How Buying a House Works

Making an Offer on a House

You've finally found your dream home. Now it's time to make your offer irresistible.
You've finally found your dream home. Now it's time to make your offer irresistible.
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After weeks, months, even years of searching, you've found the house you want. It meets all of your needs and a surprising amount of your wants for an affordable price. Now you are ready to begin the negotiation stage of home buying. It's time to make an offer.

But how much do you offer? Everyone wants to get a good deal, but how much lower than the asking price can you go? And when is it smart to offer more than the asking price? The starting point is your mortgage pre-approval letter. Remind yourself that there is a maximum amount you can afford to pay. The goal is to pay even less than this, giving you more breathing room in your budget.

The listing price is certainly a key indicator of value, but it's not the only one. A good place to start is by checking the sales price of homes that recently sold in the same neighborhood. Your real estate agent can provide you with a Comparative Market Analysis (CMA) or you can look it up on sites like by searching the "sold" listings. If the sales prices of similar homes are roughly the same as the listing price, then you know you're in the right ballpark. If they're radically higher, it could mean that the seller is hiding a flaw. Radically lower? The seller is inflating his price.

Talk to your real estate agent about short-term and long-term price trends. Is the area getting hotter or did the bubble recently burst? How long has the home been on the market and how does that compare to others in the area? You should also see how much you can find out about previous offers. Have there been any? Why were they rejected? A savvy buyer's agent might also be able to gather clues about the seller's motivation. Are they desperate to unload or are they holding out for the asking price?

In rare situations, such as an incredibly hot real estate market in a city like San Francisco or New York, it's necessary to offer more than the asking price. This is something you should discuss in detail with your real estate agent, who can best serve your interests in a potentially expensive bidding war.

Once you arrive on a price, it's time to draw up the details of the offer. More about that on the next page.