How to Make an Offer on a House

To ensure that you receive the house you desire without paying too much, begin by following these tips to make an offer on your dream house.

#1. Get Pre-approved for a Mortgage

Getting pre-approved for a mortgageis the first step toward placing an offer on a home.

You’ll need to supply some basic income and credit information, as well as the approximate purchase price you’re looking at, to get pre-approved. After the lender has gone through the calculations, you will be given the interest rate, closing cost estimates, monthly payment amount, and the purchase price you qualify for. You will also receive a letter of pre-approval.

When submitting an offer on a house, always include your pre-approval letter. This demonstrates to sellers that you have the requisite financing to back up your offer. Make sure that you are receiving a pre-approval rather than a pre-qualification. Because pre-qualifications are not subject to a credit check, they are erroneous and untrustworthy. More importantly, most sellers will only accept pre-approval letters with their offers.

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#2. Find the Right Home

It’s time to start looking for a home now that you’ve been pre-approved. Begin by viewing listings online, setting up listing notifications on various real estate platforms, and coordinating tours and open houses with your real estate agent.

When you find a home that interests you, delve deep into the facts. You’ll need to know the following to make an incredible, most competitive offer:

How long it’s been on the market: Generally, the longer a home is on the market, the less competition it has. This could imply an increase in bargaining power.
How long has the present owner been there: Long-term homeowners may have an emotional relationship with their home, making them less likely to accept a lower price or be pickier about the buyer.
If it has recently been refurbished or expanded: Request the seller’s disclosures about the property from your agent and verify with the city permitting office to see if any modifications or extensions were recently done. Depending on what you discover, your offer price may change.
What it’s like to live in the neighborhood: Understand the community and its features, as well as its location, closeness to retailers and companies, and school district. Take a look at recent home sales in the area as well. This might help you choose a suitable offer price.

The more you know about a property, its location, and its history, the more compelling your offer will be. Keep in mind that you are not alone in this. Allow your real estate agent to advise you along the route; they are the experts in this field.

#3. Calculate Your Offer

Numerous factors contribute to the starting price you select when making an offer on a house: your budget, the local market, the seller’s status, and the house’s condition, to name a few. This is the point at which you will thank yourself for hiring a competent real estate agent.

Your agent’s role is to understand your needs, the local market, and the best strategy for each property. Feel free to ask your real estate agent several questions and conduct your research, but also place your trust in your agent’s knowledge.

>> More: How to Buy a House (Step-by-Step)

#4. Decide How Much Earnest Money to Offer the Seller

Your purchase agreement will state how much money you’re putting down as an earnest money deposit. This money shows the seller that you’re serious about your offer since if you walk away from the agreement in any way that isn’t allowed under your contract, the seller keeps the money. Offering a larger earnest money deposit than the competition can help your offer stand out in a competitive market.

Earnest money deposits are typically 1 to 3 percent of the buying price of the home. If your offer is accepted, you will place your deposit in an escrow account, which is a special bank account where neither you nor the seller will be able to access it until the deal is completed. If everything goes well, your deposit will usually be taken from what you owe the seller when you close the house.

#5. Research and Decide on Contingencies

Contingencies are clauses in your contingent offer that you include to safeguard yourself. They enable you to withdraw from the transaction without forfeiting your earnest money deposit or running afoul of the law.

There are five distinct categories of contingencies:

Home Inspection: Before closing, you’ll want to have a home inspection completed on the property. Ahome inspection contingency enables you to renegotiate or walk away from the agreement entirely if significant flaws are revealed.
Appraisal Contingency: This contingency permits you to renegotiate or withdraw from the purchase if the home’s appraised worth is less than the price you’ve offered.
Mortgage Contingency: This contingency allows you to withdraw from the transaction if your mortgage loan falls through.
Home Sale Contingency: This is for buyers selling their existing homes. It states that you promise to purchase the seller’s home, but only when your current residence sells.
Title Contingency: Under this contingency, you may walk away from the deal if the property has title concerns.

Because contingencies increase the seller’s risk, eliminating some of them can help make your offer more competitive. However, you should consult with your agent first. Waiving real estate contingenciesis rarely recommended and may have severe consequences.

#6. Write Your Offer Letter

Next, draft your offer. Your agent will handle the paperwork, but you must review and sign it before giving it to the seller. Included in your offer letter:

The seller’s name
Address of the property
Names of those on the title, including yourself
The buying price and down payment you are willing to offer
Earnest money deposit
Include any contingencies you choose.
Requests for seller concessions
A list of all fees and closing costs
Dates you want to close on the house
Your selected house move-in dates
A deadline to accept or decline the offer

Because real estate contracts vary by state, more items may be required where you live. Regardless, thoroughly review everything to ensure that all information is valid, and nothing is left blank. Your agent or a real estate attorney can assist you in ensuring that your offer adheres to all applicable local laws and regulations.

