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A college education is an investment in the future. But as with any investment, it’s important to consider what you’ll get in return — your ROI — to determine if the cost is worth it. And so college students and their parents are weighing the cost of college against future earning potential, as well as intangibles like friendships, network building, and soft skills.

This guide explores the “return on education” for bachelor’s degrees, and offers insights into how to maximize the value of your college education.

Average Cost of a Degree

Choosing the right college is a multifaceted decision. Considerations include where the school is located, whether it has programs that meet your interests, what student culture is like, and of course price.

The price tag for college can be jaw dropping. The average cost of college for an in-state student attending a four-year university is $27,146 per year (including living expenses). Students that attend private, nonprofit universities spend an average of $58,628 per year living on campus.

💡 Quick Tip: Fund your education with a low-rate, no-fee SoFi private student loan that covers all school-certified costs.

Return on Investment by Education Level

You can determine your ROI by education level by looking at the ratio of the cost of your degree to your expected income once you graduate. Your return on education is much like a traditional ROI calculation, which looks at the ratio between net profit and cost from investing resources.

In this case, time and money are the resources you’re investing, and your future income is the profit. The ROI for your education will depend largely on how much you spend on your schooling, what type of job you get after school, and to a certain extent what you major in.

Median 40-year ROI for a College Degree, per Education Data Initiative

Associate Degree Return on Investment

Associate degrees can typically be completed in one to two years and often at a community college, which can make them more affordable than four-year degrees. According to data from the Education Data Initiative, the ROI for an associate degree is 363.5% after 20 years.

Bachelor’s Degree Return on Investment

Bachelor’s degrees typically take students four years to complete. According to Education Data Initiative, the ROI for a bachelor’s degree is 38.1% after 20 years. Keep in mind, though, that this estimated return on investment can vary greatly based on the major you pursue. For example, computer science degrees offer an ROI of 716.6%.

Master’s Degree Return on Investment

A master’s degree can be completed after a student receives their bachelor’s degree. This degree allows the student to specialize in a specific area of interest, such as those who pursue a Master in Business Administration, or MBA. The ROI for a master’s degree is 90.1% after 20 years, according to Education Data Initiative.

Doctoral Degree Return on Investment

A doctoral degree is generally the most advanced degree one can get in a particular field. Doctorates can take up to eight years to complete, though the exact timing will vary depending on factors like the program type, structure, and research being completed by the doctoral candidate. The estimated ROI for doctorate degrees is 84.0% after 20 years, according to Education Data Initiative.

Professional Degree Return on Investment

Professional degrees are advanced degrees that prepare a student to work in a particular field, such as law or pharmacy. After 20 years, the ROI for a professional degree is 60.4%, according to Education Data Initiative.

Highest Earning Degrees

The return on education will vary depending on the degree program you choose. For example, a student with a computer science degree may earn more than an English major. There are exceptions, but it’s a good idea to understand the norm for particular fields. These are some of the highest-earning degree programs.

Associate Degree

As mentioned, an associate degree takes about two years to complete and can often be finished at a community college for significantly less than it may cost to get a four-year degree. Associate degrees often allow students to specialize in a specific trade or field, and in some cases, this specialization can lead to a high-earning career.

One of the top-earning post-associate degrees is air traffic controllers. According to the Bureau of Labor Statistics (BLS), air traffic controllers earn a median income of $137,380.

Dental hygienists, MRI technicians, and funeral service managers all earn an average salary of $70,000 or higher, making them top associate degrees based on earning potential, as well.

Bachelor’s Degree

According to Best Colleges, some of the bachelor’s degrees with the highest earning potential include chemical engineering, computer engineering, computer science, finance, and business analytics.

For example, in 2023, chemical engineers earned a median salary of $112,100. Financial analysts earned a median salary of $99,890 per year, according to the BLS.

Certifications

Some people may consider adding a certification to their resume in order to boost their earning potential. Professional organizations often award certifications for specific skill sets. Some top earning and in-demand certifications include those for project management and data engineering.

Recommended: Guide to Student Loans for Certificate Programs

Bachelor’s Degree ROI by Major

The ROI can vary quite a bit based on the type of bachelor degree pursued. As mentioned, computer science degrees have some of the best ROI for bachelor’s degrees — about 716.6% over 40 years, according to Education Data Initiative. Take a look below at a list of majors and their estimated ROI after 40 years, according to Education Data Initiative:

•     Business finance — 710.2%

•     Business accounting — 547.2%

•     Electrical engineering — 517.8%

•     Biology — 225.0%

•     Communications — 209.3%

•     Architecture — 188.6%

•     Fine Art — 70.5%

Consider What Can’t Be Measured by Money

Yes, going to college or pursuing other higher education opportunities can be expensive. But in addition to the cost and potential boost in earning potential, there are a variety of intangible benefits that can’t be measured by a dollar. For example, college students living on campus are gaining a newfound independence and developing life skills they’ll carry with them.

Plus, many colleges have strong alumni networks that can help when a student is looking for a job post-grad. Students have the chance to not only get to know themselves better, but in the process they may make lifelong friends.

