosing a professional buyer’s agent to represent you is key during this step of the process because they leverage their expertise and education and combine those with your home buying goals to make the best offer possible for you. Since your agent is working for your best interests, communication should be a two-way street. Be clear as to what kind of offer you want to make, but also remember that your agent is an advisor. Should you be lost on what kind of offer makes sense, lean on your agent to decide what’s best. Even though they are acting on your behalf, at the end of the day, it is still up to you to decide what your offer should be.

When making an offer, your agent is required to send you and other buyers involved the offer to sign before they send it to the seller’s agent to evaluate. This is to ensure that there is full transparency when sending out your offer and that what you and your realtor discussed is clear on the offer itself. Any confusion or miscommunication that occurs during this step can cause a lot of issues, so make sure you are in constant contact with your agent to put forward the correct offer.

After making an offer, it’s time to play the waiting game. Ideally, the seller’s agent discusses the offer would the sellers and decides if they want to accept your offer or not.

Now, there are several ways to make an offer on your top home. Depending on your financial goals, it may make better sense for you to offer below the asking price, especially if the house has been on the market for too long or you really want the house, but can only afford it at a certain price. There are no rules when it comes to making an offer on a house, but there is one true piece of advice: be reasonable. If a house is listed at $500K, don’t bother making an offer at $200K when you know that that’s far off from the true value of the home. Once you make an offer underestimating the home’s value, the seller may disregard you completely and will not hear any more offers from you now that they know you aren’t serious.

Making an Offer on a House: Below Asking, At List, or Above Asking?

Making an offer is stressful, but it doesn’t have to be if your real estate advisor is experienced and professional enough to guide you through it. Your real estate agent may recommend that you get pre-approved by a lender before they start making offers on your behalf. A pre-approval letter indicates that you have received an underwriter’s credit pre-approval to proceed with a certain purchase price, loan amount, and loan program. Some sellers and seller agents will require a pre-approval letter to be included with any offers before they will even review the offer submitted.

Now, your offer can be very competitive as it compares against other possible offers on the table. You may even submit the only offer that the seller has received. Regardless, a good agent will provide you with “comps” aka “comparables” that will allow you to see similar homes and what they sold for recently to help you decide what to offer. Whether you know how many offers you’re competing against is up to the seller and their agent and if they wish to disclose that information. So what kind of offer should you make on a home?

Below Asking

If you want to make an offer below asking, here are some questions you should ask yourself:

• Is my offer reasonable?
• Am I able to negotiate if the seller counters my offer?
• Am I okay with my offer not being accepted because it’s lower than what the seller is asking?

There is a lot of discussion around making an offer below asking, especially if your offer is way under the asking price set by the seller and their agent. It’s a tricky situation when you consider making an offer below asking, because you may think that the house is valued at a lower price than what is originally asked for. Some sellers and their agents will not even consider an offer that devalues their ideal asking price because they may have their own financial goals to meet, and that’s okay! That’s why it’s important to make the best offer you can if you want the home in question.

There are some cases where making an offer below asking makes sense, such as if the property has been on the market for a long time, there have been multiple price cuts since the listing has been active, or the seller has overpriced their home and you truly feel that it should be a lower price.

At List

If you want to make an offer at the asking price, here are some questions you should ask yourself:

• Is this the best offer I can make?
• Do I love the house enough to make this offer?
• Is this my top choice?

Some sellers will set a price on a home that is reasonable, or a price that aligns with the general housing market conditions, making it a fair and desirable asking for buyers who want to make an offer on their property. Once it’s time to make an offer on a home with a fair price point, let’s say you make one with a price that is exactly what the seller is asking for! You may assume that making an offer at list is the best bet that the seller can get, but that doesn’t mean that there are other offers on the table. Other offers may also be at list, which comes down to the seller and their agent honing in on your ability to buy. They may look at your chosen lender to ensure it’s reputable, the type of loan program you’re using, how much you’re willing to put down, and so much more. There also may be other buyers that agree that the price is fair but desire the house so much, that they make an offer above asking to increase their chances of getting accepted.

Competition can be frustrating when making an offer, especially when your offer completely aligns with what the seller is asking for! That’s why you need and your realtor needs to discuss the possibility of other offers and make sure that what you put forward is the best you can. If it’s a property in high demand and also your top choice, consider making an offer above asking to beat out the rest, but make sure that the offer is within your budget and not a decision you will regret later.

Above Asking

If you want to make an offer above asking, here are some questions you should ask yourself:

• Am I comfortable with the price point I’m offering at?
• Does my offer align with my financial and homeownership goals?
• If my offer is accepted but the house is appraised lower than my offer price, can I make up the difference?

So you want to make an offer above asking! While doing this increases your chance of getting an offer accepted, it is still considered a risk. If you can afford the price you’re offering, then you may feel more comfortable making the offer than if you were stretching your budget a bit to secure the home. However, you still have to think about the appraised value of the home.

If you are going through the mortgage process with an appraisal set to take place, the appraisal will let you know if your offer price was realistic or not. For example, let’s say you make an offer of $525K on a house that was listed at $475K and it gets accepted. Then the appraisal comes in, which shows the home appraised at $500K. Now, in addition to appraisal contingencies that are written into the purchase contract, some home loans have policies on appraisals where if the property appraises under-value, then the loan may no longer be applicable. Should this happen, reach out to your lender to learn more about appraisal differences and how to move forward.

In a market where buyer demand is high and inventory is low, making an offer above asking is usually a good way to get one step closer to the home of your dreams. Before you send in your offer, just make sure that you are still able to make the mortgage payments and that you aren’t overpaying for a property that is valued lower than it may seem.

After the Offer is Made

After you’ve made the offer, you simply wait for the seller and their agent to get back to you. In your offer, you can put a deadline for the seller to give their response within a certain timeframe. This helps the seller make a decision quickly without you having to wait longer than needed.

The seller will either accept your offer, counter your offer with their own contingencies, decline it, or they may just ignore it. Ignoring it implies that they may have accepted another offer and have already moved forward or for other reasons. When this happens, it’s best to move on to the next house on your list.

If your offer is rejected, you may be able to put in another offer at a better price point, but this is uncommon. Again, it’s best to move on if your offer wasn’t accepted the first time around. If the seller counters your offer, you will have to accept their offer to proceed with the purchase. Some examples of seller counteroffers include removing specific contingencies that you requested, asking you to make the highest/best offer you can (this is common when the seller is entertaining multiple offers), allowing them to reside in the property for a certain time period after closing or they may want to specify how certain fees will be paid or if any personal property will be included in the sale. However, if your offer is accepted and the sellers sign the offer acknowledging that they’ve accepted, then congratulations! You’re ready to move on to escrow and be one step closer to your number one home.

Are You Ready to Make Your Offer?

We know making an offer can be a bit intense and nerve-wracking, especially if you’re doing this for the first time! Whenever you feel a bit stressed or unsure of how to make an offer, you can always lean on your real estate agent to guide you through your thoughts and decide on an offer that you’re satisfied with.

Whether you’re making an offer below asking, at list, or above asking, remember that your offer should be the best offer you can put forward. Also, offers are meant to be taken seriously, so we highly recommend not making multiple offers on a house at once or making an offer on a home that you aren’t serious about. Buying a home is one of the greatest purchases you’ll make in your life, and you want to do it right.

Want to know more about the mortgage process after your offer is accepted? Learn more about the different steps in the process by meeting with a loan officer to talk about your homeownership goals.