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Buyers who learn how to negotiate house prices lay the foundation for a mutually acceptable deal. Whether you’re a first-time homebuyer or not, these strategies to negotiate home prices may help you score a property at the price that works best for you.

Why You Should Negotiate House Prices

While negotiating the price of a home as a buyer can seem intimidating, the benefits often outweigh the fear. For starters, negotiating lets the seller know you’re serious about the home. And if the asking price is over what you feel comfortable with, negotiating can help you see if there is any wiggle room.

A successful negotiation gives you the opportunity to create a concise offer that you’re happy with and that helps you stay within your budget. It feels great to get the house you want without putting yourself in a stressful financial situation.

Things to Know Before Negotiating Home Prices

Know Your Market

The market will dictate how much leverage you have to negotiate a home price. So start by determining whether it’s a hot seller’s market or a buyer’s market.

The power is typically in your hands if the number of homes for sale exceeds the number of willing buyers. Markets can vary from city to city and neighborhood to neighborhood. So check with your real estate professional to be certain what type of market you’re working with.

Know the Value of an Agent

Can you buy a house without a real estate agent? Sure, but it’s not a decision to make lightly.

Besides the fact that real estate agents know what’s reasonable for the current market conditions, they have valuable experience that can help you navigate offers and counteroffers. And because they aren’t emotionally attached to the outcome, they are better set up to get the best deal without making ​​excessive concessions.

But you don’t want to work with just any agent. You want to work with someone who is a buying and selling expert, has connections with other agents in the area, and is knowledgeable about the community you’re interested in.

Got your eye on a house for sale by owner? You can find a real estate agent or go it alone.

Recommended: Finding a Good Real Estate Agent When Buying a House

How Much Can You Negotiate on Average?

One of the best ways to get an idea of how much you can negotiate is to research the prices of “comps,” recently sold homes in your target area that are similar to the property you’re trying to buy.

A real estate agent will have access to market trends. But you can obtain the information yourself on sites like Zillow, Realtor.com, Redfin, and Trulia. If you’re moving from out of state, this guide to the cost of living by state can give you a sense of what housing expenses to expect. In a large state such as California, it’s helpful to consider the cost-of-living breakdown for individual cities.

Zillow also lists how long for-sale properties have been on the market, which can give you some insight into how negotiable a list price may be.

Unless you’re in a hot seller’s market, you may be able to offer 10% under the asking price and even ask the seller to pay closing costs or certain other concessions.

How to Negotiate a House Price as a Buyer

Once you have a sense of the market and an agent to help you negotiate, the next step is to get your finances in order so you’ll be in a strong position to negotiate. Sellers are apt to be most enthusiastic about buyers who have been preapproved, as opposed to prequalified, for a mortgage.

While both involve a lender taking a peek at your financial information, such as income, credit history, debts, and assets, preapproval involves an in-depth application and verification process. It’s a great way to send your offer to the front of the pile.

If you already own a home, selling it ahead of time could also put you in a better position to negotiate: It means you won’t have to wait until your home is sold to go forward with the buying process.

This “chain-free” approach requires careful timing and possibly setting up a temporary living space. While it’s not feasible for everyone, it is an option to keep in mind if you’re hoping to increase your odds of success in a competitive market.

Recommended: How Long Does a Mortgage Preapproval Last?

Now it’s time to make a smart offer.

Tips on Negotiating House Prices

Keep Your Cool

From the first time you walk through the home, it’s a good idea not to show all your cards by appearing overeager, even if you’re totally in love with the place. If you come across as desperate for the house, sellers may feel they can expect a higher offer from you.

Don’t be afraid to point out any drawbacks that give you pause, and give yourself time to shop around before you get serious about putting money on the table.

Get an Inspection

Found a property you love? While your mortgage lender might not require a home inspection — and while forgoing one may make your offer more appealing to the seller — it’s probably in your best interests to have one.

Without a home inspection, the only information you have about the house comes from what the seller is able (or willing) to disclose and what you observe during your tour. Home inspections can reveal hidden issues like cracks in the foundation or plumbing problems.