Recommended: How to Budget as a College Student

Controlling Costs

One way to improve ROI is to lower the amount of money you are paying for school. This could be particularly useful if you already know you want to pursue a career in a relatively low paying field.

Scholarships

You can help offset the cost of tuition by looking for scholarship programs that help pay your tuition and other college expenses. Many schools offer need-based financial aid to families who might otherwise struggle to pay tuition costs. In some cases, you could even get a full ride.

You can find scholarships by looking at your school’s financial aid website, connecting with your guidance counselor, or reviewing databases or online scholarship search tools.

In some cases, you may be able to apply for unclaimed scholarships to help supplement the aid you have already received.

Grants

Students may qualify for grants directly from their school or through federal financial aid. Grants typically do not require repayment, so they can be an incredibly helpful addition to a student’s financial toolkit when it comes to paying for college. Pell Grants are one type of grant awarded by the federal government to students who demonstrate exceptional financial need.

Pell Grants are available to undergraduate students. In order to maintain eligibility for a Pell Grant, undergrads will also be required to meet satisfactory academic progress requirements.

Student Loan Forgiveness Programs

If you need to take out student loans to help pay for college, keep an eye on your terms and interest rates to help keep costs down. If you take out federal loans and plan to work for certain non-profits or government organizations, you may be eligible for loan forgiveness under the Public Service Loan Forgiveness (PSLF) program. After making 10 years’ worth of qualifying monthly payments, the remaining balance of your loan may be forgiven through this program.

Private Student Loans

Private student loans don’t qualify for federal benefits like PSLF, but they can be helpful tools for students who have exhausted their federal financial aid.

If you are interested in paying for college or another higher education degree with a private student loan, take the time to shop around and review interest rates, terms, and other fees or benefits offered by lenders. 

Employer Support After Graduation

Finally, some employers may also help you pay back your student loans as part of a benefits package. Consider working for an employer who offers these benefits.

Recommended: Finding Jobs That Pay Off Student Loans

The Takeaway

College students can estimate the return on their educational investment by looking at how much they’ll pay for their degree and comparing it to their lifetime earnings. Though important, the money you’ll eventually earn isn’t the only thing you should consider when choosing a college. Getting a bachelor’s degree can help you acquire skills and expand your horizons in ways that aren’t directly related to your degree or job prospects.

When you decide on the right school for you, take the time to consider all your options — including scholarships, grants, federal and private student loans, post-graduation repayment programs, and other sources of public and private funding — to help you achieve your education and career goals.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

What is the average return on investment for a college degree?

The average return on investment (ROI) for a college degree varies by field, but generally, bachelor’s degree holders earn significantly more over their lifetime than those with only a high school diploma. On average, the ROI for a college degree ranges from 9% to 10%, but can be higher depending on the major and institution.

Which degree has the highest return on investment?

Degrees in fields like engineering, computer science, and technology typically have the highest return on investment (ROI). These degrees often lead to high-paying jobs with strong job security and growth prospects, resulting in a significant lifetime earning advantage compared to the cost of education, making them highly valuable investments.

Is a bachelor’s degree a good investment?

A bachelor’s degree is generally a good investment as it can lead to higher lifetime earnings, greater job stability, and more career opportunities compared to having only a high school diploma. However, the return on investment depends on the chosen field, the cost of education, and individual career goals and outcomes.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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.

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.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOISL-Q324-052

Most people you know who have bought a home have probably done so with the help of a Realtor® or real estate agent. In fact, a 2023 report shows that 89% of home purchases involve a Realtor or broker. (Realtors, by the way, are real estate agents who belong to the National Association of Realtors, requiring them to adhere to a certain code of ethics; we’ll use the terms interchangeably here.)

But agents may charge a fee, so you might be asking yourself, “Do I need a Realtor or real estate agent to buy a house?” The answer is no — you aren’t required to go through a professional to complete the transaction.

That said, doing without an agent is not a decision to make lightly. Buying a house is likely the biggest investment you’ll ever make. So if you make a mistake in the home-buying process, there’s a lot of money and possibly other risks on the line. Let’s take a look at the pros and cons of going solo as a home shopper.

What Does a Real Estate Agent Do?

Before you decide whether or not to forgo a real estate agent, it can be a good idea to brush up on what they actually do.

Real estate agents are licensed to help clients buy and sell real estate. Realtors, as mentioned, have to follow an ethics code, which includes putting their clients’ interests first.

Among the work that real estate agents do for buyers is:

•   Look for property listings that fit their clients’ goals

•   Check out listings in person

•   Write offers and counteroffers

•   Be present for inspections

•   Help negotiate with the seller

•   Troubleshoot any roadblocks that come up

They can also often help with a variety of referrals, whether to a mortgage broker, a home stager, a real estate lawyer, or a contractor.

How to Buy a House Without a Real Estate Agent

If you want to join the few buyers who forge ahead and buy a house without a Realtor, it’s important to prepare yourself to take on the tasks agents normally do.

