Why Offering Less Than the Asking Price Might Be a Smart Strategy When Buying a Home

The homebuying process can be difficult to navigate for first-time homebuyers and seasoned real estate investors alike. This is especially true during the negotiation portion of the journey. Hopeful buyers may be hesitant to offer less than asking price (also referred to as a lowball offer) for fear they’ll miss out on a great opportunity.

In some cases, however, putting in an offer under asking price isn’t just acceptable, it’s smart. Let’s look at this strategy and talk about when you should use it.

When Should Buyers Consider Offering Less Than Asking Price?

Lowball offers won’t work in just any circumstance. Before you use this strategy, make sure at least one of these factors applies.

• The home has been on the market awhile.

  Sellers who have just listed their homes are usually not as open to lower offers as those who have had the home on the market for a few weeks or longer.

• The property isn’t move-in ready.

  Fixer-uppers generally appeal to a smaller number of buyers, making these properties less popular than their updated counterparts. If you’re willing to take on a home that needs work, you may be able to get sellers to agree to a lowball offer.

• The price is inflated compared to others in the area.

  Sellers sometimes overprice their homes because they think they’re worth it, or they just throw it out there to see who bites. Making a reasonable offer under asking price is a smart way to negotiate in these situations.

How to Make an Offer Under the Asking Price without Insulting the Seller

There are lowball offers, then there are ridiculous offers that waste everyone’s time. Your biggest resource in knowing what to offer will be your real estate agent.

Use these tips to give your offer credibility and increase the likelihood you’ll land the property.

• Get pre-approved.

  Work with a mortgage originator to get pre-approved for a loan. It will show the seller you’re serious about purchasing the property and may give you an edge over other buyers.

• Increase the required earnest money.

  Let them know you are a serious buyer by putting up additional earnest money with your offer.

• Don’t go too low.

  Making a lowball offer is acceptable, but be reasonable. Don’t offer half the price and expect sellers to take you seriously.

• Prepare for some back-and-forth negotiations.

  Be ready for the seller to not accept your first offer. However, if they’re motivated to sell and don’t have other viable offers, they may counteroffer with a price that’s still lower than asking.

Negotiating a home’s price is one of the most difficult and stressful parts of the homebuying process. Before you make an offer under asking price, do your research and make sure it’s a reasonable strategy to take.