6 steps to make an offer on a house1: Decide on how much to offer2: Choose your contingencies3: Decide on earnest money amount4: Write up the offer letter5: Submit your offer and wait6: Negotiate the terms of the sale
Making an offer is one of the most important steps in the homebuying process. It’s the moment you find out whether the home will actually be yours. From deciding how much to offer to choosing contingencies and earnest money, and preparing for negotiations, there’s a lot to consider.
In this Redfin article, we’ll outline how to make an offer on a house in six steps. Whether you’re buying a home in Minneapolis, MN, or a townhouse in Austin, TX, here’s what you need to know about submitting an offer on a home so you have the best chance of getting it accepted.
What to do before making an offer
Before making an offer on a home, there are a few things you can do to help move quickly and confidently when you find the right home:
Get a mortgage pre-approval: Most sellers won’t take an offer seriously without a pre-approval, so having one helps you understand exactly how much home you can afford.
Understand your local market: Knowing whether you’re in a buyer’s or seller’s market can help you decide how competitive your offer needs to be.
Strategize with your agent: Your real estate agent can share insight into why the sellers are selling their home, local pricing trends, and whether you’re likely to face competition.
Understand the key parts of an offer letter: It includes your price, contingencies, earnest money deposit, closing timeline, and any seller concessions you may want to request.
Once you’ve checked these off, you’re ready to write and submit your offer.
How to make an offer on a home
Now that you’ve learned what to do before making an offer, you can begin the steps of submitting an offer on a house.
Step 1: Decide on how much to offer
If you’ve already been pre-approved, you probably have a good idea how much you can afford to spend on a home. But the price you decide to offer will depend on many factors – the competitiveness of the housing market, the home itself, your budget, and more.
Housing market conditions
Buyer’s market: More homes for sale than buyers – you may have the opportunity to offer lower than the home’s listing price.
Seller’s market: Fewer homes for sale than buyers – you may need to offer above the listing price to stand out above the competition.
Budget
Your budget is often the biggest factor in determining how much to offer on a house. Even if you’re pre-approved for a larger mortgage, that doesn’t mean you should buy more than you can afford. Consider offering less than your mortgage amount to leave room for negotiation.
The home
There are circumstances where it makes sense to offer an amount above or below the list price and others where you should meet the list price. Your agent can help you determine the right offer for you. Some factors include:
Time on the market: The longer the home has been on the market, the more likely the seller is to consider a lower offer.
Necessary repairs: Whether the property needs lots of repairs or is turnkey can affect how much you offer.
Comparable homes in the area: Your real estate agent can pull comparable homes, also called “comps,” which are similar homes for sale or recently sold in the area. This data gives insight as to whether the home is fairly priced.
Competition: Competition for a home can highly influence your offer. Talk with your agent about handling a bidding war or making a backup offer if the seller has already accepted one.
Step 2: Choose your contingency clauses
Contingencies protect you as the buyer by giving you a way to back out of the deal if certain conditions are not met. When you use a contingency to cancel the deal, you can usually recover your earnest money.
Sellers prefer offers without contingencies, so use them sparingly if you can. The contingencies available depend on your location and the current housing market. Here are the most common ones:
Step 3: Decide on the earnest money amount
The third step is deciding how much to offer in earnest money. Earnest money is a deposit, usually 1-3% of the home’s sale price, that you pay after your offer is accepted. It shows that you’re committed to purchasing the home.
If the sale goes through, it’s applied to closing costs. If you back out of the sale due to a reason covered in your contract, such as a contingency that isn’t met, earnest money will be refunded to you. The seller keeps the earnest money if you withdraw from the sale for another reason.
Step 4: Write up the offer letter
The offer letter refers to the legal offer document, not a personal letter to the seller. Personal letters to sellers are discouraged as they can violate Fair Housing laws.
Your real estate agent will draft up the offer letter for you, but if you’re working without an agent, here’s what you’ll need to include:
Address of the home you’re offering to buy
Your name and anyone else’s name that will be on the house title.