Especially if you’re green, it’s essential to learn how you can prepare to buy a home. Here’s a rundown of some of the key responsibilities you will likely need to manage.

Step 1. Consider Your Mortgage Options

Unless you are an all-cash buyer, you’ll need to explore the different types of mortgage loans. You could get prequalified for a mortgage with several lenders so you have a sense of what size mortgage loan you might qualify for.

Step 2. Research Neighborhoods

As you zero in on neighborhoods that meet your criteria, then it’s a good idea to do your research and learn the price of recent sales. This will help you understand if the homes you tour are priced correctly — and if they fit within your budget.

Step 3. Get Preapproved For a Home Loan

As your house search starts to heat up, you’ll probably want to get preapproved for a mortgage. Once your application is processed, you’ll have a preapproval letter to share with sellers to reassure them that you’re serious about buying. The lender will consider your income, your debt-to-income ratio, credit scores, and ability to make a down payment and meet closing costs.

Step 4. Hire a Home Inspector

When you find a home you’re interested in, it’s recommended that you hire a home inspector. This professional will issue a report that lets you know the ins and outs of a home’s condition and may lead to further negotiation.

Step 5. Request a Seller’s Disclosure

Ask for a seller’s disclosure, a document that can contain information about repairs and upgrades the seller did on the home as well as problems they’re aware of. You can ask them about any structural problems; condition of the HVAC, plumbing, and electrical systems; mold and mildew; termite damage; the presence of lead paint, radon, and asbestos, and so forth.

Step 6. Make An Offer

The offer will include the amount you’re offering, what you’d like to stay in the home (such as appliances), and closing dates. Including an appraisal contingency in the offer means you can cancel the contract if something goes wrong without losing your deposit.

Recommended: How to Make An Offer On a House

Step 7. Hire a Real Estate Lawyer

It’s usually a good idea to hire a real estate lawyer to prepare documents and look over your contract before you sign it.

Step 8. Negotiate

Sellers, meanwhile, will likely include a loan contingency. During this part of the process, there may be counteroffers and negotiations between you and the seller about the price of the home or repairs you might want the seller to make. The appraiser will also file a report on the home, so that you and your lender can feel confident the home’s value matches its price. Keep copies of all communications as negotiations progress.

Step 9. Finalize Documentation and Close On Your Property

At the closing of the loan, you’ll need to sign documents and handle other aspects that a Realtor might typically help you with.

It is typically recommended that the buyer obtain owner’s title insurance, which protects the buyer against title defects such as mechanic’s liens and other after-closing problems. It usually costs about $1,000, but will vary with the price of your home and from state to state.

Recommended: How Long Does It Take to Close On a House?

Benefits of Buying a House Without a Realtor

Buying a home without a real estate professional can have some upsides. Here’s a closer look at the benefits you might reap.

1. Saving Money

Historically, there wasn’t much incentive for a homebuyer to work without a real estate agent because the agent’s commission fees were paid by the seller. But starting in mid-2024, the landscape changed. Now real estate commission fees are changing, and there is no guarantee that the seller will pay the buyer’s agent. Instead, the buyer and agent need to discuss a fee structure before they begin working together. You might find that an agent is paid an hourly fee, or perhaps charges a flat rate. Some agents may request a percentage of the home price.

While working without an agent may save you money, how much is up in the air. The only thing you can be certain of is that if you don’t use an agent, you will work harder to find a home and close the deal.

2. Info Galore

If you’re planning on buying a house without a Realtor, you likely have access to some of the same information that the pros do. Historically, agents had lots of insider tidbits about listings.

Now, you can instantly find out about new properties and neighborhood demographics with the click of a button online. That means taking the buying process into one’s own hands is considered by some as increasingly feasible. Plus, there are an array of great tools to help you with calculations, like a home affordability calculator.

And since no one knows what you are looking for as well as you do, the search process can sometimes be more efficient.

3. A Familiar Real Estate Deal

One situation where it might make sense to eschew an agent is if a friend or family member is selling you the property.

Although risks may still be involved, the transaction may be more straightforward if you are buying a house from a relative or someone you know well. You still want to make sure you and the seller are clear on the price, closing date, what furniture or fixtures will be included, contingencies, and more.

It is typically recommended that a buyer review and approve home inspections and obtain full loan approval in writing before lifting certain contingencies.

If it is known that a contingency date cannot be met or another material change takes place after the contract is written, such as a seller credit for closing costs, a contract addendum executed by all parties outlining the change is usually obtained.

Drawbacks of Buying Without a Realtor

Not hiring a real estate agent or Realtor to assist you with your home search comes with disadvantages and risks.

1. All the Work

You have to be constantly on the ball, keeping a lookout for properties and arranging a time with sellers to visit them.

The process can be exhausting and time consuming, and if you aren’t attentive, you could let great homes slip by or make the hunt longer than it might have been with a real estate agent.

You’ll also have to navigate the world of mortgages (from the mortgage basics to possibly buying points to bring down your rate) without an agent to serve as a sounding board or offer a second opinion.

