How to make an offer on a house

FG Trade/Getty Images

Deciding how much to offer on a home — probably the most expensive purchase you’ll ever make — is a little like Goldilocks’ experience with the fairy tale bears. You don’t want to make an offer that’s too big or too small. Instead, to have the best chance of reaching a deal, you need to make an offer that’s just right.

How to make an offer on a house

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 the steps you’ll need to take to get your offer prepared and submitted:

  1. 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 asking price you should be.
  2. Know how to time your offer. The housing market is extremely competitive in most areas right now, so for many buyers, getting into 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.
  3. 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 there are fewer fees, and the process is much more streamlined.
  4. 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.
  5. 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).
  6. If the seller declines or counteroffers 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.
  7. 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 when you go to 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 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 buyer’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 a 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 asking price?

“I advise my clients to make an offer they feel good about, and that can sometimes mean offering under asking prices,” explains 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.”

Offering less than asking price can be a risk because it’s more likely to be rejected, but if you’re willing to chance it, it’s 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,” says Hertzberg. “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. You’ll also hand over large checks to the seller or their attorney to cover closing costs.

Get your writing hand ready, and for more info, read Bankrate’s guide to closing.

With additional reporting by Zach Wichter.

Learn more: