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How to make an offer on a house: 7 steps

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Before you start the hunt for your dream home, there are a few things to do to prepare. Doing these things in advance will put you in a better position to quickly make a stand-out offer once you find “the one.”

What to do before making an offer on a house

  • Get lender preapproval: Talking with a lender as your first preparation step has several advantages. You can go ahead and get preapproved so you know how much you can borrow and narrow down your search into your approved price range. This also gives you the chance to compare the preapproval amount with your own housing budget to determine what you can comfortably afford. Additionally, it is a great opportunity to ask the lender for real estate agent recommendations. Lenders and real estate agents work very closely giving lenders insight on which agents are the best. Avoid confusing prequalification and preapproval. Preapproval is more detailed and will provide more assurance to the seller.
  • Find a real estate agent: Using your lender referrals or referrals from family and friends, select the best real estate agent for your needs. They will be a critical part of your home buying process.
  • Prepare your earnest money: Once you have found a home you want to make an offer on, you’ll need to be prepared to pay an earnest money deposit. This deposit, usually 1 percent of the purchase price, shows the seller you are serious about the offer. It will be credited to your purchase at the loan closing.
  • Save for a down payment: Unless you’ll be paying in cash and won’t have a need for financing, you’ll need at least 20 percent of the purchase price as a down payment to avoid private mortgage insurance (PMI).

How to make an offer on a house in 7 steps

Once you’ve decided to buy a home and found one that you love, it’s time to get down to business. Writing an offer that gets a seller’s attention is about standing out from other buyers. Here are the steps you’ll need to take to get your offer prepared and submitted.

Step 1: Review comparable listings with a real estate agent

Work with your real estate agent to evaluate comparable listings in the area to determine the right amount to offer. A good rule of thumb is that the more competitive the market, the closer to the asking price you should be.

Step 2: Know how to time your offer

The housing market is extremely competitive in most areas right now, so for many buyers, getting into a contract quickly is key. If a listing has been on the market for a while and isn’t moving, however, you might have a little more leeway to drive a hard bargain.

Step 3: If you can, offer cash

Offer cash if you can. Not having a mortgage will make the sale much more efficient for you and the seller. Oftentimes, sellers will accept a lower all-cash offer than a higher financed one because the process is much more streamlined.

Step 4: Be patient while the seller reviews your offer

Wait for a response from the seller. It’s the worst part, but obviously necessary. Don’t let yourself get too anxious during the waiting game.

Step 5: If accepted, begin the homebuying process

If the offer is accepted, you’re ready to move on to the other steps in the homebuying process (finalizing financing and getting a home inspection, for example).

Step 6: If declined or countered, consider a counteroffer

If the seller declines or issues a counteroffer and you still want to buy the home, come up with a more attractive offer and resubmit. It’s important to make sure you can still comfortably afford your counteroffer. If the seller wants more than you can reasonably pay, you need to be ready to continue your home search. The same advice applies if you find yourself in a bidding war. In this competitive market, it’s normal for multiple buyers to compete over the same house. It can be intense, but be sure to keep your cool and not blow your budget. Work with your realtor to figure out how to best navigate this tricky terrain.

Step 7: If it’s your dream home, avoid the deal-breakers

Avoid common deal-breakers. If you want the best shot at scoring your dream home, it’s wise to know what pitfalls to avoid. Common deal-breakers can include too many contingencies, asking for personal property, demanding a really fast closing date and other potential turn-offs to sellers. Work with your real estate agent to craft an offer that shows you’re willing to compromise.

What is included in an offer on a house?