2. All the Risk

You’ll be on the hook for all the details of the transaction. Without an agent, you’ll need to determine the correct bid price and terms, watch the contract contingency dates, and know the ins and outs of the purchase contract.

Agents are experienced in helping to point to hidden flaws in the property or transaction.

If you don’t have a real estate agent in your corner to help research the proper bid price, you may risk paying more than you need to on the home — which may work out to more money spent.

3. Your Pool of Knowledge May Not Be That Deep

Agents have access to information that’s not necessarily online, thanks to their connections with other real estate agents, inspectors, etc.

Then there’s the experience factor. Most agents operate under a seasoned broker who oversees and consults on various transactions.

It could take a lot of effort to figure out what a Realtor has learned through years on the job and ongoing education. That learning curve may not be worth your time.

Factors to Consider When You Buy Without an Agent

So now that you have read about how to buy a home without a Realtor, as well as the pros and cons, perhaps you are still thinking that flying solo is right for you. If so, do one more check-in and consider these factors:

Market Knowledge

You will not have in-depth, ongoing insight into housing prices in the area where you are searching. A Realtor can help you understand pricing history, potential upcoming property-tax hikes, local drainage or flood potential, and more. They are often skilled at pointing out distinctive features as well as potential problem areas with homes.

Negotiation Strategy

Real estate agents typically have years of experience knowing when a home seller is negotiable and by how much. They can guide you through offers and counteroffers, as well as bidding wars. They also know next steps if a home inspection points out significant problem areas or if there are hitches as you work through your mortgage contingencies. This can save you time and stress, as well as keep your deal in play.

Red Tape and Paperwork

Bidding on and purchasing a home involves all kinds of paperwork, including mortgage applications, offers, contracts, title searches, and more. For someone who is not familiar with the process (you, quite possibly), this can be a steep, time-consuming, and possibly frustrating learning curve. A Realtor can help alleviate a chunk of this burden.

Professional Connections

As noted above, it can take a village of professionals to finalize a home sale. Some of the people who may be involved include mortgage brokers, home inspectors, roof inspectors, real estate lawyers, contractors, and more. Most real estate agents have an extensive network to quickly get you the connections you need to qualified professionals.

The Takeaway

Do you need a real estate agent to buy a house? No, you don’t. It’s entirely possible to learn how to buy a home without a Realtor and perhaps avoid paying for the agent’s time and expertise. Just realize all of the work and risk involved in finding a home, making an offer, handling contingencies, and closing the deal.

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 you make an offer on a house without a real estate agent?

A buyer is not required to be represented by a real estate agent in order to make an offer on a house, but unless the house is for sale by owner, you’ll need to work with the seller’s agent to communicate your offer to the owner.

Does buying a house without a real estate agent reduce the price?

Not necessarily. Even if you, as the buyer, are not represented by a real estate agent, the seller may use an agent to list and show the home and process offers.

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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.

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.

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.

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

SOHL-Q324-048

For both buyers and sellers, real estate inventory is a key factor to note. When inventory is abundant, buyers may have the upper hand. If the list of available properties is short, sellers may be able to command higher prices. This means that whether housing inventory is high or low can impact your strategy if you are hunting for a home or trying to get yours sold.

It pays to keep your eye on the market, as inventory can sometimes change swiftly. In recent memory, we’ve seen a pandemic-fueled buying frenzy that fueled bidding wars. As mortgage rates rose, some markets evolved into low-demand, high-availability scenarios.

Here’s a closer look at how to gauge the local real estate market and navigate high and low housing inventory through the perspective of buyers vs. sellers.

What Is Housing Inventory?

An area’s real estate inventory can be thought of as the current supply of properties for sale. The housing inventory will increase or decrease according to the difference between the rate of new listings on the market and the number of closed sales or houses taken off the market for other reasons.

Although this calculation can be done at any time, it’s common practice to assess the balance at the end of the month. Comparing monthly figures can show if housing inventory is trending up, down, or staying relatively stable.

If there appears to be a rapid trend in either direction, it may signal the need to take quick action on a purchase or sale (seeking preapproval for a home loan, for example), or take a wait-and-see position and hold off for a while.

Even within a town or city, real estate inventory can vary significantly. To better understand your local housing market trends, you can dig deeper into important indicators like average time on the market and average price of nearby homes or in your desired neighborhood. Next, we’ll delve into this in more depth.

High Housing Inventory

An area with a high housing inventory has more properties on the market than there are people looking to buy. This can also be referred to as a buyer’s market, since the larger selection of homes usually favors prospective buyers more than sellers.

These conditions may cause the price of homes to stagnate or, in more extreme cases, fall. Typically, the average property will also take longer to sell in this environment.

Still, there’s a huge variety of financial situations and unique property characteristics out there. Each case will be different, but here are some considerations if you’re buying or selling during a moment of high housing inventory.

If You’re a Buyer Amid High Housing Inventory

In many cases, shopping for a new home during high housing inventory can be a blessing.