Along with helping you plan for unforeseen repair costs ahead of time, the inspection can also give you leverage to ask the sellers to knock down their price a bit, offer you a credit for closing costs, or fix the problem themselves. Your real estate agent can help you decide how to negotiate the house price after the inspection.

Put Your Offer in Writing

Many experts recommend putting your offer in writing and adding as much detail as possible. That way you avoid any disagreements on what was said and can negotiate on factors beyond price.

When competing against multiple offers on a house, buyers may waive one or all contingencies to sweeten their offer. Contingencies are simply conditions that must be met in order to close the deal.

An appraisal contingency can be an opportunity to negotiate the home price or back out if the property does not appraise at the price in the purchase contract.

A clear title contingency also gives the buyer a way out if liens or disputes are associated with the property.

And it can’t hurt to ask for help with closing costs.

Plead Your Case

In a competitive market, you might also consider adding a personalized letter to your offer. It might sound cheesy, but selling a home can be just as emotionally fraught as buying one. Describing why you love the house or how you imagine your family growing with the property can help your offer stand out from others, even if you aren’t the highest bidder.

Avoid offending a seller with a lowball offer, particularly if you’re negotiating in a seller’s market or purchasing a beloved property that’s been in the family for years. If you do decide to bid around 20 percent under the asking price, make sure you’re willing to walk away.

When it comes time to make an offer, consider not only the list price but closing costs and any repair or renovation expenses.

Knowing When to Walk Away From an Offer

Although you’ll generally hear back on (realistic) offers within a few business days, sellers aren’t legally obligated to respond to your offer at all. Including an expiration date in your offer will give you a firm calendar date on which you’ll know for a fact you didn’t get the home, which means you’ll be able to redirect your efforts.

Purchasing a home can take a long time. There’s no reason to waste your energy when it’s a moot point.

A seller who responds to your offer but who isn’t inclined to move on the price of the house might be willing to instead make repairs that are needed and that are identified during the inspection of the property. And consider asking the seller to throw in items like furniture or play equipment that they might be planning to take with them. If they decline and you still don’t feel good about the price, it’s time to walk away.

The Takeaway

Negotiation goes on in love and war, in a salary decision, with parents and toddlers, and in real estate. If you’re a buyer, the more you know about negotiating home prices, the better.

As important as it is to shop around for the right home — and negotiate for the right price — it’s also important to find the right home mortgage loan. SoFi offers competitive fixed-rate mortgage loans, and qualified buyers can put down as little as 3%.

FAQ

How do you politely ask for a lower price?

Rely on your real estate agent to help you determine a good offer price. Then consider writing a personal letter to accompany the offer, addressing the seller by name if possible and conveying, in a friendly tone, a sincere message about what you like about the house or how you can imagine your family living there.

How much can you negotiate when buying a house?

How much you can negotiate depends on how “hot” the market is. In a competitive seller’s market you may not be able to negotiate at all. Rely on your real estate agent to guide you. A property that has been on the market for a long time may provide more opportunity for negotiation.

What is not a smart way to negotiate when buying a home?

Avoid making a very low initial offer — you risk offending the seller. And don’t criticize the seller’s taste by, say, pointing out that the kitchen decor isn’t to your liking. Finally, if you are preapproved for a mortgage that is greater than your offer price, don’t tip your hand; instead, ask your lender to tailor the preapproval letter to the amount you are offering.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOHL0523020

In housing markets teeming with buyer demand, it’s not uncommon to put an offer on a home only to be outdone by a competing offer. If two or more potential buyers want a property badly enough, they may find themselves locked in a bidding war.

Some market watchers think that pent-up demand from homebuyers and increasing seller activity will make for a busy homebuying market in 2025. And let’s face it: Some markets are always competitive, and new “hot” markets are born regularly.

Here’s how to increase your chances of winning a bidding war so you don’t have to bid adieu to a home you really want.

1. Know How a Bidding War Works

Bidding wars usually take place in a seller’s market, when demand outpaces housing inventory. They also typically occur when there are multiple interested parties and when there is some sort of constraint, like timing.

