Can you offer less than market value with an all-cash offer? You can offer whatever you like, no matter how you're paying. But a seller may be more inclined to accept a lower offer if it is all-cash.
For sellers, the biggest perk of a cash offer is the surety it comes with — particularly in a volatile rate environment. Mortgaged buyers just come with more risk than cash-backed ones. Namely, they should have finance contingencies in their contracts, which allow them to back out if their loan doesn't come through.
20% Below Asking
Dropping an offer this low is justified if the home needs extensive repairs to bring it up to code or make it livable. If the property has problems like roof damage, plumbing and electrical issues or foundation problems, it may be reasonable to offer 20% below the asking price.
Probably not a good idea to go in with a lowball offer $50,000 below asking price. A whole year on the market, with price reductions? Go ahead and roll the dice. The longer a house has been on the market, the less of an upper hand the seller has in negotiation.”
With cash in hand, savvy homebuyers may be able to offer up to 20 percent off their original asking price for the property.
Counter-offer pros and cons for buyers
The major benefit of a counter-offer for buyers is the potential to secure the home for less money and on better terms, always a good thing. However, if you really want the house, it's not a great idea to go back and forth too many times with counter-offers.
Offering 1% to 4% below asking may not seem like a lot of savings when you're spending hundreds of thousands of dollars, but the reduced price will make your mortgage payments less every month. You may want to offer below 5% when you're paying with cash or when the market is more balanced.
Yes, you can, but it all depends upon how you present it, and the situation of the sellers. You have to condition your sellers to listen to your offer without being offended.
A common starting point is to offer around 5-10% below the asking price, but it's essential to work closely with your real estate agent, analyze comparable sales, and consider any unique circumstances to determine a competitive yet reasonable offer.
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.
Sellers love buyers without a financing contingency because it's one less possibility for the deal to fail. This means a cash buyer can often negotiate a slightly lower price or other concessions.
How much can I negotiate on a new house? In a buyer's market, it can be acceptable to offer up to 20% under a seller's asking price, assuming the home in question requires hefty repairs. Otherwise, you're better off negotiating 1% – 10% below the asking price.
Look for sellers who are strongly motivated to sell. For instance, job relocation or sellers who have already purchased and closed on another home. These home sellers will be more likely to entertain the idea of paying for closing costs or changing the close date for a lower price.
Key takeaways
A homebuyer who makes a cash offer intends to pay in full, with no mortgage or other type of financing. Cash deals are more appealing to sellers than financed deals, because they close faster and are less risky.
While all-cash offers might not earn you the best possible price, they do provide significant perks for sellers: Less waiting: Accepting an all-cash offer means that you avoid time-consuming steps like waiting for the buyer's financing to be approved, and thus get to the closing table faster.
However, if you're interested in grabbing a bargain and becoming a homeowner for financial reasons (and are less invested in which house you own), a low offer could be the right option for you. Consider making an offer that hovers 25% below the asking price—and see what happens.
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.
In 2023, the Federal Housing Administration reduced mortgage insurance premiums on all new FHA loans for the first time since the mid-2010s. The move lowered monthly payments by $300 per year per $100,000 borrowed and boosted home affordability.
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.
You won't be able to offer more than you can afford, so it's important to determine your budget upfront. Some financial experts use a rule of thumb that says your home should cost no more than two or three times your annual household income.
Mistake No. 2: Showing you can afford much more than your offer. Yes, you want to be a strong buyer and having a pre-approval letter in hand will lend you credibility—but you don't want to let the seller know you can actually afford much more than what's on the table.
Time to act quickly!
In California, buyers have 17 days to change their mind once the offer is accepted. Sellers have 0 days. On the other hand, as long as you're negotiating – which often lasts several days – other offers can come in and change the whole game.