I am thinking about making a cash offer for a house, below the current asking price. I would like to make (at least) a rough calculation of a sensible offer amount.

First what I have read already:

Also, a summary of the general situation: it is January/soon February 2023 in the U.S., and real estate is suffering from low supply and low demand simultaneously. Thus the low demand has not led to very much lower prices, relative to the quite high prices during the corona virus economic disturbances. But prices have dropped somewhat over the last several months, and houses now stay on the market a bit longer.

The house last sold in September of 2005. The initial offering (five weeks ago) was at a nominal 41% markup from the 2005 price. But one week ago the price was lowered to be at a 36% markup.

According to the CPI inflation calculator, a 2005 dollar corresponds to a December 2022 amount of $1.49. So naively, I might think a 17-year markup of 49% is reasonable, from the seller's point of view. One factor to consider, however, is that September 2005 is quite near to the peak of the housing bubble; that selling price from 17 years ago perhaps deserves a haircut.

For example, if we take 15% off for the bubble effect, than apply my 49% via the CPI inflation, we arrive at a markup of 27%. I could make the resulting number my maximum price, and make a slightly (at least not insulting) lower offer.

I have two questions regarding these thoughts. Specifically, I wonder if the CPI calculator is a good choice for what I am doing. Here is discussed an HPI (housing price index), and there is an on-line calculator: https://www.fhfa.gov/DataTools/Tools/Pages/HPI-Calculator.aspx

By plugging in my locality, this HPI tool suggests that the 17-year markup for inflation should be more like 55-60%. If this is appropriate, then the current asking price is nearly right where it should be. So then maybe I can hope for a lower price just due to the convenience of a cash transaction? What is a rule of thumb, 8% off for the convenience? I don't know.

More generally, is my approach any good? I'd be curious of any other approach that you might suggest.

  • 1
    Do you have a real-estate agent? They might know. Jan 22, 2023 at 0:59
  • 3
    First time buyer making a cash offer without an agent seems like a recipe for disaster.
    – littleadv
    Jan 22, 2023 at 1:16
  • 3
    Some are covered in the answers here. Generally the risk of damage (missing a step, not insisting on something you don't know you're entitled to, overpaying for services because seller provides them, etc) is significantly higher than the cost of your agent (which in most cases is $0 since the seller pays).
    – littleadv
    Jan 22, 2023 at 1:31
  • 1
    Remember to adjust for house age and any renovations also. A 10-year-old house in 2005 is very different than 30-year-old house in 2023. Usually home price indexes use either average of all houses, or specify an age of the houses considered.
    – jpa
    Jan 22, 2023 at 12:33
  • 2
    Is your objective to buy a specific house for a good price or to buy some house at a (very) good price? Some sellers are quite motivated by the assurance that a cash offer brings, others not so much. If you are most interested in the price reduction an all cash offer brings you need to find the sellers who appreciate it the most. Jan 22, 2023 at 15:52

1 Answer 1


Specifically, I wonder if the CPI calculator is a good choice for what I am doing.

What someone paid for a house 'x' years ago is irrelevant, maybe it required massive repairs at the time they purchased, maybe they've improved it greatly, or maybe they've terribly neglected it. Even if you knew the condition then and now, CPI is too broad to be applied, and likely HPI is as well.

Historically realtors have focused on finding comparable houses in the area that have sold recently to come up with valuations because there are a lot of variables that impact price. When sales slow down it gets more difficult since there are fewer data points. Real estate sites like Zillow and Redfin provide estimates and show comparable houses, useful tools but not without their flaws.

What is a rule of thumb, 8% off for the convenience?

Very unlikely to get a discount that significant for a cash offer unless making concessions like waiving inspection or other. I answered similar here: https://money.stackexchange.com/a/80498/52448

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