•   Take it slow (or at least slower). You may be able to see multiple properties before making an offer and size up which home best suits you. High housing inventory means there are fewer buyers to compete with, so there’s less of a risk that homes will quickly get scooped up.

•   Shop around. Knowledge is power when it comes to making an offer. Having viewed comparable houses in the area firsthand could help when it’s your turn at the negotiating table.

•   Do your research. Other property details, such as price reductions and total days on the market, are potential indicators that sellers might be ready to accept an offer below asking price.

Although buyers can have a comparative edge when housing inventory is high, there is, of course, still a chance of multiple offers and bidding wars for well-priced homes. There are likely to be others who want to take advantage of what may be called a soft market in real estate terms.

Recommended: A Guide to Real Estate Counter Offers

If You’re a Seller Amid High Housing Inventory

Putting a property on the market in a location with high housing inventory may require investing more time to find the right buyer. After all, you’re not the only game in town. However, there are several strategies at a seller’s disposal to unload a house without financial loss.

•   Fix it up. To stand out in a crowded field, it can help to address any persisting issues and accentuate your home’s best assets. Parts of the property in need of common home repairs — the foundation, electrical system, HVAC system, and so on — could discourage potential buyers. Instead of accepting lower offers or other concessions, sellers may save more money by handling the repairs before putting the house on the market.

•   Improve it. Making improvements can be helpful, too. A kitchen reno may be out of reach in terms of time and money, but doing a thorough cleaning and tidying up landscaping are easy fixes that could make a better impression on prospective buyers.

•   Declutter. It’s another way to enhance a house for showings and listing photos. It could also indicate a shorter turnaround for buyers eager to move quickly.

•   Price it right. When all is said and done, setting an asking price that’s not too far above similar properties may be necessary to keep your property on buyers’ radar.

Low Housing Inventory

Also known as a seller’s market or a hot housing market, an area with low housing inventory has a surplus of interested homebuyers and a shortage of available listings.

Usually, sellers in an area with low housing inventory can get a higher price for their property. Thanks to the abundance of buyers, It’s not uncommon to see multiple offers and bidding wars for any type of housing stock.

Let’s take a closer look at how to make the most of low housing inventory for either side of the deal.

If You’re a Buyer Amid Low Housing Inventory

Although the odds may not favor buyers in a low housing inventory environment, they still have some options to increase their chances of finding a dream home.

•   Think beyond price. In a multiple-offer situation, the highest price may not be the most advantageous deal for the seller. Being flexible on the closing date and limiting contingencies can affect an offer’s competitiveness.

•   Get prequalified or preapproved. Doing the legwork, researching the different kinds of mortgages in advance, and getting prequalified can show that buyers are ready to go and financially eligible. Typically, lenders provide potential borrowers with a letter stating how much they can borrow, given some conditions.

◦   Preapproval, which involves analysis of at least two years of tax returns, months’ worth of income history and bank statements, and documents showing any additional sources of income, can carry more weight and speed up the mortgage application process.

•   Consider cash. If you can swing it, a cash offer is often seen as advantageous because there’s no risk of the deal falling through from a denied mortgage loan.

•   Opt for an escalation clause, a method for beating out competing bids. The clause means a buyer automatically will increase their initial bid up to a specified dollar amount. For example, a buyer with an escalation clause could offer $250,000 with an option to bump up to $255,000 if another offer exceeded theirs.

•   Know what a place is worth. Even in a seller’s market, house hunters would do best to keep appraised values in mind. If buyers pay thousands more than the appraised value of a house, their home equity could take a hit.

If You’re a Seller Amid Low Housing Inventory

When the forces of supply and demand favor sellers, they have a better chance of fielding multiple offers on a property. Still, getting a great deal is not a sure thing as many factors affect property value. Here, some advice to help you take advantage of this scenario.

•   Spruce it up. The same conventional wisdom applies for cleaning and touching up a house to get more foot traffic at showings or open houses.

•   Set a reasonable asking price just below the market value — a figure based in part on comps, or comparables, which reveal what similar homes in the same area have sold for recently. This can be a good way to capture buyer interest. In a multiple-offer situation, this gives buyers room to outbid each other, potentially increasing the purchase price above asking.

•   Look past price alone. If faced with more than one offer, it may be tempting to go for the highest bidder. It can be beneficial to review each buyer’s finances and contingencies to lower the risk of a deal falling through.

•   Recognize that cash is king. Cash offers are generally the most secure. These have risen significantly in the current hot market, according to a National Association of Realtors® report. They made up 32% of sales in February of 2024, the highest rate in a decade.

•   Check contingencies. If there are offers with contingencies like the house passing an inspection, they could allow a buyer to back out of a deal; an offer that waives such contingencies is likely preferable.

Recommended: What Is a Mortgage Contingency? How It Works Explained

Other Considerations When Buying a Home

Housing inventory can be an important factor when looking for a new home and may impact your experience in a positive or negative way. Knowing how to negotiate both scenarios, whether as a buyer or seller, can help you get the best deal with the least amount of stress.

