Even the best listing agents/Realtors get stumped by a variation of this question. When there are a lot of closed comps (recent sales) it can be easier, but it's not as simple as a price per square foot.
Every home is different. And sometimes, the list price is what the seller has instructed the listing agent to post, and may be over market.
KEY POINT: Just because a home has a specific list price, that does not mean the home is worth that, nor does it mean that you must offer that.
This is where a good Buyer's Agent comes in. Experience and local market knowledge is critical in evaluating the list price on a home, compared to other active competitors of similar size, condition and amenities.
KEY POINT TOO: Keep in mind that many upgrades, while nice, might help the home sell more quickly, but may not increase the value of the property.
Ultimately, the true value of a home is what a buyer is willing to pay, and what an appraiser will support.
Unless you can buy your home with cash, you will be getting a home loan. Your lender will require an appraisal, which will be part of their determination on whether to give you the loan or not. No one wants to pay for a home inspection and an appraisal, and then discover that the home doesn't appraise high enough to match the contract price.
It's best to avoid that disappointment by evaluating the market and comps, both active and closed, prior to writing an offer or hiring an inspector.
When you have a Buyer's Agent, that Realtor works specifically for you.The Seller's Agent will be working to keep every penny in the Seller's pocket possible, and your agent should be doing the same for you. That means considering the list price, but weighing all active competitors and recent closed properties to confirm fair market value for that home. While it isn't an appraisal, all solid Realtors can do a Broker's Professional Opinion (BPO) and will utilize it in discussing your offer with you.
ANOTHER KEY POINT: Seller concessions ARE a discount in the purchase price.
Contrary to current belief, the seller is not obligated to pay buyer closing costs! If you write an offer and are asking for the seller to pay your buyer closing costs and to provide a home warranty, you are already getting a "discounted price" from the seller. Those items add up and come out of the Seller's pocket (typically 3-4%), plus they are paying the real estate commission (ranges from 5-9%, but negotiated at time of listing), their own closing costs, and sometimes the title policy. This could easily diminish the sellers net by 11% or more, before they pay off their mortgages and pro-rated property taxes. Your Realtor should discuss this with you and show you the real costs to the seller when you make an offer. This is particularly crucial when you are competing with other buyers for the same property. When you are in a multi-offer situation, you must put your best offer out there, as you may only get one chance to win the contract.
Keep in mind:
1) Never offer more than what you can comfortably afford or believe the home and neighborhood is worth.
2) Any concessions you ask from the seller IS the same as a discount in price
3) If your Realtor cannot provide you with a BPO for both active and closed properties, you should reconsider working with them. Professionals know the market and can evaluate property to assist you in making a good decision on your offer.
4) Multi-offer situations call for your highest and best offer. You will usually only have one shot at it. IF the seller sends you a counter offer, and you've given your highest and best, stick firm and be willing to walk away.
5) If you MUST have this house, you may have to pay a premium price if you have competition. Discuss with your Realtor and real estate attorney adding language in the contract that if the home does not appraise at the negotiated price, the seller will drop the price to meet the appraised value (they are not obligated to do this, otherwise.)
6) Your Realtor works for you, and is there to assist you in making a good decision. If you are considering making offers on your own, remember, a Buyer's Agent costs you nothing in most cases, but not having representation can cost you thousands in the long run.
We hope these thoughts are encouraging and empowering, and wish you every success in finding the perfect place to call home!