When a seller’s agent receives offers for a property that has attracted a lot of buzz, the agent may set a date by which would-be buyers should make their “highest and best” offer. Sellers can accept the best offer, counter one offer while putting the others to the side while awaiting a decision, or counter one offer and reject the others.

This brings up a salient point: It’s true that you can buy a house without a Realtor® or real estate agent, but an experienced agent can guide you through offers and counteroffers, contingency snags, and more.

2. Line Up Your Financing

One of the best things you can do to be prepared for a potential bidding war — or really any time — is to get your finances, and financing, in order.

Be sure to know how much house you can afford, including a down payment and monthly payments.

Determine if you qualify for a mortgage by going through the prequalification with several lenders. Familiarize yourself with the types of mortgage loans that are available: government-backed loan or conventional loan, fixed rate or adjustable rate.

Taking the next step beyond prequalification and go through the mortgage preapproval process. Getting preapproved for a mortgage will give you a specific amount that a lender is tentatively willing to let you borrow. A preapproval letter shows sellers that you are a serious candidate to buy a home. Many experts recommend getting at least three preapproval letters from three lenders.

And a preapproval letter shows sellers that you are a serious candidate to buy a home. Many experts recommend getting at least three preapproval letters from three lenders.

3. Lessen or Drop Contingencies

Contingencies are certain conditions that must be met before a real estate deal becomes binding. Potential buyers can back out of a deal without penalty if the contingencies aren’t met.

A clean offer, one with as few contingencies as possible, is attractive to sellers in a competitive market.

In a typical real estate market, a common contingency is the mortgage contingency, or financing contingency, which allows homebuyers to exit the deal and have their earnest money returned if they cannot secure financing by the agreed-upon deadline.

Another is the inspection contingency. Based on the findings of a professional inspection, the buyer may be able to negotiate repairs or the price, which are known as seller concessions if the sellers are agreeable, or cancel the contract.

Waiving contingencies shows your eagerness to triumph, but it comes with risk. The biggest is losing your earnest money deposit if you hit a snag.

4. Be Quick About Any Remaining Contingencies

Sellers want to avoid spending a lot of time with a potential buyer only to have the deal fall through. If you’re including appraisal and inspection contingencies, do what you can to expedite them.

The real estate purchase contract includes any contingencies, the sales price, the closing date, and the date of the title transfer and possession. The contract is considered a working document until both parties agree on the terms.

5. Use an Escalation Clause

Unsurprisingly, one of the best ways to win a bidding war is by offering more money.

You may want to include an escalation clause in the contract if you assume there will be multiple offers. The clause asserts that if another buyer makes a competing offer, your bid will automatically increase by a certain amount, up to a limit, to exceed the offer.

Say you put a $400,000 offer on a home, with an escalation amount of $10,000 and a ceiling of $430,000. If someone else bids $410,000, you will automatically bid $420,000, up to your ceiling.

6. Stay Flexible

A willingness to be flexible can give you a leg up in the eyes of a seller.

For example, a seller might be moving across the country for work and need to close by a specific date. So if you can get the appraisal and inspection done swiftly, that could be a huge plus.

Alternatively, sellers may need to stay in the house for a while. Working with them on their specific needs could give you an edge.

7. Pay With Cash

If you are able to do it, buying a house with cash can be very attractive to sellers. The process is typically much faster than going through a lender, and sellers don’t want to worry about financing issues that might hold up the deal or cause it to fall through.

It’s even possible that a seller would choose a cash offer over a slightly higher offer backed by a mortgage.

8. Increase Your Deposit

There are timeless standards for how to make an offer on a house. One is determining the size of your earnest money deposit.

The deposit, held in escrow by the title company, secures the real estate contract. It tells the seller that you are serious about buying the house.

Earnest money is typically 1% to 3% of the purchase price but can be more in a competitive market. If you close on the home, the deposit will be applied to your closing costs.

9. Write a Personal Letter

When sellers are choosing a buyer during a bidding war, they’re often just looking at numbers on a page. Consider writing a offer letter, aka a love letter, to humanize the transaction.

You might want to make a case for why you’re the ideal candidate to buy the home, and note commonalities: You’re a ceramicist and noticed an artist’s studio in the backyard. You have dogs; they have a dog. That big elm reminds you of the one at your childhood home.