Your offer price
Any contingencies you want to include
Any seller concessions you’re asking for, like repairs or closing costs
Your mortgage pre-approval letter
Items you want in the sale, such as appliances
Earnest money deposit amount
The date you anticipate the loan closing
The date you expect to move in
Deadline for the seller to respond to the offer
Step 5: Submit your offer and wait
Once your offer is ready, your real estate agent will submit it on your behalf. If the seller has received other offers or expects to, you may have to wait a few days for an answer. Some sellers may have a set deadline to submit offers and will begin reviewing offers after that date.
Step 6: Negotiate the terms of the sale
It’s common to negotiate with the seller, and having an experienced real estate agent is crucial. Discuss ahead of time which aspects of the offer you’re willing to negotiate and which are non-negotiable. Here are three scenarios you may face after submitting your offer.
Scenario 1: The seller accepts your offer
If the seller accepts your offer, then you’ll move on to the next steps. This means signing the purchase and sale agreement, gathering your earnest money, and applying for a mortgage.
Scenario 2: The seller makes a counteroffer
The second option is that the seller makes a counteroffer. It’s up to you and your real estate agent how you’d like to proceed. The negotiations are typically informal and help you come to an agreement – or walk away from the deal.
Here are some things to consider:
You don’t have to negotiate the purchase price: The seller’s counteroffer may be a higher purchase price than you offered, but that doesn’t mean you have to accept that. You can consider negotiating repair costs or other concessions, such as covering a portion of closing costs.
Learn what the seller is looking for: Your real estate agent will reach out to the sellers and their agent to determine what the sellers are looking for. Do they want you to remove contingencies? Were they looking for a higher price? This information can help you determine what to negotiate.
Scenario 3: The seller rejects your offer
The final scenario is that the seller rejects your offer. Maybe your offer was too low, or there was a cash buyer. If your offer is rejected, then you can begin looking at other homes on the market.
What happens after your offer is accepted?
Congratulations, your offer was accepted. Here’s what you can expect as you begin the closing process:
Sign the contract: Read it carefully to ensure there are no errors, and make sure you understand the details before you sign.
Secure your mortgage: You’ll need to apply for your home loan. Your lender will conduct a deeper financial review, finalize your loan terms, and order an appraisal to confirm the home’s value.
Schedule your inspection and appraisal: Be sure to have a home inspection to uncover any issues with the property and arrange a home appraisal.
Close on your new home: When any contingencies are met, and your mortgage is ready, you can sign the paperwork and close on the home. Your lender will transfer your funds to the attorney or title company to finalize your purchase and receive the keys.
FAQs about making an offer
How much should I put down?
How much your down payment is will vary depending on your loan type and budget, but here are some things to consider.
0% down – VA or USDA loans
3-5% down – FHA and some conventional loans
10-20%+ down – Helps avoid private mortgage insurance (PMI) if you have a down payment above 20% and lowers monthly payments.
While a larger down payment can reduce your monthly costs, many buyers successfully purchase a home with less than 20% down – especially first-time buyers.
What if I’m caught in a bidding war?
A bidding war happens when a seller receives multiple offers in a short amount of time. Because buyers are competing against each other, they may raise their offer price, give up contingencies, or make other “concessions” to make their offers more appealing. Your agent can give you advice to help you avoid bidding wars when possible and navigate them wisely when you can’t.
How much is too low to offer on a home?
Offering a lower offer on a house than the list price depends on several factors. Your real estate agent will have insight as to what is too low to offer in your area.
How long does it take to hear back after submitting an offer?
It’s common to hear back anywhere from 1 to 3 days after making an offer on a house. However, this timeline can vary depending on how many offers the seller has to review or other personal circumstances.
How long does it take to close on a home?
Closing on a home with a mortgage can take anywhere from 30 to 60 days. There are things you can do to prevent delays and speed up the closing process.
