How does the asking price compare with the market value of the house, based on recent sales of comparable houses in the area? To find out, ask whether the listing agent prepared a "comparative market analysis" (CMA) on the property. This is a written report that reviews prices of comparable homes that are currently on the market, that are currently under contract, and that have closed (sold) in the past several months.

Condition of the house

   Before making an offer, you should be fairly confident that you are aware of any major problem areas in the house. You should have inspected the house to the best of your ability, as well as questioned the sales agent and the owner about the structural soundness and condition of the basic systems. (Both sellers and real estate sales professionals can be held liable if they fail to tell the buyer of any defects they know of in the house.)

Circumstances surrounding the sale

   In deciding how much to offer, try to determine how anxious the owners are to sell. For example, if the sellers already have a contract on another house that is dependent on the sale of this house you may be in a good negotiating position. It will be to your advantage to know how long the house has been on the market and whether the asking price has already been reduced. Also how much did the seller pay for the house, and when?

What can you afford?

   Before making an offer on a house, you need to know what your monthly housing costs (PITI) would be should you get the hoist at the price you plan to offer. This requires knowing the annual cost of utilities, local taxes, homeowner’s insurance, condominium fee (if applicable), and any special assessments, as well as the current rate for whatever mortgage loan program you are considering. Also find out when the tax assessment on the house will increase based on the sales price of the house.

Financing terms

   Remember that there are two aspects to an offer: the price and the financing terms. For example, if the seller is willing to offer attractive financing terms, including paying for the title search, the home inspection, and other settlement costs, you may not want to quibble over the price.

   Most prospective buyers do not offer the full asking price, at least initially. For example, you may want to offer less than the asking price if you feel that the condition of the house warrants a lower price.