Have your real estate agent pull up the most recent sold comparables (CMA) within a reasonable radius of the home, so you can compare the home with other similar homes in terms of location, size, features, and amenities.
Next, consider the most current market conditions, so you can choose the right offer strategy.
In a buyer's market, discounts are common because there are fewer buyers, more properties for sale, and home prices are soft or falling so offers under list price are common.
In a seller's market, homes sell quickly for full price or higher because there are plenty of buyers and few homes for sale.
Whether you are in a buyer's market or a seller's market, your goal is to buy the home at a fair price. If you were the seller, what is the lowest possible price you'd accept?
To show the seller you're serious, include a copy of your lender's pre-approval letter, along with a cover letter summarizing your strengths as a buyer in terms of creditworthiness, flexibility in closing, and why you love this home. Include a copy of the comparables you used to show why your offer is a fair price for the property.
If the seller's home is offered at a reasonable price, don't waste time. Pay asking price or close to it. A home priced to sell will sell quickly and you'll lose it if you mess around.
Offering too little for a property is risky. If the seller feels insulted by your offer, you've lost the opportunity to negotiate. On the other hand, some sellers are simply unrealistic about their home's value. Maybe your offer will be their wake-up call. The seller will probably respond with a face-saving still-high offer, but at least they're negotiating with you.
If your offer is conditional, such as your need to sell another home before closing on the seller's, you'll have to find a way to sweeten the deal, such as a full-price offer. Few sellers will accept a discount and a contingency.
Your real estate professional will help you draft the offer with a price, estimated closing date and terms, including earnest money (a guarantee that you'll perform as a buyer in good faith,) final approval by your lender and your right to have an inspection. Your earnest money check will be forwarded to the escrow agent when your offer is accepted.
You'll have a brief period to get your home inspections completed. Your home inspector will go through the home with you and point out the condition and potential lifespan of all systems and appliances. You should only renegotiate when a problem wasn't obvious before, or when a system is found to be unsafe or not functioning.
Once you and the seller have agreed to terms, your offer is now a binding contract and you're on your way to owning a home!