How Much to Offer on a House

Consider prices of comparable homes that have recently sold in the area, and offer only what you can afford.
Barbara Marquand
By Barbara Marquand 
Updated
Edited by Alice Holbrook

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Figuring out how much to offer on a house is a delicate balancing act.

You never want to pay too much, but making a low bid could mean losing out on the house altogether. While there are no hard-and-fast rules, here are some things to consider so you can pinpoint a price likely to win over a seller without tanking your budget.

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How much can you afford?

When you're preapproved for a mortgage, the lender will estimate how much you can borrow, but that shouldn’t dictate your spending threshold. Only you can decide how much house you can afford.

To get a rough idea, use the 28/36 rule, which says to spend no more than 28% of your gross monthly income on housing expenses — your monthly mortgage payment, including property taxes and home insurance — and no more than 36% on housing and all your other debt, such as car and student loans. For a quick online estimate, use NerdWallet's home affordability calculator, which estimates how much you can spend on a house based on your income, debts, credit score, down payment and current mortgage rates.

🤓Nerdy Tip

As you look at your total budget to calculate an affordable mortgage payment, make sure you account for ongoing housing expenses after you move in, an often overlooked part of how much it really costs to buy a home. It's a good idea to set aside at least 1% of the home's market value per year for repairs and maintenance.

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How much are comparable homes selling for?

Sale prices of comparable homes, or "comps," give important clues for how much to offer. Comps are homes that are similar in size, location and condition and have been sold in the last several months or are pending sale. If you're making an offer on a three-bedroom, two-bath house built in 1980, for example, look for sales of other three-bedroom, two-bath houses of a similar age and condition in the same neighborhood.

No two homes are identical, so you'll have to adjust your offer accordingly. For example, you may want to offer more than the comp prices if the house you want has a bigger yard or a fancier kitchen than the comparable homes. Or the home may be worth less than the comps if it's in poor condition.

A good buyer's real estate agent will share a list of comps and help you interpret them to set a reasonable offer price.

Is it a buyer’s or seller’s market?

Are homes selling at, above or below the asking price and, if so, by how much? Understanding the competitive landscape is essential for deciding what to offer.

Seller’s market

In a seller’s market, demand for homes is high and supply is low. You may have to offer more than the asking price to purchase a home.

But be careful not to blow your budget to win a bidding war.

Instead, try searching for homes below your spending limit, leaving room to bid higher if necessary. And consider strategies besides offering a higher price, such as accommodating a seller's timeline for a closing date or limiting contingencies.

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Buyer’s market

You have an edge in a buyer’s market because the supply of homes is greater than the demand.

Depending on the property, offering below the list price may make sense. Ask your real estate agent what a reasonable offer would be.

Balanced market

A balanced market occurs when there are roughly an equal number of buyers and properties for sale, so neither buyers nor sellers have the upper hand. A low-ball offer probably won't get accepted, but bidding wars are rare. Generally you're more likely to offer close to the list price in a balanced market than in a seller's or buyer's market, but it all depends on the individual property and fairness of that seller's asking price. Your real estate agent can help you puzzle it out.

How long has the house been on the market?

You might have some leverage if the house has languished on the market while others around it have sold. This could be a clue that the property is overpriced, and the seller might be ready to accept lower offers. You can find the listing date on real estate listing sites like Realtor.com or Zillow. Your agent can also get that information and may be able to get the scoop on why the house hasn't sold.

There's no formula for setting an offer price, but comparing how the property stacks up against others for sale, understanding the local market and knowing how much you can afford will move you in the right direction. A good buyer's agent, who's well-versed in market conditions and sensitive to your budget, can guide the way.

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