A very common question that pops up when people are interested in buying a home is: "How much should I bid on a home?" Unfortunately, there is no hard set rule that states you should bid 5% under asking price. Read on to find out more about the art of making an offer on a home.

Finally, after countless hours of looking up houses online, driving around and looking at houses with for sale signs, setting up appointments with Realtors to view homes and calling the numbers on the houses that are for sale by owner you are finally ready to place your first bid and make an offer on a home. While buying a home and trying to find the "right" home can be a very tedious and long process, it can all be well worth the time and trouble when you find that perfect house that you have been searching for and you are able to get it under market value. So how much should you bid on this house? What determines your initial offering price? How can you be sure you are not offering too  much or too little? Read on to find out the answers.

Making an offer on a home is one of the first really major steps to the home-buying process. There are many that suggest making an initial offer that is equal to 5% or 10% below the market value of the home. For example if a house is being sold for $200,000, then 10% of that would be $20,000 and you would make your bid at $180,000. While 10% seems to be a very good general gauge as to what to make your first offer at, there are a lot of factors and variables that should come into play when deciding what to bid.

First, you should find out how long the home has been on the market, what was the initial asking price and how much has it come down from the original price. A home that has been on the market for a long time may either have problems with it, the seller may be asking to much for the home, or a seller may be becoming desperate to sell the home. This will have a major bearing on how you make your first offer on the home.

Second, throughout your walk-thru (s) of the the home, you should jot down any potential problems, concerns, hazards, defects, worn down appliances, or other types of deficiencies that you see in the home. Make sure you walk in the home a couple of different times and at different times of the day, because you may notice different things in different lights (natural light versus man-made light).

Third, ask questions about why the current homeowners are moving. Pry a little bit to find out as much as you can. If they are moving because of a transfer at work or because they had a new home built somewhere else already, they may be more desperate to sell.

Fourth, Figure out between you and your spouse what is the most you want to spend on a home and what you both feel comfortable with as your maximum bid (actually you should probably do this before you even begin looking at a home). You should also consult with your mortgage professional to see how much you can be qualified for to make sure you all are on the same page. Remember, just because you may be pre-approved for a certain amount does not mean that you have to buy a home worth that much. This is one of the big reasons as to why there are so many foreclosures, because people bought as much as they were approved for instead of what they could afford and maintain their current lifestyle.

Fifth, you need to consider the market conditions. Is it a buyer's market, a seller's market, an extremely "hot" real estate area, etc...? If houses in a certain area or community are selling as quickly as they are listed, you may end up having to pay over market value to buy the home and bidding to low may cause you to lose the home to another buyer. If you are in a slow real estate market, where there are more homes for sale then there are buyers, then you can probably get away with starting pretty low with your bid.  

Lastly, prepare a letter to go along with your offer explaining why you are making your offer. Let the seller know of what problems you can see with the home, items that need to be fixed, appliances that are worn down, etc... to back up your bid. This may help to open the seller's eyes to problems with their home. This letter is extremely useful and beneficial when a house has been on the market for a long time and/or there are a lot of deficiencies or problems with the home.  

Therefore, you can see that there is a lot more to making a good offer on a home above and beyond just bidding 10% under market value. You always want to make sure you buy a home at the best value you can get it for and you do not want to overpay. If you feel that bidding 20% under market value is a good bid on a home, then go for it. If you feel that the house will sell quickly and is a rare find you may want to bid at or close to market value to increase your chances of your bid being accepted. DO NOT let your Realtor dictate your bid or make you feel like your bid is too low. There is nothing wrong with bidding too low and the worst that will happen is your bid will be rejected and no counter offer made (which is rare). Buying a home and getting a good price are easy to do, especially if you put a little time into it and have patience.