You’ll also have other considerations to keep in mind as you shop for your home. These may include:

•   How much you can put down

•   What type of mortgage works best for you

•   How much your mortgage will cost

•   What your closing costs will be

•   How much you’ll need for any necessary renovations

•   What the property taxes are

The Takeaway

For both buyers and sellers, the amount of available housing inventory can have an impact on the home purchase process. Keeping tabs on the market you’re shopping or selling in and looking carefully at competing properties (buyers) or competing offers (sellers) can help you get the most from your real estate deal.

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

What does inventory mean in real estate?

Inventory is the number of properties available for sale in a particular real estate market. It is often recorded once a month, so that trends can be observed.

Why is housing inventory so low?

Several factors have contributed to low housing inventory: During the Great Recession that began in late 2007, construction of new homes declined and took many years to recover. More recently, mortgage rates trended upward, causing many people who might have sold a starter home to stay put rather than put their home on the market. Finally, investors have been buying up available properties and renting them out, taking them out of the sale market.

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.

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.

SOHL-Q324-046

Putting an offer on a home involves more than naming a price. Assuming that you’ve been preapproved for a mortgage and that you’ve found a home in your price range, there’s a customary method to follow in submitting an offer that stands out but also protects you.

In a hot market — where you might encounter a bidding war, compete against cash buyers, or be asked to waive a contingency — it can be vital to know the process. But even in a less heated market, it’s important to know what making an offer on a house involves, the steps for making an offer in real estate, and what to do if you change your mind when making offers in real estate (it happens!). Read on for tips that will get you from homebuyer to homeowner.

Making an Offer on a House

So let’s say you’ve found that mid-century marvel or stately townhome of your dreams. You’re ready to go for it. Here’s how the process of making an offer in real estate typically goes.

1. Determine Your Offer Price

A home’s listing price is often set by comparing it to similar homes in the area that are for sale, then adjusting up or down based on additional amenities or detrimental issues. But as the old saying goes, “A home is generally worth what someone is willing to pay for it.”

You might find a property that’s fairly well-priced and consider coming in close to asking, or you may want to adjust your offer if you feel that it’s priced too high or needs a lot of work.

There are lots of things to consider when trying to find the right offer price.

•   A common way to break down a listing amount is by price per square foot, but that often includes only the heated, livable spaces. A home can (and should) be priced higher than average for the area if it includes extra rooms like a garage or attic, outbuildings, or extra land, which add to its value. Superior workmanship or permitting in place for potential changes can also play a role in increasing a price.

•   Check the home’s history on the multiple listing service. It records every transaction related to the house, including previous buy and sell dates, price fluctuations, and how long the home has been on the market. It can give you a good idea of where the sellers are coming from in terms of what they paid for the property.

•   Take a look at other properties in the area that have recently sold. Is the price per square foot more or less than the home you have your eye on? One key to an accurate read on the local market is to ensure that you’re comparing apples to apples when it comes to the number of bedrooms, bathrooms, square footage, garage space, and other amenities. Your broker can likely provide what are known as “comparables” for the area to help with this process.

Recommended: Mortgage Preapproval Need to Knows

2. Incorporate All the Fees

It can also be important to look at factors not directly related to the price of the property that could affect your overall cash flow. One big consideration is closing costs, which typically average 2% to 6% of the total cost of the home. So let’s say you are considering a $400,000 mortgage loan; the closing costs (origination fees, title search, any points, and more) would be between $8,000 and $24,000.

It’s also important to estimate the amount of money you’ll spend making repairs or changes to the property once you move in. As long as the repairs are not related to health or safety issues, which could affect financing, one tactic could be to lower your offer price in order to free up cash for future upgrades.

Or you might plan on getting a home improvement loan after buying the house, provided you have enough equity to access those funds.

3. Determine Your Earnest Money Deposit

The next step in making an offer in real estate is to figure out your earnest money. What’s earnest money? It’s a good-faith deposit that buyers place with the offer up front, usually amounting to around 1% to 3% of the offer price, to show that they are serious, especially when there are multiple offers on a property.

It’s held in escrow by the title company. Showing purchase intent in this way can help a buyer get to the top of the seller’s list.

Customs and laws pertaining to an earnest money deposit can vary from state to state, and even from county to county, so it’s important to understand the rules that determine when the money is (and isn’t) refundable.

4. Protect Yourself With Contingencies

The time between a signed offer and closing day is called the due diligence period, and it’s when the buyer will normally set up a home inspection and possibly a land survey or other inspections for specialty items, such as a septic system or a pool, and the lender will order an appraisal.

Because the contract is signed before inspections and the appraisal take place, contingencies give you an out if you discover a deal-breaker.

Here are the most common contingencies when making offers in real estate:

•   Financing This lays out the specifics of the financing that will be used by the buyer, which must be fully approved by the lender within the contingency period. This protects the buyer in case financing falls through.

•   Appraisal If the appraisal comes back lower than the agreed-upon price, the seller and buyer may find themselves renegotiating.

