Just one year ago, the idea of making an offer below the asking price on a California home purchase might have seemed silly. Back then, competition among home buyers soared and bidding wars became the norm in many cities.
But the California real estate market is now in a kind of transition phase. Like the nation as a whole,
California is currently experiencing a bit of a slowdown within the housing market. This could give home buyers more leverage than they’ve had in a while.
As a result of these changes, some buyers might now be wondering: Should I make an offer below the asking price, when buying a home in California? The answer is … it depends!
Offering Below the Asking Price
As of summer 2022, most housing markets across the state still favor sellers when it comes to negotiating leverage. That’s because of an ongoing inventory shortage of homes for sale.
But some local markets could begin to shift in favor of buyers, as we move through the second half of 2022 and into 2023. In these areas, buyers could start to enjoy some additional negotiating leverage. So they might be able to offer less than the seller’s asking price, in some cases.
Market research is a great place to start. Before you start house hunting, spend some time bringing yourself up to speed on local housing market conditions in your area. Better yet, bring an experienced real estate agent onto your team.
As a home buyer, you have every right to offer less than the asking price if you feel it’s too high. On the other hand, the seller has every right to reject your offer, if they feel it’s too low. So be sure to do your homework and tread carefully.
Sellers Use Different Pricing Strategies
There is no standardized formula for determining the list price (a.k.a., asking price) on a home. Different homeowners go about it in different ways, depending on their unique situations.
But most sellers determine their asking prices in one of the following ways:
- Market-based pricing: Some homeowners set realistic asking prices by taking current market conditions into account. They do this because they are serious about selling, and they realize that a reasonably priced home will sell faster than an overpriced one.
- Mortgage-based pricing: Some homeowners might choose to price their homes based on the amount they need to pay off their mortgage, working backward from there. But that amount may or may not reflect current market trends.
- In a hurry: Some sellers might price their homes below what’s considered to be “fair market value,” because they need to sell as quickly as possible.
There are all sorts of pricing strategies. These are just three of the most common. As a buyer, you’ll want to evaluate each property separately, based on its unique features and local market trends. So let’s talk about that next…
Evaluate Homes Individually, Based on Market Trends
Home buyers in California should consider current market conditions and sales trends when making an offer on a house. You’ll also want to determine whether you’re in a seller’s market, a buyer’s market, or a “balanced” real estate scene that doesn’t necessarily favor one party over the other.
- In a slower market, where sellers tend to be more flexible, it might make sense to offer below the list price — especially if you believe the house is overpriced.
- In a more competitive market, where sellers tend to receive multiple offers, going below the asking price could work against you. It might cause the house to slip right through your fingers.
Comparable sales can be helpful when making an offer on a house. A comparable sale (or “comp”) is basically a similar house that sold recently, in the same area where you’re trying to buy. Real estate agents use comps to help their clients determine a reasonable amount to offer.
Researching comps can help you decide whether or not it makes sense to offer less than the asking price on a California home purchase. It could also help you avoid overpaying, in cases where the list price far exceeds comparable sales data. It’s good information to have!
Consider Any Features That Might Add Value
When visiting a home you’re thinking about buying, keep an eye out for any value-adding features. If a particular house has upgrades or enhancements that set it apart from seemingly comparable homes, the homeowners could justly setting a higher asking price.
Value-adding features and characteristics might include the following:
- Swimming pools
- Deck and patio additions
- An updated kitchen and/or bathrooms
- Solar power (in areas where it would be beneficial)
- A larger lot size compared to the comps
- A better location compared to the comps
The bottom line: Making an offer on a home is a case-by-case situation. There is no rule-of-thumb or generic formula that applies to all pricing scenarios. Look at the comps for your area. Consider the type of market you’re in. Rely on your agent’s advice.In short, be a savvy home buyer!
FAQs
Typically, a lowball offer is considered to be at least 20% below the asking price. If you're offering 10% below, the property should be in a good condition but may just need some cosmetic work done. The goal of offering 10% below the asking price is to use those extra funds to cover the repairs.
Is it rude to offer below asking price? ›
A low offer may be upsetting to the sellers, but if you and your real estate agent present the offer along with an expression of your appreciation for the property, it's more likely to be accepted than a low offer accompanied by a half-complete contract or an insult about the property's condition.
