How To Make An Offer On A House: 6 Steps For Buyers

If you’ve finally found the home of your dreams after months of late nights spent looking through online listings and many weekends filled with open houses, it probably feels like a great load has been lifted off your shoulders. The only problem? You’re probably not going to be the only one interested in this dream home of yours. That means it’s important to know how to make the best offer on a house and what it’ll take to all but ensure your offer is the one chosen.

Before You Make An Offer On A House

Before making an offer on a house, it’s best to take a step back and consider a few important items beforehand. Each of these will be critical for making the home buying process as easy as possible.

Get A Preapproval

Before you even begin looking for a home, it’s best to get preapproved from a mortgage lender.

Not only will a preapproval give you a better idea of how much house you can afford, but it will let sellers know you’re a serious buyer and give them some peace of mind that you’ll be able to close the loan if they select your offer.

Find The Right Real Estate Agent

Working with a real estate agent can be a big help when buying a new home. If your agent is familiar with the area you’re searching in, they’ll be able to help you understand the fair market value of a home so you’re getting the best possible deal.

How To Put An Offer On A House In 6 Steps

Upon finding your dream home, it’ll be time to put in an offer. When making an offer on a home, you’ll want to take several actions to give yourself the best chance of having your offer accepted.

1. Decide How Much To Offer

Having an experienced real estate agent to help you through the home buying process is important. When the time comes to put in an offer, your agent will be able to help you understand the comparables, or “comps,” in the neighborhood. Specifically, they’ll know how much other homes have recently sold for and how those homes compare to the house you’ll be making an offer on.

When deciding how much to offer, you’ll need to consider how much you’ve been preapproved to borrow. Make sure you leave yourself some wiggle room in case you need to negotiate. If you’re in a seller’s market, it’s likely the home will have multiple offers and sell for more than the asking price.

2. Decide On Any Contingencies

When submitting an offer on a home, you’ll also need to decide whether you’re going to include any contingencies. Buyer contingencies are clauses added to the offer, and they serve to protect the buyer in certain situations, allowing them to back out of the sale if certain factors aren’t met. Common contingencies include:

• Inspection contingency: One of the most often-used contingencies, a home inspection contingency lets the buyer have an inspector go through the home to make sure the home has no major issues. If there are issues, the buyer can renegotiate or back out.
• Appraisal contingency: This contingency allows the buyer to back out of the agreement if the home appraisal shows the home isn’t worth the agreed upon price.
• Financing contingency: Typically, buyers will include a financing contingency to protect their earnest money if they’re not approved for financing within a specific period of time.
• Home sale contingency: If a buyer needs to sell their current home before they can buy the new home, they’ll usually opt to include a home sale contingency. This will allow them to back out of the deal if their home doesn’t sell within a certain time frame.

3. Decide How Much Earnest Money To Put Forward

With any home purchase offer, you’re also going to be offering the seller earnest money. Known as a “good faith” deposit, earnest money shows your commitment to buying the house.

Earnest money is usually an amount equal to 1% – 3% of the offer price, and it typically goes toward your down payment or closing costs. However, if you back out of your offer for reasons that fall outside of your contingencies, the seller can keep the earnest money.

4. Draft The Initial Offer Letter

Once you’ve found the home you want to buy and have decided on the offer amount, it’s time to put it into writing. Here’s what you’ll want to include in or with your offer on a house:

• The name of the seller
• The home or property’s address
• The name of everyone who’ll be on the title
• The purchase price
• The preapproval letter
• The down payment amount
• The earnest money deposit
• Any contingencies
• A list of fees and closing costs
• The tentative closing date and move-in date
• A deadline for the seller to respond by

Some states require more information than others, so it’s important to review your offer carefully to ensure all requirements are met. Some states have a standard form as well – such as Michigan, where your offer letter is just a purchase agreement sent with terms for the seller to sign if they agree. Your real estate agent can help draft and review your offer letter to ensure all information is correct.

5. Negotiate The Price And Sale Terms

Once you know what you and your agent think the home is worth, it’s time to consider other factors that should inform your offer price and the other components of your offer. For example, seller motivation (how fast the seller wants to sell) and timing (when you should submit your offer) are important considerations when drafting an initial offer.

