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Making an offer on a house is an exciting step in the home buying process, but there are a few things that need to happen before you can make a serious offer.
All your prep work will boil down to a well-crafted, attention-getting offer letter. The letter should describe your interest in making the seller’s home your home. It will also detail any included contingencies and, of course, your offer price.
Want to know how to make an offer on a house – and what happens after it’s submitted? We’ll walk you through the steps you’ll need to take to get closer to homeownership.
What To Do Before Making an Offer on a House
Make sure all your ducks are in a row before you make an offer on a house. Preparing ahead of time can help improve the chances of your offer getting accepted.
A mortgage preapproval letter is a signal to the seller that you’ve already gotten your finances checked out by a lender. It essentially declares that the lender believes you’re good for the money, and they’re willing to lend you what you need.
This valuable first step reveals how much house you can afford. It also shows sellers and their agents you’re serious about buying – and you’ve got the funds to back it up.
Sellers will usually take your offer more seriously if it’s backed by a mortgage preapproval.
Use our mortgage calculator to get a rough estimate of how much you could be approved for.
Set a budget
You can use your mortgage preapproval amount as the basis of your budget, but there are other factors you should consider before making an offer. Consider some of the hidden costs of buying a home that could influence your offer, including closing costs, moving fees, taxes, maintenance and repairs.
Knowing how much house you can afford will help you make an informed decision when you’re ready to make an offer.
Find a real estate agent
You’re going to need a partner. A real estate agent will be your much-needed right hand for the rest of these steps. They’ve been through this before, and they have valuable expertise to offer.
When it comes to finding a real estate agent, get referrals. Ask friends and family who’ve been through the home buying process for recommendations.
But recommendations can only get you so far.
You’ll need to check an agent’s credentials and work experience to make sure your agent is someone who understands your goals and will support you throughout the process.
Pick a home
There’s no offer letter if you haven’t picked a home. Put home-listing sites on your binge-watch list. Visit open houses and make a point of checking out the homes your real estate agent finds.
When you’re touring homes, use a house-hunting checklist and keep a sharp eye out for the features or amenities that are important to you. Don’t be shy. Ask the seller or seller’s agent questions about the home’s features and the neighborhood to help you narrow your choices.
How To Make an Offer on a House
Making an offer on a house can be stressful, especially in a seller’s market. But it doesn’t have to be.
Here are the steps you’ll want to take to successfully submit an offer on your new home:
1. Decide How Much To Offer
Once you’ve found the home that ticks off all the boxes, you’ll start to assemble the offer. First, you’ll need to decide how much to offer. You can’t pluck your offer price from thin air. There are lots of considerations that will factor into the final number.
To help you come up with a strong offer price, there are a few things you’ll want to know about the house, including:
- The seller’s asking price
- How old the house is and what repairs might need to be made
- How long the house has been on the market
- If the house has had any major renovations
- How long the owner has lived there
- If there’s a lot of competition for the house
Each of these factors will play a role in determining how much money you should offer.
Your real estate agent will come in handy here. They can help you factor in all these details and create a good offer that sticks to your budget and gives you room to negotiate.
Your agent will also do a comparative market analysis and see what similar homes in the surrounding area have sold for recently (aka real estate comps).
They should also be able to spot any trends in the local market that might be worth noting. This will help them determine whether it’s a buyer’s or seller’s market, and that will affect your offer price.
2. Settle on Your Contingencies
Contingencies are conditions that must be met for a sale to go through. If they aren’t met, a buyer can walk away from the deal and get their earnest money deposit refunded (that’s money you give the seller to take a house off the market). Contingencies cover everything from loan approval to a home inspection to repairs you want the seller to make.
Some contingencies could put extra work on a seller’s already full plate. Keeping contingencies to a minimum may appeal to the seller and help your chances of getting your offer accepted.
Here are the five most common contingencies:
A financing contingency, also known as a mortgage contingency, means that the offer is contingent on your getting approved for a loan. While you may be preapproved, you’ll still need the lender’s final stamp of approval on the loan.
Home inspection contingency
The home inspection contingency is one of the most common contingencies included in a buyer’s offer letter. It states that you plan to have a certified inspector evaluate the home within a set time frame. This gives you an out if a major problem is discovered during the home inspection. The findings could also affect your offer price or move you to ask the seller to make repairs before you buy.
The appraisal contingency states that if the house is appraised lower than the purchase price, you’re no longer on the hook to buy the home. Lenders typically want this contingency included to protect their risk. It also protects the buyer from losing their earnest money deposit if the house has a lower appraisal value than the asking price.
Home sale contingency
The home sale contingency makes the sale contingent on the buyer selling their current home by a set date. They can back out of the offer if their home doesn’t sell.
With a title contingency, if the seller can’t transfer the title to the buyer without any liens or encumbrances (aka third-party claims against the property), the buyer is free to walk away from the sale.
If liens showed up during the title search, it would complicate things. A title contingency is a great way to protect yourself.
