Any offer I submit is always accompanied with comps. It's my way of saying "Here's what's sold, here's what the appraiser is going to base what your home is worth when he/she comes out and does their homework."
Base your offer on what is fair market value. You're buying a house, not a pair of shoes on clearance or a fridge from the Scratch and Dent department.
I think you can see from our answers that it's not a percentage issue....it's a value issue. On a short sale or bank-owned home, for instance, it might be listed artificially low to attract buyers and for you to be considered you will need to bid OVER asking price....there is no magic formula.
Talk to your agent and look at the actual comps for the home, then decide what you want to offer. Some things to remember....if you really WANT the house, then don't gamble with a lowball offer. But if it's just a home that "would work" then feel free to try a lower price...and it's still only worth what it's worth to YOU.
Good luck with the offer,
What if the house you're looking at is only worth $137,000? You offer $140,000. The owner accepts. You've overpaid.
What if the house is worth $175,000? It's a bargain at $159,900. You might get it for less, but don't be greedy. I remember a foreclosure I was showing to some clients. The comps suggested it was worth $210,000. It was a nice house in move-in condition. It was listed at $185,000. They loved the house. They really wanted it. But they were convinced that they had to negotiate down the price. They wanted to offer $165,000. I managed to persuade them to offer $175,000. And it was a weak offer--contingent on financing and other items. They lost the house. The successful bid was $205,000 all cash.
Recognize, too, that you can't read the seller's mind. I've seen sellers who wouldn't budge a dime. They already felt they "were giving their house away" and wouldn't negotiate at all. I've seen other sellers accept 20%, 30%, and more under what they were initially asking.
So, let's agree, first, that you'll pay no more than the house is worth. And you can only tell that from the comps your agent provides you.
Second, to have your offer taken seriously, make it as "clean" and strong as possible. As cash offer is usually stronger than one contingent on financing. An offer that isn't contingent on the buyer selling his/her current home is stronger than one with that contingency. An offer with a solid earnest money deposit (it varies around the country--in some areas it might be $2,000, in other areas maybe 2% or 3% of the asking price) is a lot stronger than one with a $100 earnest money deposit. An offer with an accompanying preapproval (of financing) is a lot stronger than one without. And so on. Your Realtor can advise you on how to make your offer as strong as possible and, thus, more likely to be taken seriously.
Hope that helps.
For your offer to be taken seriously, you have to offer as close to the actual market value of the house as possible. To do this, have your Realtor do a Comparative Market Analysis (CMA) to determine the market value of the property. The listing price of the property may not necessarily be the market value of the property. The property may be listed below market value to generate offers and create a 'bidding war' or the property may be listed higher than market value. You want to submit an offer that is realistic for both yourself and the seller. Price is the 'main' factor in an offer but it is just the starting point. Other factors include the amount of your ernest money deposit, the type of financing you are doing, are you asking for closing costs, etc.
Hope this helps and good luck.
Keep in mind that there is more to an offer than just the price. If you are offering lower, then it is better to put a big earnest money deposit down and to have a strong approval letter. In your case, an offer at $140k may not be vary appealing to the seller, but if you combined this with a $20k earnest money deposit, they will know that you are serious.
An offer can be made more serious by including a preapproval letter, larger deposit, quick closing date and limit contingincies.