When you make a purchase offer you should always offer less than the asking price True or false? ›
Depending on your financial goals, it may make better sense for you to offer below the asking price, especially if the house has been on the market for too long or you really want the house, but can only afford it at a certain price.
Can a seller refuse a full price offer in California? ›
A home seller can always reject an offer that they don't think reflects the value of their real property. Even if the offer is above the listing price, the seller has the legal right to deny the offer and accept a higher sale price.
Is 15% below asking price too low? ›
Talk with your realtor about whether the offer really is a lowball offer. In general, a lowball offer is 15 to 25 percent (or more) below the listed price. However, just because you're getting a $250,000 offer for your home that's listed at $300,000 doesn't automatically mean that it's an unrealistic or lowball offer.
Can I offer 50k below asking price? ›
You need to pay attention to the property history. It doesn't make sense to submit lowball offer $50,000 below asking price if the property is only been on the market for two days. A whole year on the market, with price reductions? Go ahead and roll the dice.
How do you politely offer less on a house? ›
How to Successfully Make an Obscenely Low Offer on a House
- Do Your Research Before House Hunting. ...
- Use Cash When Buying a House. ...
- Work With a Realtor When You're House Hunting. ...
- Use Rhetoric and Flattery. ...
- Give the Seller Reasons for Your Reduced Price. ...
- Be Reasonable With the Seller.
The rule of thumb is usually between 5 and 10 percent of the home price. Bear in mind that you could lose the money if the deal falls through, so it's important not to put up so much that you'd be ruined if you lost the cash.
What is considered a lowball offer? ›
A lowball offer is a slang term for an offer that is significantly below the seller's asking price, or a quote that is deliberately lower than the price the seller intends to charge.
Can I lose an offer by negotiating? ›
Rescinding a job offer is extremely rare, but it happens. In my 13 years of experience as a recruiter, I've only done it three times. The biggest reason was that the candidates' negotiation styles were egregious and not aligned with the employer's company culture.
Because no one can force a seller to sign (contracts must always be signed freely and without undue influence to be binding), a seller doesn't have to accept even a supposedly "perfect" offer.
What is a good counter offer on a house? ›
Counter at Your List Price. Most sellers will make a counteroffer with a price that's higher, but still below their list price, because they're afraid of losing the potential sale. They want to seem flexible and willing to negotiate to close the deal.
Do sellers usually accept first offer? ›
Should You Accept the First Offer on Your Home? In short- Yes, if it is at an acceptable price, the buyer makes a cash offer, accepts your contingencies, and is negotiable. It is often the case that many of these criteria will be met by your first buyer, but not always.
How much do sellers usually come down on a house? ›
The amount you may want to reduce your home's asking price depends on many factors, including the median price in your area, what comparable homes nearby are selling for and the length of time the home has been on the market. According to a Zillow study, the average price cut is 2.9 percent of the list price.
Why would a seller not accept an offer? ›
If your offer came in lower than others or you didn't meet certain financing requirements, a seller is likely to turn your offer down. To avoid your offer being rejected for financial reasons, it's important to have your mortgage preapproved.
Can I offer 5 less than asking price? ›
“Will my offer be accepted if I offer 5% less than what they're asking?” is the correct question. In the current market, the answer is probably no, unless you're offering all cash, no contingencies (not recommended). And even then, you'll probably be outbid, on the same terms, by someone with more cash.
How much can you offer below the asking price on a car? ›
Make a realistic offer, but one that's also bold enough to anchor the negotiation to a lower point. A savings of 5% or so below the market value (not the price they are asking) is a reasonable starting point for negotiations. Another way to look at it is to do about 15% to 25% below the maximum you're willing to pay.
What is considered a lowball offer on a house? ›
By strict definition, a lowball offer is one that is significantly below market value. In practice, an offer is considered "lowball" if it is significantly below a seller's asking price. Understanding this distinction between market value and asking price is critical to your success.
What percent over asking price should I offer? ›
Offers typically need to exceed at least 1 to 3 percent over list price when there are multiple competing buyers. “It's not unheard of in these situations to see the winning bid come in thousands over list price,” says Philip Kranefuss, head of Real Estate in Colorado with Homie.
