How to Properly Make an Offer on a Home

Buying a home involves a complex process culminating in a formal offer. A well-constructed offer reflects a buyer’s serious intent and can position them advantageously in competitive housing markets. This guide covers how to make an offer, from initial preparations to understanding potential responses.

Preparing to Make an Offer

Preparation ensures financial readiness and market understanding. Securing mortgage pre-approval is a key step, providing a definitive answer from a lender on the maximum loan amount. This differs from pre-qualification, which offers only an estimated borrowing capacity without a comprehensive financial review. Lenders typically require documents like pay stubs, bank statements, tax returns, and an employment history check to issue a pre-approval letter, which often takes one to three days to obtain.

Pre-approval clarifies a buyer’s budget, allowing a focused property search within an affordable range. Market research on comparable sales (“comps”) helps determine a competitive offer price. Agents use recently sold properties with similar characteristics (size, bedrooms, location) to establish fair market value. Analyzing these comparables, ideally from the last three to six months within the same neighborhood, provides insight into local market conditions and helps avoid overpaying.

A real estate agent guides buyers through preparation, offering expertise in market data and offer strategy. They access detailed comparable sales and advise on how market dynamics (buyer’s or seller’s market) might influence an offer. Buyers should also review property information, including seller disclosures, which outline known issues or conditions. This helps understand the property’s true state and potential future costs before committing.

Key Elements of a Home Offer

A formal home offer outlines the terms for purchasing a property. The offer price is a primary component, balancing the buyer’s budget with market research and comparable sales data. It reflects the maximum amount the buyer will pay.

Earnest money, also known as a “good faith” deposit, accompanies the offer to show serious commitment. This negotiable deposit typically ranges from 1% to 3% of the purchase price, though it can be higher in competitive markets. It is usually held in an escrow account and applied towards the buyer’s down payment or closing costs at closing. If the deal falls through for a reason not covered by a contingency, the seller may retain this deposit.

Contingencies are clauses protecting the buyer, allowing withdrawal from the contract under specific conditions without losing earnest money. A financing contingency (30-60 days) permits cancellation if a mortgage loan cannot be secured. An appraisal contingency allows exit if the home’s appraised value is less than the offer price, as lenders typically only finance up to the appraised value. This contingency often spans 17-20 days.

The inspection contingency (typically 7-10 days) allows a professional home inspection. If significant issues are discovered, this allows requesting repairs, negotiating a lower price, or withdrawing. Another less common contingency is the sale of a prior home, making the current purchase dependent on selling an existing property. The specified closing date (often 30-60 days from offer acceptance) marks the target for finalizing the transaction.

The offer details inclusions and exclusions, clarifying which items are part of the sale. Permanently affixed items (heating, electrical, lighting) are typically included. However, non-permanently attached items (appliances, window treatments, decorative objects) should be explicitly listed as inclusions if the buyer expects them to remain. Conversely, any fixtures the seller intends to remove must be specified as exclusions.

Submitting Your Offer

Once all terms and conditions are decided, submitting the home offer begins. The buyer’s agent prepares the purchase agreement and related documents. This integrates the offer price, earnest money details, and various contingencies.

The agent ensures the offer package is complete, typically including the signed purchase agreement, mortgage pre-approval letter, and proof of funds for the earnest money deposit. These documents demonstrate the buyer’s financial capability and readiness. Offers are commonly submitted electronically to the seller’s agent, though in-person delivery might occur.

Sellers often set an offer deadline, especially in competitive markets, to manage multiple submissions. After submission, the buyer’s agent usually confirms receipt with the seller’s agent. This signals the offer has entered the seller’s consideration phase, awaiting review and response.

Understanding Offer Responses

After submitting an offer, buyers can anticipate several responses. The most straightforward outcome is acceptance, meaning the seller agrees to all terms. Upon acceptance, immediate steps typically involve opening escrow (where a neutral third party manages funds and documents) and depositing earnest money.

A common scenario is rejection, where the seller declines the offer without changes. A buyer might move on to other properties or, after re-evaluating strategy and market, submit a revised offer. Rejection can provide an opportunity to refine the offer based on feedback.

A counteroffer is a frequent response, indicating the seller is interested but proposes modifications. Common items subject to counteroffers include purchase price, contingencies, closing date, and specific inclusions or exclusions. For example, a seller might counter with a higher price, shorter contingency period, or a different closing date.

Upon receiving a counteroffer, the buyer has several options: accept, reject, or issue their own counter-response. This can lead to a negotiation cycle with multiple rounds until both parties reach a mutually agreeable contract. If a seller receives multiple offers, they may choose the most favorable one, not always solely based on price but also considering the strength of contingencies or closing terms.