Be complimentary about the things you like about the house and how it has been maintained. And be concise.

The Takeaway

Whether you’re buying in a time of burgeoning bidding wars or not, it’s good to know how they work. The tactics help homebuyers understand the lay of the real estate land — contingencies, earnest money, escalation clauses, love letters — and use them to best effect.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Can a homeowner refuse to sell a house to a particular buyer?

Yes, a seller can refuse to sell a home to a buyer without penalty as long as there is no purchase agreement in place, and as long as the refusal is not a violation of the Fair Housing Act. The act prohibits housing discrimination based on sex, race, color, familial status, or national origin.

When should you walk away from a bidding war?

You’ll know you should walk away from a bidding war when you run the numbers on a home mortgage calculator and determine that the monthly payments just aren’t feasible (or are doable but will keep you awake nights). Other reasons to walk away include: The home was pricey for the market or a stretch for your budget at its initial asking price; there are multiple bidders; or the house wasn’t your dream home to begin with.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This article is not intended to be legal advice. Please consult an attorney for advice.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

SOHL-Q424-139

Saving for retirement is one of the most important steps you can take to help secure your financial future. Your employer might offer a 401(k) retirement plan — and possibly matching contributions as well. However, if you’ve never signed up for a 401(k), you might be wondering whether you can afford to take a chunk of money out of your paycheck each pay period, especially if you’re just starting out in your career.

What is a 401(k) exactly and how does it work? Read on to learn about this retirement plan, including how to open and contribute to a 401(k) account, plus how it can help you save for retirement.

What Is a 401(k)?

A 401(k) is a retirement savings plan offered by an employer. You sign up for the plan at work, and your contributions to the 401(k), which may be a percentage of your pay or a predetermined amount, are automatically deducted from your paychecks.

You decide how to invest your 401(k) money by choosing from a number of available options, such as stocks, bonds, and mutual funds.

Employers may match what individual employees contribute to a 401(k) up to a certain amount, depending on the employer and the plan.

How Does a 401(k) Work?

The purpose of a 401(k) is to help individuals save for retirement. Once you sign up for the plan, your contributions are automatically deducted from your paychecks at an amount or percentage of your salary selected by you.

There are two main types of 401(k) plans. Your employer may offer both types or just one. The main difference between them has to do with the way the plans are taxed.

Traditional 401(k)

With a traditional 401(k), contributions are taken from your pay before taxes have been deducted. This means your taxable income is lowered for the year and you’ll pay less income tax. However, you’ll pay taxes on your contributions and earnings when you withdraw money from the plan in retirement.

Roth 401(k)

With a Roth 401(k), contributions to the plan are taken after taxes are deducted from your pay. Because your contributions are made with after-tax dollars, you don’t get an upfront tax deduction. The money in your Roth 401(k) grows tax-free and you don’t owe any taxes on the withdrawals you make in retirement — as long as you’ve had the account for at least five years.

Traditional 401(k) vs Roth 401(k)

Here’s a quick comparison of a traditional 401(k) and a Roth 401(k).

401(k) Contribution Limits

The amount an employee and an employer can contribute annually to a 401(k) is adjusted periodically for inflation. For 2024, the employee 401(k) contribution limit is $23,000. If you’re 50 or older, you can contribute an additional $7,500 as part of a catch-up contribution. For 2025, the employee 401(k) contribnution limit is $23,500, and for those 50 and up, there is a catch-up of $7,500. Also, in 2025, those aged 60 to 63 can contribute $11,250 instead of $7,500, thanks to SECURE 2.0.

The overall limits on yearly contributions from both employer and employee combined are $69,000 for 2024, and $70,000 for 2025. The limit is $76,500, including catch-up contributions, for those 50 and up in 2024, and $77,500 for those 50 and up, and $81,250 for SECURE 2.0 in 2025.

How Does Employer Matching Work?

If your employer offers matching contributions, they will likely use a specific formula to determine the match. The match may be a set dollar amount or it can be based on a percentage of an employee’s contribution up to a certain portion of their total salary. For instance, some employers contribute $0.50 for every $1 an employee contributes up to 6% of their salary.