•   Inspection The buyer usually has 10 days after signing the contract to order an inspection, and the contingency remains in place until it comes back without uncovering any major issues with the property that were previously unknown. Based on the findings, the buyer can cancel the contract or negotiate repairs or the purchase price. (If the seller agrees to pay, these are called seller concessions.)

•   Title search A preliminary title report shows the home’s past and present owners and any liens or judgments against the property. If any title disputes are unable to be resolved before closing, you have the option to exit the sale.

In some situations, the list of contingencies can be long. But once they’re all satisfied and lifted during the given timeframes, the option to buy turns into a binding commitment to purchase the home.

5. Submit a Written Offer

In real estate, the best way to make an offer official is to put it in writing. If you’re working with a real estate agent, the agent will have a form that you can fill out together that lists the offer price and contingencies and covers all the state rules and regulations.

If you’re flying solo, working with a real estate lawyer or title company can help to ensure that your offer covers all the necessary legal language and is legally valid.

This concept goes both ways. As the buyer, it’s a smart idea to make sure all correspondence, counteroffers, and property disclosures are put in writing by the seller as well.

Recommended: How to Win a Bidding War

6. Move Ahead, Move On, or Move Things Around

Once you submit your written offer, one of three things is likely to happen: The sellers sign the document and enter into a binding contract, they reject the offer outright, or they submit a counteroffer.

In this last case, the sellers might counter back with changes that are better suited to them. (If your offer includes a price reduction to accommodate repair costs, for example, the seller might ask for the full asking price and offer a credit back at closing instead.)

A counteroffer puts the ball back in the buyer’s court for approval, rejection, or another counteroffer, and it can keep going back and forth until both parties agree to the terms and sign the document or one party calls it a day.

What If You Change Your Mind About Buying a House?

Contingencies give you a way out in the event of some unforeseen issue, but what if you just decide you don’t want the house? Cold feet can be a real thing!

Although the laws vary by state on this topic as well, in most instances a buyer is allowed to withdraw an offer until the moment the offer is accepted. However, once the offer document is signed by both parties, it’s considered a binding agreement.

At that point, the sellers may be well within their rights to walk away with your earnest money if you don’t decide to move forward.

The Takeaway

How to make an offer on a house? It pays to understand comps, contingencies, the temperature of the market, earnest money, and counteroffers. You’ll consider your price, keeping track of all fees that will be involved, and make your bid in writing, typically with what’s known as an earnest money deposit. Then sit back and await the seller’s response.

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

Should I use a real estate agent to buy a house?

An agent familiar with the local market can help you determine the right offer amount and hold your hand during the negotiation process, which is especially helpful in a hot (seller’s) market. An agent can also help coordinate everything leading up to the closing and ensure that you (and your financing) meet critical deadlines.

Is a deposit required when making an offer on a house?

Yes, your offer will come with what is called earnest money, a good-faith deposit of 1% to 3% of the proposed purchase price, which will be held in escrow during negotiations about the house.

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.

SOHL-Q324-052

There are many different types of college financial aid available to college-bound students, with student loans being an option that many students consider. Roughly 46 million students have federal student loan debt.

Students who need additional financial aid can choose between federal student loans or private student loans. However, there are many benefits of federal student loans that private loans don’t always guarantee.

10 Benefits of Federal Student Loans

1. No Credit History Is Required

A significant advantage of federal student loans is that many government-owned student loans don’t require a credit history or credit check. The only federal student loan that requires a credit check to determine eligibility is a Direct PLUS Loan.

To see if you’re eligible for federal student loans, you’ll need to submit a completed Free Application for Federal Student Aid (FAFSA®).

Recommended: How Credit History can Impact Student Loans

2. No Cosigner Required

Private student loan lenders might require a cosigner for student borrowers who don’t have a credit history or credit score. However, students who haven’t established their credit are still eligible to apply for a federal loan without a cosigner.

Having no cosigner requirement is an additional step to lending that federal student loan borrowers can avoid.

3. Fixed Interest Rates

Fixed interest rates are among the notable benefits of student loans owned by the Department of Education.

Generally, private student loans allow borrowers to choose between fixed or variable interest rates. A fixed rate doesn’t increase or decrease throughout the loan term, making monthly payment amounts easier to anticipate.

Variable student loan rates can be advantageous during a low-rate environment, but borrowers risk their interest rate changing at any point during the repayment term. This variable feature can make it more challenging to predict how much money to budget toward monthly payments during repayment.

4. Low Interest Rates

A higher interest rate increases how much you’ll pay toward your college education overall. Generally, federal student loan rates are lower than private student loans or when using high-interest credit cards to pay for college expenses.

5. Interest Doesn’t Accrue During College

Federal Direct Subsidized Loans are designed so that borrowers aren’t responsible for paying back interest that accrues while in school.

Interest that accrues on loans from this federal program is paid by the government while the student is enrolled at an eligible school at least half-time. When you leave school, any interest that accrues on Direct Subsidized Loans is the borrower’s responsibility to repay. Students who borrow Direct Unsubsidized Loans or PLUS Loans are responsible for repaying interest that accrues while they are in school. Subsidized federal loans are only available to undergraduates.

