Your budget is $400,000. You see a house you love, and it’s listed at $400,000. Perfect match, right?
Not so fast.
If you’re thinking of buying a house in 2026, you’ve likely noticed the U.S. is experiencing a peculiar housing market that won’t allow home shopping to be that simple. You’ll need to budget for the anxiety question: “How much should I offer over the asking price?”
Work With a Top Agent to Nail Down Your Offer
Most people only buy one or a few homes in their lifetime, but experienced agents help buyers all the time. When it comes to making a solid offer on your dream home, who you work with matters.
As you consider this balancing act, here’s what potential home buyers around the country can expect in the coming year:
- The National Association of Realtors® (NAR) predicts that existing home sales will increase 14% in 2026.
- NAR expects mortgage rates to ease to 6%.
- Fannie Mae is also forecasting 2026 to end with mortgage rates at 5.9%.
“[2026] is really the year that we will see a measurable increase in sales,” NAR Chief Economist Lawrence Yun said. “Home prices nationwide are in no danger of declining.”
However, real estate is a highly local game, explains James Strum, a Richmond, Virginia-based agent with 20 years of experience. “There are so many variables. Is [the buyer] jumping into a beautiful, polished home with all the finishes in a hot market?” Or are you shopping in a city where homes have been sitting on the market for a while?
So, how much should you offer to pay over asking price? Factors such as your budget, preapproved amount, local market trends, appraisal, and even competing offers can help you decide on an appropriate amount. Our expert-backed guide is here to help you dive into these considerations.
5. Write a strong offer letter
Yes, money is important. (Very important!) But it’s not the only factor that will set your offer apart. Consider what else might sway a seller besides the price. Your agent can help you figure this out.
For instance, when sellers sell their homes quickly, they might need a place to stay to bridge the time before finding a new place to live. If this is the case, you can offer a rent-back arrangement, allowing the seller to stay in the home as a renter for a specified timeframe after closing.
Beyond that, think about how much you can put down. Can you offer a larger down payment? Can you offer more earnest money — a good-faith deposit to show you’re a serious buyer — as a way to entice the seller? Can you even pay in cash if you have the means to do so?
Can you eliminate contingencies? For example, adding a sales contingency to an offer means you are asking the seller to enter into a waiting game with you. You can see how another offer without a home sale contingency can look more appealing to the seller.
Remember, if you’re financing the purchase, you might not be able to eliminate some contingencies. At the very least, your lender will require an appraisal or financing contingency written into the purchase agreement.
6. Work with your agent to determine your offer price
With all this in mind, you’re ready to work with your agent to write your offer.
In some cases, you can set yourself up for success with an escalation clause. This means your offer price will automatically escalate higher than any competing offers, typically in pre-specified increments, up to a limit that you decide. While this can be a good tool in a highly competitive market, it won’t always apply, Strum says.
“An escalation clause says, ‘I’m prepared to give you X number of dollars, but you need to show me that next-highest offer in order for me to go that high,’” he explains.
“We’re seeing sellers who won’t allow escalation clauses. When agents specify, ‘no escalation clauses,’ it really gets that buyer thinking — and oftentimes, they’re offering higher than they probably would have if they were allowed an escalation clause.”
7. Be prepared for a possible low appraisal
An appraisal contingency is commonly found in real estate contracts. It allows the buyer to back out of the deal if the home doesn’t appraise at the purchase price. But depending on the local market and how much you love the home, it may make sense to waive the appraisal contingency in an effort to get your offer accepted.
If you and your agent decide together to go this route, prepare yourself for a possible low appraisal — because it could mean you’ll have to pay more out of pocket to close the deal.
“Now you’re going to be bringing that much more to the table as far as cash to bridge the difference on the shortfall of the appraiser,” Strum says, adding that this is another reason that a wise buyer will know their budget backward and forward.
He cites this example: Let’s say you’re offering $550,000 for a house listed at $500,000. Your down payment is $110,000. If you waive the appraisal contingency, and the house appraises at $510,000, then you’ll most likely have to pay the $40,000 difference yourself. If you decide to divert some of your down payment money toward paying the appraisal gap, you could end up increasing your loan-to-value ratio. (That’s the ratio between the amount of your home loan and the property’s total value, typically expressed as a percentage.) The higher that percentage is, the higher the assumed risk by the lender — which means the conditions of your mortgage loan could change.
Save thousands when buying a home
HomeLight-recommended real estate agents are top-tier negotiators who understand the market data that helps you save as much as possible when buying your dream home.
In this example, you might use some of the money you set aside for a 20% down payment to help you bridge that $40,000 difference, which means that your down payment is now $70,000, or 13.7% of the property value. Your loan-to-value ratio has increased, from 80% to 86.3%. As a result of the smaller down payment and higher loan-to-value ratio, you’ll now be paying mortgage insurance on the loan, and you may have to pay a higher rate while you’re at it.
If all of this sounds daunting… well, it can be. But if you’ve done all of your homework and come in fully prepared to write a standout offer, you’re well on your way to scoring that home you love and building your personal wealth.
HomeLight can connect you with a top-performing agent in your market who can guide you from that first offer, through the negotiations and inspections, to your homeowner closing day.
Header Image Source: (fizkes / Shutterstock)
English (US) · 