Our goal here at Credible is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders, all opinions are our own.
Touring homes to find the perfect one for your tastes and budget is the fun part — the work starts once you prepare to write an offer. But making an offer doesn’t have to be intimidating if you follow these steps.
How to make an offer on a house
Your offer specifies the price you’re willing to pay, plus other terms you hope the seller will agree to. Here are the steps you should take:
- Get pre-approved
- Decide on a fair price
- Consider any fees and contingencies
- Draft and submit the offer
- Decide on next steps
Step 1: Get pre-approved
You can request a mortgage pre-approval from any lender. Just contact the lender with your request and be prepared to supply information needed to check your credit and review your income.
A pre-approval letter gives you an idea how much house you can afford, and shows the seller that you’ll be able to pay what you offer, by showing how much your lender might be willing to lend to you.
With Credible Operations, Inc., you can secure an instant streamlined pre-approval letter in just three minutes across multiple lenders. That means you don’t have to secure multiple letters for every lender you wish to compare.
Disclaimer: This is a simulated scenario for illustrative purposes to demonstrate how the Credible instant streamlined pre-approval process works. These are not actual terms that are available.
Step 2: Decide on a fair price
The next step is to determine the fair price of the home you wish to purchase. Here’s what you can do:
- Look at recent sale prices of comparable homes in the same area as the home you want to purchase
- Adjust for factors like condition and specific location
- Ask your agent to provide comparables to you with a recommended offer price
In a buyer’s market, where supply exceeds demand, you might be able to offer less without jeopardizing the deal. In a seller’s market, where demand exceeds supply, you might find yourself bidding against competing buyers willing to pay even more than the asking price.
This is also a good strategy when you’re making an offer on a home that’s “for sale by owner.” An owner selling on their own won’t have had professional guidance in setting the price.
Step 3: Consider any fees and contingencies
Contingencies are conditions that must be met in order for a sale to close. Common ones include:
- Financing: States that the buyer must be able to secure mortgage financing by a certain date
- Inspection: Allows the buyer to terminate the contract if they’re dissatisfied with the results and can’t negotiate an acceptable resolution
- Appraisal: Lets the buyer terminate the agreement if the home fails to appraise for the sale price
- Home sale: Lets the buyer back out if they can’t sell their current home by a certain date.
As far as fees go, the only fee you pay at this point is the earnest money deposit, also referred to as an escrow deposit, which will be credited toward your down payment.
Earnest money is a show of good faith that you’re serious enough to risk your money, and it’s due once the seller accepts your offer.
Step 4: Draft and submit the offer
Next, your agent or attorney will draft your offer using a sales contract. In addition to specifying the buyer’s and seller’s rights and responsibilities, the contract provides a step-by-step guide to completing the sale.
Some buyers also write a letter to tell the sellers a little bit about themselves and why they want to purchase the sellers’ home. Including such a letter can add a nice personal touch.
Your agent will submit the contract, pre-approval, your letter, and a copy of your earnest money deposit check to the seller’s agent.
Step 5: Decide on next steps
Now, you wait for a response. One of several things could happen next:
- If the seller accepts your offer, your agent will deliver your earnest money deposit to the seller’s broker to clinch the deal.
- If the seller counters your offer, you can accept, decline, or come back with another offer.
- If the seller rejects your offer, you’ll get a hard “no” indicating you’ll need to keep house hunting.
Making an offer on a house: FAQ
What do you need to make an offer on a house?
The most important item is the purchase offer, which is typically the sales contract. Here are some of the items the agent will help you fill in:
- The legal description, which is the physical location of the property
- Names of the buyer and seller
- Purchase price
- Payment terms, including deposit amounts and the types of mortgage loans you’ll consider
- Anticipated settlement date
- Contingencies, as discussed above
- Seller concessions, if you want to ask for them
In addition to the offer, you’ll submit your pre-approval letter, your personal letter (if you write one), and a photocopy for your earnest money deposit check.
Learn More: How to Buy a House
Can you make an offer without a real estate agent?
You might be wondering how to make an offer on a house without an agent — or if it’s even possible. The answer is yes.
But having an agent who knows your local market and has experience negotiating contracts on behalf of buyers gives you a significant advantage over going at it alone.
What are common deal breakers in an offer?
Price is one reason offers are rejected, but it’s not the only one. Here are some other common deal breakers:
- Condition: Although sellers must disclose any material defects upfront, the home inspection can reveal issues the seller wasn’t aware of and might not be willing to fix.
- Contingencies: Any contingency can put the buyer at a disadvantage, but a home sale contingency can really kill a deal since it can be extra risky for the seller, especially in a seller’s market. It’s a good idea to consult your agent if you’re considering contingencies.
- Financing issues: Buyers who lack the cash to close can ask for seller concessions, which allow the buyer to finance their closing costs. Concessions reduce the seller’s proceeds from the sale and are a sign the buyer might be struggling to afford the house.
Can you back out of an offer?
You can withdraw your offer before it’s accepted or if the seller makes a counteroffer you don’t accept. After you and the seller have both agreed to the contract terms and signed the contract, the contract is binding.
You can only back out for reasons the contract allows, like the contingencies, but in most states the seller can’t force you to do much more than forfeit any earnest money you paid to secure the deal.
Keep Reading: First-Time Homebuyer Tips: 10 Mistakes to Avoid
