Making an offer on a house below asking price can often be a smart move, but there are some factors you need to take into consideration before you do so. The offer needs to be one that is a great deal for you but also secures you the property. A low offer isn’t a great deal if someone else gets the house!
Here are some tips on how much below asking price to offer on a home, especially if you're looking in the Minneapolis area.
1. Determine the fair market value
If you think a homeowner is asking a lot more than the property is worth, then making a low offer is a good strategy. But you choose to do that, it's important to have the facts to back up your theory. At Pro Team, our agents help do some research on comparable sales over the last three months to work out what the home’s value is. An experienced local agent can help you with factual support, so you know what is reasonable to offer below asking prices.
2. What can you afford?
There’s no point making a low offer if it’s still outside your budget. It’s a must to make sure that your offer price for any given home falls within the range of what is affordable for you. Does the amount you want to offer fall within the range of your pre-approved mortgage? Have you included closing costs, furniture purchases or any repairs you may need to make? Working with your financial advisors and mortgage lenders can give you mortgage and budget scenarios that fit your home search best.
3. Do you have competition?
If you’re thinking of putting in a low offer, there’s a good chance you won’t be alone. Check with the agent if there is any competition you need to know about. If there are multiple offers on the table, you’ll probably need to up your game to compete against them successfully, especially in a competitive real estate market like the Twin Cities area. Lean on your real estate agent and their local market knowledge to know what the current competitive market landscape looks like.
4. How much do you want it?
Check your motivations for making a low offer. If you have a competitive nature, then you may want to put in a low offer for the sake of winning a great deal. If you genuinely love the place and it’s overpriced then making an offer within the range of the home’s fair market value is a good business decision.
5. Exceptions that make it worth the seller’s while
You may have something else to offer the seller that will make a low offer particularly attractive. For instance, are you a motivated buyer with a large inherited sum of money? Are you a first-time buyer with a pre-qualified mortgage and no other house to sell? Exceptions like these can make a seller willing to accept a low offer if they don’t have to worry about the deal going through.
6. It’s all about negotiation
Remember that making a low offer is usually the starting point of the deal. When considering how much to offer on a house below asking price, go in at 10% less and be prepared to haggle from there. If the seller is willing to counter your low offer, you’ll have room to negotiate and get a feel for how flexible they are on price. While the house may not be sold to you for the original low offer you made, if you buy it for less than asking price, and within the range of the fair market value, then you’ll still be getting a great deal.