Buying a house can seem complicated, especially if you haven’t done it before. From browsing the listings to touring different homes to arranging financing, there’s a lot you need to know. Once you’ve found a home you love, you may wonder, “How do I make an offer on a house?” This page will answer your questions, including getting preapproved for a mortgage, landing on the right price, and what conditions to include in your offer.
What Does It Mean to Make an Offer on a House?
When you make an offer on a house, you’re telling the seller that you want to buy the property at a certain price and under certain conditions. The conditions often include a home inspection, financing approval, and a particular closing date. Think of an offer as a package rather than just the price.
Before Making an Offer
A more important question than “how do you make an offer on a house” is “how do you prepare to make an offer on a house?” Getting all your ducks in a row puts you in the best position to make a strong offer that has a good chance of being accepted.
Get Preapproved for a Mortgage
Preapproval is a critical step in making an offer on a home. Preapproval means a lender has looked at your finances and determined how much they’re willing to lend you. Preapproval is important because:
- It tells you how much you can afford to spend on a home.
- Sellers take your offer more seriously when you have a preapproval in hand.
- In competitive markets, sellers may not even consider an offer that’s not preapproved.
- When you’re preapproved, you can move more quickly when you find the right house.
Choose a Real Estate Agent with Experience in Your Market
A good real estate agent is invaluable when you’re looking for a home. An experienced agent brings deep knowledge of the local market, research skills about comparables and neighborhoods, negotiation skills honed over years of successful deals, and insights into seller psychology. An experienced agent knows how to make an offer on a home that has the best chance of being accepted. As an added bonus, their fees are typically paid by the seller, so you get a very valuable skill set and a reliable advisor at no cost to you.
Research the Property and the Market
To determine a fair and competitive offer price, do some research on the property itself and what the real estate market is doing in that area. Your agent will help you get this information:
- How long has the house been on the market?
- Have there been any price reductions so far?
- What have similar homes (“comparables” or “comps”) sold for recently?
- Is it a buyer’s market or a seller’s market?
- What condition is the property in, especially in relation to the comparables?
This information will help you determine whether the list price is reasonable, whether you should come in higher or lower, and by how much.
Components of a House Offer
How do you make an offer on a house? By putting together a package that includes:
- The purchase price: what you’re offering to pay for the home.
- The amount of your earnest money deposit: what you’re putting down on the house (typically 1-3% of the purchase price).
- Contingencies: conditions that have to be met for the deal to close. Contingencies can include financing, home inspection, clear title, and appraisal.
- Closing date: when the property actually changes hands.
- Inclusions and exclusions.
- Other terms, depending on your situation, might be: a request for the seller to contribute toward closing costs, an escalation cost, and a rent-back agreement.
How to Make an Offer on a Home: Step by Step
This is the typical process of how you make an offer on a house:
Step 1. Discuss Your Strategy with Your Agent
Before you decide on anything, sit down with your agent. They will help you determine how to make your offer as competitive as possible, given the current market conditions. This will include the best price to offer, what contingencies and terms to include, and how much earnest money to put down.
Step 2. Complete the Purchase Agreement
Your real estate agent will prepare a purchase agreement, also called a purchase and sale agreement or offer to purchase. This is a legally binding document, so make sure you understand it before signing. If you have any questions, now is the time to ask. A good real estate agent will explain things to you carefully and completely.
Step 3. Submit Your Offer and Wait for a Response
Your agent will submit your offer on your behalf by giving it to the seller’s agent. While you’re waiting, the seller will consider your offer and either accept it as written, reject it outright, or send a counteroffer. Unless your offer is completely unreasonable, or there are multiple offers, they’re likely to counter your offer with a different price, different conditions, or both.
Step 4. Negotiate If Needed
If you receive a counteroffer, you can accept it, reject it, or counter it with your own price or terms. An offer can go back and forth a few times before everyone settles on an agreement or one of the parties walks away. The negotiation process is a normal part of how to buy a house, and it usually ends with an agreement that neither party is completely satisfied with but that both think is acceptable.
Step 5. Execute the Contract
Once an agreement is reached, both parties sign off on it. At that point, the deal is “under contract,” and you can start working on discharging the contingencies.
What Happens After Your Offer is Accepted
the process of how to buy a house doesn’t end when the offer is accepted. Here are the typical steps that follow:
- Home inspection: Usually completed within a set number of days as stipulated in the offer.
- Appraisal: Your lender will organize this to confirm that the home’s value matches or exceeds the total of your loan amount and down payment.
- Finalize financing: Your lender will request additional documentation and give you final approval on your mortgage loan.
- Title search: This ensures that there are no outstanding claims against the property, such as liens or heirs.
- Arrange insurance: Homeowner’s insurance and title insurance need to be purchased.
- Final walkthrough: Just before closing, you and your agent will do a final walkthrough to make sure the property is in the agreed-upon condition.
- Closing: you and the seller sign the final paperwork, the necessary financial transfers are made, and you get the keys to your new home!
Making an Offer on a House
Learning how to make an offer on a house is a process, but it’s a fairly predictable one. Having an experienced real estate agent to guide you through the process is critical, so put time into choosing the right one. Other keys to success are:
- Getting preapproved before you start looking.
- Doing your research on pricing and market conditions.
- Making a competitive but reasonable offer.
- Protecting your position with appropriate contingencies.
- Being prepared to negotiate.
- Staying calm and not letting your emotions get the better of you (your real estate agent will help with this).
Good luck with your house hunting, and may your offer be successful!