3. Write the Offer Letter
It’s finally time to write the offer letter to buy the house. It should be personal, engaging and short. If you’re working with a real estate agent, they will use their expertise to help write this letter for you.
If you choose to write the letter yourself, make sure to include:
- The property’s address
- Your name
- The seller’s name
- Sale price
- Offer price
- Earnest money deposit amount
- Information for the title company and closing attorney
- Time and date the offer expires
- Proposed closing date
End your letter on a positive note with a sincere thank you. Making a good impression may just be the thing that slips your offer letter into the seller’s “seriously considering” folder.
What Happens After You Submit an Offer To Buy a House?
Once you’ve submitted your offer, it’s up to the seller and their agent to decide how they want to respond. In the best case scenario, your offer will be accepted – but your offer may be countered or even denied.
Here’s how to proceed in any scenario:
If the seller accepted your offer
Some home offers are accepted without much or any back and forth, but this isn’t normally the case. If you’re among the lucky few to get their home offer accepted after submitting it to the seller, you can start moving forward with your mortgage lender.
If the seller countered your offer
It’s common for sellers to return with a counteroffer that outlines what they want changed in your offer. It could be the asking price, the contingencies or something else you added to the letter.
The seller may disclose whether they have multiple offers or a higher offer in the mix. Multiple offers or a higher offer could result in a bidding war. You’ll want to know whether your initial offer was a lowball offer or if it was competitive. The seller may ask you to boost your offer closer to or higher than the asking price.
If you find yourself in this situation, you’ll need to evaluate what you’re willing to let go of and compromise on – and what you’re not willing to let go of or compromise on. You start negotiating once you communicate your concerns or compromises back to the seller or their agent.
Negotiating may feel intimidating, but don’t let it scare you from buying the house you want. Besides, this is one of the reasons why you hired an experienced real estate agent. Rely on them to help you evaluate the seller’s counteroffer and decide how to respond.
If the seller denied your offer
Getting your offer denied never feels good, but it’s not uncommon. You may have been beaten out by a slightly higher offer. The seller may have decided they no longer want to sell their home. Or maybe it just wasn’t meant to be.
Don’t let this get you down. The right home will come along. Take what you learned from this and use it to your advantage the next time you find a house you want to put an offer on.
4. Finalize and Sign
Once you and the seller agree on the purchase price, contingencies and closing date, the house is considered “under contract.”
But don’t pop that bottle of bubbly yet.
After your offer is accepted, you’ll start working on getting approved for the mortgage loan. You’ll make an earnest money deposit and work with your lender on the appraisal, title search and scheduling a home inspection.
Depending on what was negotiated, the seller may start prioritizing any agreed home repairs.
Yes, anyone can make an offer on a house. And if your offer is accepted, it will become a legally binding contract. Without certain contingencies, it may be difficult to back out of the deal penalty-free. So think twice before you put an offer in on a house.
The size of your offer will depend heavily on the market. If you’re trying to purchase a home in an overheated seller’s market, consider offering 1% – 3% over asking. But if you’re in a buyer’s market, you may be able to offer below the asking price, though you won’t want to go so low that you risk offending the seller.
Help persuade a seller to accept your offer by:
- Making sure you’re preapproved
- Offering above the asking price in a hot market
- Increasing your earnest money deposit
- Structuring your offer around the seller’s motivation to sell (think: closing on the seller’s preferred date, etc.)
- Making a “clean” offer with no contingencies
- Making an all-cash offer (if you can)
- Adding an escalation clause to your offer
In short, yes. You can back out of the offer, but the consequences you’ll face (if any) will depend on how far along in the process you are and whether there are contingencies in place. Until the purchase agreement is signed (read: legally binding), the buyer and seller can back out of the offer.
In terms of consequences, you might lose your earnest money deposit, which would compensate the seller for taking their property off the market. And you’d risk being sued for breach of contract once you’re past the negotiation stage.
With the Right Offer, Homeownership Is Within Reach
Making an offer on a house is a big step toward your homeowning aspirations. To succeed, you’ll need to make more than the right offer. You’ll need to make the right offer for you.
It’s a tricky balance, but you should work closely with your real estate agent to make an offer that’s in line with your budget – but competitive enough to stand out.
Home is worth it.
The mortgage process can be exciting, and we’ll be with you all the way. Take the first step to owning a home. You’ll be glad you did.
The Short Version
- Work closely with real estate industry professionals, like a real estate agent and a mortgage lender, to strengthen your offer
- Your offer letter should be personal and respectful and include any information you need on the home, any contingencies and your offer price
- Negotiating on offers may be intimidating, but it’s common practice. Buyers need to compromise with sellers on what matters most to both parties
National Association of REALTORSⓇ. “December 2021 REALTORS® Confidence Index Survey.” Retrieved December 2022 from https://www.nar.realtor/blogs/economists-outlook/december-2021-realtors-confidence-index-survey-fewer-buyers-waiving-appraisal-inspection-contract