This article was submitted by Jerry Armen.

Purchasing a home takes a lot of strategy, especially when it comes to giving an offer price. The offer price has to be an amount you’re willing to spend and a price that the seller is willing to receive for their home. But how do you know the right amount to offer on a home? If you bid too low, the homeowner will not sell the home. If you bid too high, you end up with a home that is over your budget. There are many factors that influence the offer price. The following is a list of factors you will need to consider in order to determine an offer price that is right for you and the seller.

Be honest about your budget. Before you can give an offer price, it’s important to be honest about how much you want to spend. This means that you should do your homework ahead of time and come up with a comfortable amount you’re willing and able to spend, and then stick to it. Not going over your budget will ensure that you buy a home that fits your lifestyle. You will also avoid defaulting on the loan or losing it to foreclosure.

Your budget also means the amount you were pre-approved to borrow. While you might have a budget for $500,000, your credit score might have made it possible for you to borrow only half that amount. Or, the opposite might be true. You might have been approved for a larger loan than you can actually afford. Determine an amount that you’re comfortable with and that you’ve been approved to borrow.
Determine the prices of homes in the area. One of the first things you should do before giving an offer is contacting your real estate agent. Your personal agent will give you a list of the homes that have sold in the area along the final price they were sold. This will give you an idea on the approximate amount of the selling price.

Examine the current market. Your offer price depends a lot on the condition of the market. For example, if it is a seller’s market, the prices are in the favor of the seller, which means they are increasing. However, if there are more homes for sale than potential homebuyers, it is a buyer’s market and the odds are in your favor. In a buyer’s market the home prices are either dropping or stable.