Employees typically need to contribute a certain minimum amount to their 401(k) in order to get the employer match.

401(k) Withdrawal Rules

The rules for withdrawals from traditional and Roth 401(k)s stipulate that an individual must be at least 59 ½ to make qualified withdrawals and avoid paying a penalty. In addition, a Roth 401(k) must have been open for at least five years in order to avoid a penalty.

When you take qualified withdrawals from your 401(k) in retirement, you’ll be taxed or not depending on the type of 401(k) plan you have. With a traditional 401(k), you’ll pay taxes at your ordinary income tax rate on your contributions and earnings that accrued over time.

If you have a Roth 401(k), however, the qualified withdrawals you take in retirement will not be taxed as long as the account has been open for at least five years.

When you make withdrawals, you can do so either in lump-sum payments or in installments, or possibly as an annuity, depending on your company’s plan.

401(k) Early Withdrawal Rules

Withdrawals taken before an individual reaches age 59 ½ or if their Roth IRA has been open for less than five years, are subject to a 10% penalty as well as any taxes they may owe with a traditional IRA. However, an early withdrawal may be exempt from the penalty in certain circumstances, including:

•   To buy or build a first home

•   To pay for certain higher education expenses

•   The account holder becomes disabled

•   The account holder passes away and a beneficiary inherits the assets in their account

•   To pay for certain medical expenses

Some 401(k) plans also allow for hardship withdrawals, but there are rules and expenses involved with doing so.

Required Minimum Distributions (RMDs)

If you have a traditional 401(K), you’ll be required to start taking money out of your account at age 73. This is known as a required minimum distribution (RMD) and you’ll need to take RMDs annually. Otherwise, you can face fees and penalties.

The amount of your RMD is calculated based on your life expectancy.

Pros and Cons of 401(k)s

A 401(k) plan comes with benefits for employees, but there are some downsides as well. Here are some of the advantages and disadvantages of a 401(k).

Pros

•   Contributions you make to a traditional 401(k) plan may reduce your taxable income, and that money will not be taxed until it’s distributed at retirement.

•   Contributions you make to a Roth 401(k) may be withdrawn tax-free in retirement.

•   Because you can set up automatic deductions from your paycheck, you are more likely to save that money instead of using it for immediate needs.

•   Your employer may match your contributions up to a certain amount or percentage.

•   The money is yours. If you change jobs or cannot continue to work, you have the ability to either roll over your 401(k) into an IRA or into your next employer’s 401(k) plan.

Cons

•   Investment choices in a 401(k) may be limited. Your employer picks the investments you can choose from, and typically the selection is fairly small.

•   You typically can’t make qualified withdrawals from a 401(k) before age 59 ½ without being subject to a penalty and taxes.

•   You need to take RMDs from a 401(k)starting at age 73. Otherwise you may owe taxes and penalties.

The Takeaway

A 40I(k) plan is an employer-sponsored retirement savings plan that allows employees to contribute money directly from their paychecks. Plus, in many cases employers will match employee contributions up to a certain amount — meaning your retirement savings will grow faster than if you contributed on your own.

If you max out your 401(k) contributions, another option you might consider to help save for retirement is to open an IRA online. Not only is it possible to have both a 401(k) and an IRA at the same time, but having more than one retirement plan may help you save even more money for your golden years.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

FAQ

Are 401(k)s Still Worth It?

It depends on your retirement goals, but a 401(k) can be worth it if it helps you save money for retirement. Contributions to the plan are automatic, which can make it easier to save. Also, your employer may contribute matching funds to your 401(k), and there may be potential tax benefits, depending on the type of 401(k) you have.

What happens to your 401(k) when you leave your job?

If you leave your job, you can roll over your 401(k) into your new employer’s 401(k) plan or another retirement account like an IRA. You can also typically leave your 401(k) with your former employer, but in that case, you can no longer contribute to it.

What happens to your 401(k) when you retire?

When you retire, you can start to withdraw money from your 401(k) without penalty as long as you are at least 59 ½. You will need to take annual required minimum distributions from the plan starting at age 73.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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