6. Forbearance and Deferment Options

Some private loan lenders offer forbearance and deferment options to borrowers who need to temporarily pause their student debt repayment. However, these options vary between lenders and some might not offer forbearance and deferment at all.

An advantage of federal student loans is that they offer extensive forbearance and deferment options for different situations. For example, eligible borrowers can request deferment while undergoing cancer treatment, during economic hardship, while enrolled in school, during unemployment, and more.

Federal student loans offer general or mandatory forbearance, depending on your situation. Borrowers who are eligible for forbearance can request it if they need to pause or reduce their monthly payment for a short period.

7. Repayment Grace Period

Another benefit of federal student loans is that they come with an automatic six-month grace period. The grace period kicks in when the student graduates, leaves school, or drops below half-time enrollment.

This time frame gives federal loan borrowers additional time to get their financial situation ready, like securing an income or a job, in preparation for repayment.

8. Income-Driven Repayment Options

Borrowers who are unable to afford their monthly student loan payment may be able to enroll in an income-driven repayment plan.

Income-driven repayment plans offer 20- or 25-year terms. Payment amounts are limited to 10% to 15% of a borrower’s discretionary income. Depending on a borrower’s situation, their payments might be as low as $0 per month.

9. Student Loans Can Be Discharged

Borrowers of federal student loans might not be required to repay their federal loans in certain circumstances. A federal loan discharge might apply when:

•   The school closes while the borrower is enrolled.

•   A borrower experiences total and permanent disability.

•   The borrower dies.

•   The borrower of a Perkins Loan works as a teacher or other eligible professional.

•   The borrower’s school affected the loan or the borrower’s education in some way.

•   A school falsely certifies the borrower’s loan eligibility.

•   The borrower who has withdrawn from school doesn’t receive a refund of the student loan funds from their servicer.

10. Student Loan Forgiveness

Access to student loan forgiveness is another advantage of federal student loans. Unlike student loan discharge which requires borrowers to have experienced an extraneous situation to qualify, student loan forgiveness is more accessible to borrowers.

The Department of Education offers loan forgiveness through Public Service Loan Forgiveness (PSLF), Teacher Loan Forgiveness, and loan forgiveness under an income-driven repayment plan.

For example, PSLF requires participants with Direct Loans to make 120 qualifying monthly payments under an income-driven repayment plan. Borrowers must be working full-time at a qualifying employer. Qualifying employers include nonprofit organizations or government entities during the time the required payments were made.

After the required payments are made, their remaining Direct Loan balance can be forgiven. Note that the forgiven balance may be considered taxable income by the IRS  under certain situations.

Alternatives to Student Loans

Although federal loans offer borrowers many benefits, there are limits that mean not all students are able to finance their education entirely with student loans. Student loans are one type of financial aid, but there are other ways students can finance their education. These include:

Grants

Grants can be need- or merit-based. They’re provided through the federal or state government, by the student’s school, or via third-party organizations. Pell Grants and Teacher Education Assistance for College and Higher Education (TEACH) Grants are a couple types of federal grants.

Unlike student loans, recipients aren’t generally required to pay back grants for college.

Scholarships

Scholarships, like grants, aren’t repaid by the student after leaving school. Scholarships can be found through schools, private and nonprofit organizations, community groups, employers, and professional associations.

This aid option might be available based on students’ merit or need.

Private Student Loans

Federal student loans offer many benefits, but as briefly mentioned, there are annual and aggregate borrowing limits. For students who either don’t qualify for federal loans or have reached the maximum limit, applying for private student loans is another option.

Private student loans are available from state organizations, banks, credit unions, and online lenders. Borrowers must have qualifying credit, and loan features and terms of private student loans vary by lender. Again, it’s important to note that private student loans are not required to offer the same borrower benefits as federal student loans.

The Takeaway

Federal student loans offer a variety of borrower benefits, including no credit score requirements, fixed interest rates, and deferment and forbearance options for borrowers who face financial difficulty during repayment. However, students may need to rely on a variety of different finding sources to pay for college.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

What is the average student loan debt amount?

In 2024, the Education Data Initiative reported that the average student loan debt is just over $40,000. This includes both federal and private student loans.

Are student loans bad for your credit score?

Borrowers’ student loan payment status is reported to credit bureaus. Student loans can be advantageous toward building a credit history when payments are made on-time and in full.
However, making late payments or missing payments can adversely affect a borrower’s credit score.

What are the key advantages of federal over private student loans?

There are numerous benefits of student loans from the federal government compared to private student loans. The main advantage is that federal loans offer multiple repayment options, including income-driven plans that can bring monthly payments as low as $0, and most federal student loans do not have a credit score or credit history requirement.

Additionally, federal borrowers receive automatic deferment during school, and an automatic grace period after leaving school.

Photo credit: iStock/AndreaObzerova

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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.

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.

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.

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