Your real estate agent can learn more about the seller’s preferences by talking with the listing agent representing the seller. Your agent and the seller’s agent can come to an agreement on home inspection contingency timelines, the closing date, financing and a slew of other factors that can influence whether your offer is ultimately accepted or rejected.

If a home has multiple offers, you can employ various strategies to potentially win a bidding war. These include changing your offer from a loan to cash (if you’re in a financial position to do this) and waiving various contingencies.

6. Sign And Close

Once the seller accepts your offer, the buyer and seller will sign the purchase agreement. The purchase agreement outlines the terms of the real estate transaction – not just the offer price – and once signed, the house is officially “under contract.”

This step marks the beginning of the mortgage process. During this period, the home inspection and appraisal happen. More negotiations may take place depending on the inspection’s results and whether the appraisal comes in equal to, below or above the asking price.

How Long Does It Take To Make An Offer On A House?

Once you’ve put an offer on a home, the waiting game begins. If you’re buying in a seller’s market, the home could be in high demand and attract multiple offers. However, you’ll usually have a decision from the seller within a day or two.

More Tips On How To Submit An Offer For A House

Here are a few tips on how to proceed once the house hunt is over and it’s time to put in an offer that the sellers hopefully can’t pass up:

• Know the market. It’s crucial to understand the housing market in the area where you decide to live so you can concoct the right buying strategy.
• Don’t skip the preapproval. Getting preapproved can help you stick to a budget, look at houses only in your price range and show sellers you’re serious.
• Verify your down payment. Once you have your preapproval and know your price range, make sure you have enough money on hand for the down payment, if one is required.
• Don’t be afraid to negotiate. Buyers can use a number of negotiation tactics that include countering with an offer, staying firm on the offer already submitted or meeting all of the seller’s counteroffer demands.

By putting these tips to action, you’ll be steps ahead of the competition and in your new home before you know it.

After You Make An Offer On A House

Now that you’ve put an offer on a home, the waiting game begins. If you’re buying during a seller’s market, there could be a lot of demand, and multiple offers on the home. However, you’ll usually have a decision within the next day or two.

Seller Makes Their Decision

Hopefully, the next time you talk to your real estate agent, it’s for them to tell you your offer was accepted. If that’s the case, the process will start moving forward. You’ll begin working with your lender to finalize the loan and schedule a time for your inspector to take a look at the house.

But if your agent is calling to let you know the seller decided to reject your offer, a couple of things can happen. If there was a bidding war and the seller decided to go with another offer, you’ll be back to square one, looking for a new home. However, the seller might have also decided they weren’t completely happy with the offer you presented and decided to make a counteroffer.

Negotiate The Price Of The House

If the seller decides to send you back a counteroffer, this puts the negotiation process in motion. There are a number of negotiation tactics that buyers can use including countering with an offer that meets somewhere in the middle, staying firm on the offer already submitted, or meeting all of their counter offer demands.

If there are other offers for the home, there are also various strategies you can employ to win a bidding war, including changing your offer from a loan to cash or waiving various contingencies, just to name a few.

Close The Deal

Once both parties agree to all of the terms of the deal, the contract is updated and the house is officially “under contract.” This marks the beginning of the home closing process.

The first major step is usually the home inspection where you hire a professional to find out if there are any issues you may have missed during your showings. Once that is complete more negotiations occur regarding asking for repairs, a reduction in price, or cash from the seller at the closing table to help with your closing costs. Next up is the appraisal, where your lender sends an expert out to assess the value of the home.

If it comes in at or above value, things keep moving along. If not, more negotiation can occur as you try and ensure you don't overpay for the home and the lender feels comfortable approving your loan. Side note: cash deals do not require an appraisal, since there is no loan. Once you are through appraisal the only big item between you and the closing table is the final approval of your loan.

The Bottom Line

When you’ve found your dream home and are ready to make an offer, it’s easy to get caught up in the excitement. But don’t forget that the offer isn’t final until everyone signs the purchase agreement.

Are you ready to see how large of a home loan you may qualify for? Start the application process today with our friends at Rocket Mortgage^® and discover the type of house you can buy!