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How to make an offer on a house

Yahoo Personal Finance· Getty Images
Hal Bundrick
Updated 5 min read

Making an offer on a house is the critical give-and-take between you and the seller, forming the foundation of what is likely one of the largest financial transactions of your life.

It requires patience, perhaps a little diplomacy, and a firm understanding of the process.

Here are the steps involved in making an offer on a house.

You've already accomplished a lot. With a mortgage preapproval and hours of research, you eliminated the contenders and found the right house. You're anxious to get your offer accepted.

Read more: How to buy a house in 2024

Making an offer on a house is not like bargaining at a rummage sale. There are no "50 cents on the dollar" deals. A low-ball offer well below the asking price will likely irritate the homeowner and will probably be rejected by your real estate agent before it even lands in the hands of a seller.

Your real estate agent will have a comparative market analysis with home sales similar to the one you're making an offer on. These comparable sales, or comps, will guide — but not strictly dictate — the offer you make. You can offer more or less than the perceived market value of a house based on how long it has been for sale and the competitive state of the local housing market.

But above all else, aim for a viable purchase price below your preapproved loan maximum. That gives you some room to bargain and ensures you don't exceed your budget.

Read more: How much house can I afford?

Contingencies are matters that need to be addressed before the purchase can be completed. They can be related to:

  • Issues related to finances, such as loan approval, an appraisal, a clear title, or insurance. In some areas, buyers may negotiate for sellers to contribute to closing costs. In competitive markets, that contingency probably won't fly.

  • Matters pertaining to the house itself, including a home inspection or repairs, renovations, and upgrades.

  • Time-based concerns, such as when the loan closing will occur, when the buyer can move in or how long the current owner can remain in the house. Another contingency is a purchase timed to the sale of a buyer's existing home.

Tip: Many contingencies are a matter of course and usually won't be disputed by the seller. But too many can kill a deal, especially in a seller’s market. Be sure to confer with your real estate agent to make sure any deal qualifiers you want to include are market-typical — or at least fair to both buyer and seller.

Read more: First-time home buyers — What you should know in 2024

A part of your home offer is often an earnest money good faith deposit. This will be money ultimately applied to the down payment, so you won't be scrambling to find additional cash to cover it, but you do write it as a separate check.

The proper amount is based on prevailing real estate market norms and is another item where your real estate agent can provide guidance.

Tip: Borrowers with VA or USDA loans, which have no down payment requirements, should still consider saving for a down payment so they don't have to compete against a borrower who is willing and able to make a earnest money deposit.

Read more: How long does it take to buy a house?

A home purchase offer is typically not hashed out over coffee face-to-face. It is most likely a detailed written document delivered by your agent to the seller's agent and then to the seller.

The standard form conforms to local or state real estate regulations and applicable disclosure laws and generally details:

  1. The offered purchase price and terms — whether it's an all-cash offer or dependent upon obtaining financing.

  2. An estimated date for the purchase to be finalized.

  3. The earnest money deposit.

  4. How payments will be made or prorated between the buyer and seller for costs such as taxes, insurance, and utilities.

  5. What and when inspections will be requested and completed.

  6. Contingencies included in the offer.

  7. A deadline for when the offer will expire.

Read more: First-time home buyer: What you need to know

You can expect a counteroffer. If you don't get one and your first offer is accepted, it's likely a cause for celebration.

If you get a counteroffer, don't rush the process but work within offer deadlines. Be sure you understand what the seller is asking for so you can decide whether to accept their new offer or counter again yourself.

If the seller’s counter seems stiff and not in line with your expectations, understand that it’s OK to move on and begin house hunting again. Buying a house often takes a "things will work out for the best" attitude.

Tip: Keep in mind, you can negotiate more than the price. You might offer concessions that move the discussion away from the purchase price to less volatile issues such as timelines or foregoing nonessential repairs and upgrades. Or, the seller may have other priorities that can move the needle to an offer acceptance.

Read more: What is an adjustable rate mortgage? Is an ARM the way to go in 2024?

  • The offer letter is signed and is now considered a purchase agreement.

  • The earnest money will go from your hands into an escrow account.

  • You'll shop for the best mortgage lender you can find — even if it isn't the lender who gave you the mortgage preapproval.

  • You will submit an application, and the loan underwriting process will begin.

  • A closing date is set and you’ll soon be in your new home.