How to Bid on a Home

Kip Tips

How to Bid on a Home

Do some research first and set a limit on what you're willing to pay.

Your strategy for making an offer on a home -- and handling the follow-up negotiations -- depends on several factors: the sales prices of comparable homes, the favorability of the market for buyers, the number of other people bidding on the home and the condition of the property.

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Before you start negotiating, set a firm ceiling on what you’ll pay. That will help you keep your cool if you become caught up in a bidding war or a series of counteroffers, says Michael Corbett, a real estate expert with Trulia and author of Before You Buy. In a hot market, he suggests shopping for homes priced about 20% below your maximum, in case you have to pay more than the asking price. In a buyer’s market, when sales are slow, you can get away with looking at places that exceed your budget a bit and negotiating a lower price plus other concessions from the seller.

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A real estate agent can round up recent sales prices for properties in the area with characteristics similar to the home that interests you, as well as prices of comparable homes currently on the market. Exclusive buyer’s agent Dana Hollish Hill, of Bethesda, Md., also gathers any information she can about why the owner is selling and the circumstances surrounding the sale. By looking up a seller on social media, for example, she may learn that he’s in a hurry to unload his home because he has already purchased a new one.

Making a lowball offer could pay off, but you have to feel out the market and the seller’s situation. And sellers can just as easily dismiss you for undervaluing their home. You’re going to have to put up some earnest money, typically 1% to 5% of the purchase price. Some agents say the more you put down, the better your chances because it suggests you’re a more serious buyer. The earnest money becomes part of your down payment, so it doesn’t add to your cash needs.


In most scenarios, paying with cash will give you an edge. If you’re financing the purchase, your best move is to get a preapproval letter from a bank. And ask the seller’s agent if you can get the home inspected before you make an offer so you don’t have to include it as a contingency with the contract.

Other bargaining chips. If the sellers won’t come down in price, you might ask them to cover a portion of your closing costs. If you’re flexible about the closing date, ask the owners whether they would be willing to seal the deal if you allow for, say, a rent-back period during which they can live in the home after the closing. If you want to make an emotional appeal to the owners, you could write them a letter describing why you want the home.

After the inspection, you may find that the home needs repairs, such as a new roof. If you have leverage in a slow market, you could ask for cash back or a price reduction, or have the owner arrange for the repair prior to closing, says Corbett. If you’re buying a condominium in a brand-new building, Hill suggests asking for free parking or to have the condo fee waived for two years.