When You Make an Offer on a House What Happens?
Demystify the home offer process. Discover what happens when you make an offer on a house, from crafting to closing.
Making an offer on a property is a significant step in the homeownership journey. It transforms a casual viewing into a serious pursuit, formally declaring a buyer’s interest and willingness to purchase a specific home. Submitting an offer initiates a structured process involving various parties and financial considerations, laying the groundwork for a potential transaction. Understanding this stage helps buyers navigate the subsequent phases of home buying with greater confidence.
Crafting Your Offer
Before formal presentation, an offer document must be carefully assembled. A real estate agent assists in drafting this document, ensuring it clearly communicates the buyer’s intentions and terms for the proposed purchase.
The offer specifies the property address, proposed purchase price, and names of all parties. It outlines sale terms, such as whether it is an all-cash offer or contingent on financing. It also details how taxes, utilities, and rents will be prorated at closing, and who is responsible for various closing costs.
An earnest money deposit demonstrates the buyer’s serious intent to purchase. This deposit acts as a show of good faith and is held in an escrow account by a real estate professional or attorney. It commonly ranges from 1% to 3% of the home’s purchase price, though it can be higher in competitive markets. If accepted, this money becomes part of the down payment or is applied towards closing costs.
Contingencies protect the buyer by making the purchase conditional upon certain events. A financing contingency, for instance, allows the buyer to withdraw without penalty if unable to secure a mortgage loan.
An inspection contingency grants the buyer the right to have the home professionally inspected. If the inspection reveals significant issues, this allows for renegotiation, repair requests, or contract cancellation. The appraisal contingency protects the buyer if the home’s appraised value is lower than the agreed-upon price, which can impact loan approval. A home sale contingency may also be included, making the purchase dependent on the sale of the buyer’s current home.
Submitting Your Offer
Once the offer document is prepared, the next step is its formal presentation to the seller. The buyer’s real estate agent plays a central role, acting as the intermediary.
The buyer’s agent submits the offer to the seller’s agent. Submission can occur through electronic delivery or, less commonly, in-person. Confirmation of receipt ensures the offer has been successfully transmitted and acknowledged.
This formal submission marks the transition to active negotiation. This stage ensures the seller receives and can review the buyer’s proposition.
Seller Responses
After an offer is submitted, the seller has several possible responses, each with different implications for the buyer. The seller’s decision is communicated to the buyer through their real estate agents.
One response is acceptance, meaning the seller agrees to all terms in the original offer. When formally accepted, it becomes a binding sales contract once signed by all parties. The property is then “under contract,” signifying an agreement to move forward.
Alternatively, the seller might reject the offer outright. If declined, negotiation ends, and neither party has an obligation to continue. The buyer can then move on to other properties or consider submitting a revised offer.
A common scenario is a counter-offer, where the seller proposes changes to the buyer’s original terms, such as price, closing date, or contingencies. Upon receiving a counter-offer, the buyer can accept, reject, or submit their own counter-offer. This negotiation continues until both parties reach a mutually agreeable contract. In situations with multiple offers, sellers might ask buyers for their “highest and best” offer.
Moving Towards Closing
Once an offer is accepted, the transaction enters a phase of procedural steps leading to the final transfer of ownership. This period, often called “under contract,” requires various conditions to be met.
The process begins with “opening escrow” or “attorney review.” Escrow involves a neutral third party holding funds and documents until sale conditions are fulfilled. Attorney review allows legal professionals for both buyer and seller to examine and approve the contract.
A home inspection is conducted by a qualified professional to assess the property’s condition. The inspector examines structural components, major systems, and other aspects. The buyer reviews the report, which may lead to negotiations for repairs, credits, or price adjustments based on discovered deficiencies.
Lenders require an appraisal to ensure the property’s value supports the loan amount. An independent appraiser evaluates the home’s worth based on comparable sales and characteristics. If the appraisal is lower than the agreed-upon price, it can impact the loan, potentially requiring the buyer to bring more cash or renegotiate with the seller.
Finalizing financing involves the lender verifying the buyer’s financial stability and ability to repay the loan. This includes submitting documentation like income verification and bank statements. The lender reviews this information to issue final loan approval.
A title search confirms the seller’s legal right to transfer ownership and uncovers any liens or disputes. This ensures a clear title, meaning no unresolved claims affect the buyer’s ownership. Title insurance is purchased, protecting both the buyer and lender against future claims or defects.
As conditions are met, the buyer formally “removes contingencies” from the contract, waiving their right to terminate. Before closing, a buyer conducts a final walkthrough to ensure the property is in the agreed-upon condition and any negotiated repairs are completed.