#7. Negotiate with the Seller

After receiving feedback from the seller, the next step is to either make the necessary payments or head into negotiations with the sellers. Remember that the seller may decide to send a counteroffer or reject your offer, especially in a seller-based real estate market.

More importantly, you may decide to negotiate for a reduction in the home price or increase your earnest money deposit if you find yourself in a bidding war with other potential buyers. Don’t worry, your real estate agent should be able to guide you through the process.

What Is Included in an Offer Letter?

When you’re ready to make an offer, your real estate agent can assist you with contacting the seller and submitting a written offer. Your real estate agent will most likely write the actual offer letter, but here are some items to include:

The address of the home
Your name and the names of anyone buying the house with you, like your spouse
The amount of your offer
Any contingencies you’re requesting (i.e., conditions that must be met before the sale is a done deal), such as a successful home inspection
Any seller concessions you’d like (i.e., things you’re requesting from the seller), such as cash toward closing costs
Items you want to include in the sale, like appliances and window treatments.
The amount of your earnest money deposit
Your approval letter lets the seller know that you won’t run into any financing problems.
The date you expect to close
The date you want to move into the house.
The deadline to respond to your offer

Understanding Seller Disclosures

On the other hand, Seller disclosures are almost always mandated by law. Sellers are required to report whether they are aware of any issues with the property that may affect its value, such as natural dangers, structural flaws, or other significant deficiencies.

However, the types and amount of information that sellers must provide vary by state, and sellers are not always aware of every potential concern that a property may have. Disclosures may also include information such as homeowner association commitments and whether appliances and fixtures are included with the transaction.

Your offer should include a deadline for the seller to provide all required disclosures. The purchase offer should also specify how many days you have to evaluate the disclosures, as well as your right to change or withdraw your offer based on these disclosures.

What Happens After You Submit an Offer to Buy a House?

Below are some scenarios that you may experience after submitting an offer to buy a house:

Seller Accepts

Did the seller accept your offer? If the answer is yes, congratulations! You may now issue the earnest money check and sign the sales contract. Now is the time to contact your mortgage lender and arrange a home inspection and appraisal appointment.

Seller Counters

If the seller counteroffers, you have options. You can either accept the offer as is or create your counteroffer. If you decide to negotiate and make a counteroffer, be aware that it may take several rounds of discussions to reach an agreement.

Not just the price can be negotiated. You can eliminate contingencies, adjust the closing date, or offer a lease-back, allowing the seller to rent the home while looking for a new one. You’ll need to work closely with your agent during this stage.

Seller Rejects

Occasionally, things are not meant to be. Perhaps you undervalued the offer, or the seller is not prepared to sell. While a refusal may leave you unhappy, keep in mind that the house you love today may seem like an albatross in five years if you can’t afford it comfortably. Consider the event as a learning opportunity and resume your home search. The home of your dreams may be just around the corner.

How Long Does It Take to Make an Offer on a House?

There is no set-in-stone time frame required of you to make an offer on a house. However, you must study the fine print of the seller’s disclosure and other home-buying data before submitting an offer.

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Do Real Estate Agents Help You with Submitting an Offer?

Yes, your real estate agent can advise you on what to offer as your initial purchase price and when to increase your offer. Your real estate agent may also help you submit your offer to the seller or seller agent, depending on your agreement with the agent.

Can I Make an Offer without a Real Estate Agent?

You do not have to deal with a real estate agent to purchase a home. You can compose your offer and submit it to the seller (if it’s for sale by the owner) or the seller’s agent. However, tackling it alone without the assistance of a knowledgeable realtor (especially if this is your first time buying a property) may not be the most excellent decision.

Can You Back Out After You Submit an Offer?

Until both parties agree on all the terms and sign the purchase agreement, none of you is legally obliged to do anything, and you may withdraw your offer without penalty.

However, once both buyer and seller have signed, your offer to purchase becomes a legally binding sales contract, at which time you cannot withdraw your offer unless specific stipulations are met. For instance, you are not committed to purchasing the home if your loan does not go through.

Bottom Line: How to Make an Offer on a House

Always keep in mind that, even after making an offer, you have the right to withdraw and walk away before signing a contract. More importantly, it is critical to have an experienced local agent on your side when purchasing a home. From finding your dream home to submitting an offer, a good realtor will be able to research the market, inspect the property in-depth, and collaborate with you to create the most substantial offer possible.

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Elijah Bishop

Elijah A. Bishop is a Senior Personal Finance Writer who has been writing about real estate and mortgages for years. He has a Bachelors of Arts Degree in Creative writing from Georgia State University and has also attended the Climer School of Real Estate. He also holds a realtor license and has been in and out of the US mortgage industry as a loan officer. Bringing over 15 years of experience, Elijah produces content that analyzes ethnicities, race, and financial well-being. His areas of expertise are mortgages, real estate, and personal loans.