How to Put an Offer on a House

Making an offer on a house is a significant milestone toward homeownership. This step transforms interest in a property into a formal proposal, initiating negotiations with the seller. A well-constructed offer demonstrates your seriousness as a buyer and can influence the outcome of your home purchase. This article guides you through the considerations and steps for submitting a competitive offer.

Preparing to Make an Offer

Before presenting an offer, preparation is important for homebuyers. This phase involves ensuring financial readiness, understanding the market, defining housing needs, and assembling a support team.

Obtaining a mortgage pre-approval is a fundamental step in financial readiness. A lender reviews your credit history, income, debts, and assets to determine the amount you are conditionally approved to borrow. A pre-approval letter verifies to sellers that you are a serious buyer with financing capacity, strengthening your offer. It also provides a clear budget, preventing you from considering homes beyond your financial reach.

Understanding the local real estate market is important. This involves researching comparable sales, or “comps,” which are recently sold properties similar in size, location, and features to the home you are considering. Real estate agents have access to Multiple Listing Service (MLS) databases for accurate sales data. Analyzing these comps helps inform an appropriate offer price, ensuring your bid aligns with current market values.

Defining your needs and wants in a home is important. This involves distinguishing between non-negotiable requirements, such as the number of bedrooms or a specific school district, and preferences like updated kitchens or a large yard. Establishing these priorities helps streamline your property search and allows you to act decisively when a suitable home is found.

Engaging a buyer’s real estate agent is important during this preparatory stage. A buyer’s agent represents your interests throughout the home-buying process, from identifying properties to assisting with negotiations and paperwork. They provide insights into market conditions, help you understand mortgage options, and guide you through preparing for your mortgage application. Their expertise helps navigate market complexities and craft a competitive offer.

Key Components of a Purchase Offer

A real estate purchase offer is a formal, legally binding document outlining the terms under which a buyer proposes to purchase a property. It encompasses several elements, each serving a distinct purpose. Understanding these components is important for crafting an effective offer.

The offer price states the exact dollar amount the buyer will pay for the property. This figure is determined after considering market comparables and the buyer’s budget. An earnest money deposit demonstrates the buyer’s serious intent to purchase the home. While not legally mandated, earnest money is customary, often ranging from 1% to 5% of the sale price, or higher in competitive markets. This deposit is held in an escrow account and is later applied toward the down payment or closing costs.

Contingencies are clauses within the offer that allow the buyer to withdraw from the contract without penalty under specific circumstances, protecting their earnest money. Common contingencies include:
Financing Contingency: This makes the purchase dependent on the buyer securing the necessary loan within a specified timeframe, often 30 to 60 days. If the buyer cannot obtain financing, this contingency allows them to terminate the agreement and receive their earnest money back.
Inspection Contingency: This grants the buyer the right to have the home professionally inspected within a set period, commonly 7 to 10 days after offer acceptance. If the inspection reveals significant issues, the buyer can negotiate repairs, request a price reduction, or withdraw from the purchase if an agreement isn’t reached.
Appraisal Contingency: This ensures the home appraises for at least the offer price. Lenders require an appraisal to ensure the property’s value supports the loan amount. If the appraisal comes in low, the buyer may renegotiate the price or cancel the contract.

For buyers who need to sell their current home before purchasing a new one, a sale of prior home contingency can be included. This clause specifies that the new home purchase is contingent on the successful sale and settlement of the buyer’s existing property by a predetermined date. If the current home does not sell within the agreed-upon timeframe, the buyer can back out of the new purchase agreement without penalty. This protects buyers from the financial burden of owning two homes or managing two mortgage payments.

The proposed closing date specifies when ownership of the property transfers from seller to buyer. This date is negotiated and falls within 30 to 60 days of offer acceptance, allowing time for financing, inspections, and other due diligence. Inclusions and exclusions clarify which personal property items, such as appliances, window treatments, or light fixtures, are part of the sale or will be removed by the seller. Itemizing these prevents misunderstandings. Other terms might include requests for a home warranty, specific repairs by the seller, or a desired possession date if it differs from the closing date.

Submitting and Responding to Your Offer

Once an offer document is prepared with its financial and contingent terms, the next phase involves its formal submission and communication with the seller. This stage is handled primarily through the real estate agents representing each party.

The buyer’s agent submits the offer to the seller’s agent. This delivery can occur electronically or in person, ensuring the proposal reaches the seller for review. The seller, advised by their agent, then considers the offer, weighing its terms and conditions.

The seller has several possible responses. The first is outright acceptance, meaning they agree to all terms as presented, and the offer becomes a binding purchase agreement. Alternatively, the seller might reject the offer, concluding negotiations for that proposal. A common response is a counteroffer, where the seller proposes changes to terms like the purchase price, closing date, or specific contingencies.

When a buyer receives a counteroffer, they can accept the revised terms, reject them, or issue their own counteroffer back to the seller. This back-and-forth exchange is the negotiation process, continuing until both parties agree to all terms or one party withdraws. There is no legal limit to the number of counteroffers, and the process can continue with each counteroffer rejecting the previous one and proposing new terms.

Once an agreement is reached and the offer is accepted, the transaction moves into the next phase. This includes depositing the earnest money into an escrow account and initiating due diligence activities, such as scheduling the home inspection and ordering an appraisal. The focus then shifts to fulfilling the conditions outlined in the accepted purchase agreement, progressing toward the final closing of the sale.