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How Much to Offer

If you’re at the point in the house hunting process where you’re asking yourself how much you should make an offer for, that’s exciting news! It means you’ve found a house that you could see yourself calling “home.” But it also means you’re likely in a panic about exactly how much you should make your offer for. You don’t want to pay too much because there are better things you could do with your money, like be prepared for Murphy’s Law to hit five seconds into the next deployment or start dreaming about and saving for that one-day, post-military retirement, forever home. And you don’t want to make an offer that’s too low because you risk losing the house over it.

While there’s no magic formula for a single “correct” amount to offer, there are some general guidelines that will better position you to make an offer that will be accepted.

Know your final number before you start. What is the highest you know that you are willing to go for the property? The correct answer to this question is not the high number the bank says you’re good for. The bank isn’t thinking about the fact that your kid needs braces or your car’s on its second transmission in a year. Instead, what’s the number that will allow you to sleep at night knowing your bills would be paid, your budget would be in good shape, and that you’d have a little wiggle room for the inevitable emergency? Knowing your end game before you start will prevent you from finding yourself in a bidding war where the “win” comes at the cost of your family’s financial security.

Factor in any work that needs to be done on the home. Did you notice that the roof, while it would pass inspection, would likely need to be repaired within the next year or two? Would the carpeting need to come out for the sake of a child with severe allergies? Are there any immediate or short-term repairs or modifications that would need to take place to make the home livable for your family? Consider those in your calculations.

Know the market value. Lucky for you, you don’t have to be real estate market savvy because you have a real estate agent whose job is to know what that market looks like, how it’s trending, and how that potentially can impact you for good or bad. Listen to your agent. You should be more interested in the comps (recent comparable sales) than what the active listings are. (Listings will only tell you what sellers are hoping will happen, whereas the comps tell you what people are actually paying.) When you know the market value of the potential house, you’ll have a reasonable range of values to start with.

Know the market in general. Is it a seller’s market or a buyer’s market? In a seller’s market, you’ll typically have less room to negotiate. When there are fewer active listings and many buyers are pursuing the same few properties, the seller controls the game. This isn’t the time to make a low offer and hope to negotiate higher. A seller will likely have other offers that don’t require the negotiation. In a buyer’s market, houses may sit unsold for longer periods of time and a seller might be more inclined to consider a lower price. Again, this is something your real estate agent is already tracking. He or she can tell you that the house has been on the market for months and the owners have already dropped the price a few times. Or that similar properties in the neighborhood have been sold for above asking price. While those kinds of trends don’t dictate exactly what a seller will do with an offer, they provide valuable insight.

 (To the extent possible) know the seller’s motivation. Your agent will talk with the listing agent. That conversation should provide key information, like that the seller is currently paying two mortgages and can’t sell the house fast enough. Or that the seller just inherited another property and is willing to wait as long as necessary to get the best possible price for the one you’re interested in. Or even maybe that the seller is former military and would love the idea of another military family raising their kids in the home where he raised his own children.

Remember your own motivation. Do you love this house? Is it meant to be your forever home? Or is it a house that just has to work until the next PCS comes around? How much you’re willing to negotiate and how high you’re willing to go on your offer depend in part about how high the stakes are for you. If this is a for-now house and there are other available listings, you can afford to risk making a lower offer. If this is the only house for sale within a twenty-mile radius and you’re supposed to be settled in your new town within the next 60 days, there’s more to lose in haggling.

Your best resource when considering how much to offer for a home that appeals to you is your real estate agent, whose job is to make sure you’re happily in a home that serves your family’s needs. And your agent will advocate for you to make sure that’s the final outcome, whether it’s with this offer or the next.