How to Make an Offer on a House

Work with your agent to submit a written offer based on local market value, specifying how and when the steps in the purchase will happen.
Kate WoodJun 26, 2021

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Ready to make an offer on a house? Finding “the one” can be exhilarating — and maybe a little bit terrifying.

After all, the offer is a legally binding agreement that includes numerous details, and this is one time when you have to sweat the small stuff. Don't be afraid to lean on your real estate agent for help, since they're your go-to throughout the offer process. You may also want to consult a real estate attorney.

Here's what you can expect, and what you should do to prepare.

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There are three key elements that you'll want to have in place before you make an offer on a house.

The first is a from at least one lender. Ideally, you should get preapproved before you start looking at houses. It can be time-consuming to pull together all the required documents, but most importantly, a preapproval lets you know . Having a preapproval in hand also lets the seller know that you're serious and provides reassurance that the deal will close. That can be extra helpful in a scenario where the seller is in a hurry to move.

Second, know your market to ensure you're making a competitive offer. This can be based on , other market information from your own research or a comparative market analysis provided by your real estate agent. You'll probably want to make an offer that's for slightly less than your preapproval amount, which leaves room to negotiate.

Last, verify that the required by your lender is in the bank and ready to go. Simply having earmarked certain assets as the funds to buy a home (including the money required for the earnest deposit, down payment, closing costs, etc.) is not enough to ensure a smooth transaction. Having direct and immediate access to the cash is essential.

That means leaving enough time for the sale of investments or transfers from banks, brokerages or even family members’ accounts to hit your bank account. Only the will leave your pocket right away (you'll transfer it into an escrow account after your offer's accepted), but you want to be sure not to jeopardize your offer by having to wait for any additional funds.

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It may be called an “offer letter,” but this legally binding document is much more than a simple letter. There are many state, and sometimes local, laws that guide the offer process, so you’ll want to cover all the bases by using a legally approved form. An offer letter can also be referred to as a “purchase offer,” a “binder” or a “contract to purchase.” Knowing what term your real estate agent uses will help ensure you're on the same page when you're ready to make an offer.

If your real estate agent creates the offer letter, they will generally use a Residential Purchase Agreement that complies with applicable state and local laws. That agreement is then customized to suit your needs.

In some states, it’s required for a to prepare, or at least review, the written offer. Even if it’s not mandated, it’s a good thing to consider — this is too big a purchase to leave out important details or required language that might torpedo your deal. Having an attorney on your side of the transaction may be worth the added cost.

A written offer may contain these elements, among others:

Sometimes buyers are encouraged to write a personal letter to accompany their offer, hoping to gain an emotional edge over competing buyers. Though these may seem harmless, so-called can contribute to housing discrimination. Additionally, it's important to know that this type of letter does not have any legal bearing on the transaction.

Your written offer will likely include a least a couple of standard . These are things that need to happen before the sale can move forward. Common contingencies include:

Although you have to protect your interests and gather enough information to make a wise purchase, contingencies may act as roadblocks to getting a deal done — especially in . It’s best for both the buyer and the seller to put only enough stipulations in the contract to cover the necessary bases; no more.

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Seller , on the other hand, are usually required by law. Sellers are supposed to disclose whether they’re aware of certain types of issues regarding the property that may affect its value, such as natural hazards, structural problems or other substantial defects. However, states differ in the types and amount of information that sellers must disclose; and sellers are not necessarily aware of every potential problem that a property may have.

Disclosures may also document details like obligations and which appliances and fixtures convey with the purchase.

Your offer should establish a time frame for receiving all required disclosures from the seller. The purchase offer should also address the number of days you have to review the disclosures, as well as your ability to modify or withdraw your offer based on these disclosures.

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When you make an offer, in most cases you’ll be required to submit a deposit — called earnest money — that a neutral party, such as an escrow agent or real estate title company, will hold in as good-faith money. This may be anywhere between 1% and 3% of the total purchase price.

Your offer letter should detail under what circumstances you’d have to forfeit the money (for example, in the event you back out of the deal without a reason that’s allowed under the purchase agreement) and when you’d get it back. If the deal collapses because of something the seller does (such as dropping you in favor of a higher offer after the purchase agreement is signed), the deposit should be returned to you. If the deal goes through without a problem, the earnest money should be applied to your down payment.

No matter how excited you are about the prospect of your new place, at this stage of the process, you have to be prepared to negotiate or potentially even walk away if the terms aren’t right for you.

Once the seller reviews your offer, they may accept, counter or decline it.

If it’s accepted, you'll apply for a mortgage and begin the .

If the seller makes a counteroffer, you can either accept it and begin the closing process or make your own counteroffer (in the form of a new offer letter).

If the offer is refused, you’ll have to shake it off and begin a new round of house hunting.

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Remember, a phone call, handshake or verbal commitment doesn’t make it official; it’s not a done deal until both parties sign the purchase offer agreement. Once that’s done, after the brief celebration and sigh of relief, it’s time to replace your preapproval with a full and begin the other steps that will lead you to day.

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