A formal, written offer includes more than just the price you’re willing to pay for the property you’re hoping to buy. Here are some of the other items a home offer should include:

  • Earnest money: This is a deposit you put down at the time you write the contract (but before you close), which goes toward the purchase price of the home. It may not be refundable if you as the buyer back out of the deal. This part of the offer outlines the reasons the deal can be terminated while still allowing you to get this money back.
  • Contingencies: These may include things like allowing you to inspect the property before closing, and conditions that could result in the deal being terminated if issues are found during the inspection. This is closely tied to your earnest money refund.
  • Address and description: This is the property’s legal address and legal description, if applicable. Self-explanatory, but it’s important to document what you’re making the offer on.
  • Clear title stipulation: This is a mandate that the seller provides a clear title to the property. You don’t want to wind up giving money to a seller who doesn’t actually have a legal right to sell you their home.
  • Closing cost details: These details regard any seller’s participation in closing costs or other fees, as well as how certain taxes and expenses will be prorated between the buyer and the seller at closing. Closing costs are a key part of negotiations, and sellers will sometimes cover a buyer’s closing costs. (That’s less common now that the market is so competitive, however.)
  • Expiration date: This is the date and time of the offer’s expiration and projected closing date. You don’t want to wait forever, after all.
  • Other provisions: These could include other state-required provisions or disclosures. They will vary by location, obviously — your Realtor will know what to include.

Should you ever make an offer under the asking price?

“I advise my clients to make an offer they feel good about, and that can sometimes mean offering under asking prices,” says Casey Moynihan, a Realtor and broker based in Nashville, Tennessee. “In situations when my buyer is questioning the value, we look at a few things, including days on the market, if the house is currently occupied, neighborhood comps and if there are multiple offers on the property.”

In today’s highly competitive housing market, offering under the asking price can mean a quick loss of the property. Sellers are often receiving many offers, including offers over their asking price.

Work with your real estate agent to assess the market at the time you’re making an offer. If it is still a seller’s market and this is your dream home, consider offering the asking price. However, if you’re willing to take a chance, offering under the asking price can be a good way to save money and stick to your budget.

Can I make an offer without a real estate agent?

You don’t need to work with a real estate agent to buy a home. You can write your own offer and submit it to the seller (if it’s for sale by owner) or to the seller’s agent. However, going it alone without the help of a savvy agent (especially if this is your first time buying a home) may not be the best idea.

“It is critical to work with an agent that not only has market expertise but also has deal negotiation expertise,” says Hillary Hertzberg of The Jills Zeder Group at Coldwell Banker Residential Real Estate of South Florida. “The value of the agent’s negotiation skills is paramount. The savings or loss can be very significant.”

Plus, Moynihan adds, “Real estate is an emotional process, so it’s my job to make sure my clients are protected and educated throughout the process.”

Having an agent who can calmly explain every step of the process can give the buyer peace of mind — a benefit that can be hard to quantify monetarily.

How to back out of an offer

If you start having second thoughts about a home and want to back out, keep in mind that there are different versions of real estate contracts, which can vary by state.

“Most real estate offers are binding once the seller accepts, signs and the contract is fully executed,” Hertzberg says. “We draft offers with inspection periods which allow for due diligence and the buyer may have options to potentially cancel the contract depending on the terms.”

A buyer should speak to a lawyer for situation-specific clarity on contract questions. Generally, once earnest money has been exchanged, you risk losing that deposit if you back out.

“There are a few opportunities during the buying process when a contract can terminate and the buyer is not penalized,” Moynihan says, such as “if you have an inspection contingency and something comes up in the inspection that can’t be resolved between buyers and sellers; if you have an appraisal contingency and the appraisal comes back short on the home’s value; or if you have a financing contingency and the bank can’t get your loan approved.”

Next steps

Once your offer is accepted, it’s time to get ready for closing. It usually takes one to two months between your offer being accepted and actually getting the keys to your new home. At the closing, you’ll sign a mountain of paperwork and pay fees to your mortgage lender (if you have one), lawyers, municipalities, appraisers, title insurers and possibly others. Get your writing hand ready, and for more info, read Bankrate’s guide to closing.

Written by
Jennifer Bradley Franklin
Contributing writer
Jennifer Bradley Franklin is a multi-platform journalist and author, often covering finance, real estate and more.
Edited by
Mortgage editor
Reviewed by
Senior mortgage loan originator, American Fidelity Mortgage