How to make an offer on a house
Now that you've found your dream home, it’s time to submit your offer to the seller. Before you craft your offer letter, you should understand that tour offer is more than just how much you’re willing to pay for a house — it also dictates the terms and conditions for the transaction, and it’s a chance to entice sellers into selling their home to you.
Understanding the process can help it go smoothly but don’t feel pressured to know everything. Your agent will be able to help you. If you feel overwhelmed, remember this simple rule: Know your budget and stick to it — the rest is just formalizing your request.
Before you make an offer or even start house hunting, the first step in your home-buying journey is to get preapproved for a mortgage.
A preapproval letter shows that a mortgage lender has reviewed your financial information and decided that you are eligible for a mortgage of a certain amount. It’s helpful for real estate agents because it gives them a clearer sense of your budget and signals to buyers that you’re serious about buying their home.
Your budget is your biggest constraint in the search for your dream home — just because you’d pay a million dollars for a house doesn’t mean you can (or should). Your preapproval letter can provide an idea of the upper limit of your budget, but you may choose a lower threshold to keep your mortgage payments more manageable.
→ Factor in these hidden costs of homebuying when calculating your budget
Your offer amount is the most significant part of your offer letter. You want to impress the sellers while securing a good deal. Your offer price should be based on a detailed analysis of the home, the neighborhood, market conditions, and your budget. Your real estate agent will help you factor all of these elements into the calculations to come up with an offer price. Whether you come in above, under, or right at the asking price, your decision should be based on facts.
Keep in mind that your offer may still get rejected and countered, but the knowledge that your offer was carefully considered and grounded in fact will give you peace of mind.
→ Learn more offering aboveasking price or under it
Your real estate agent can help you gather sales data from similar homes in the area. This process is referred to as comparative market analysis, and it can be a valuable tool for understanding the local trends influencing the seller’s asking price. Likewise, these trends should influence your offer price.
Talk with your agent about market conditions to devise a strategy for approaching your offer price.
→ Browse market trends in your area.
Now you’ve got the big picture, it’s time to zoom in on the house itself. Examine the following to get a clearer sense of the home and its history on the market:
Your earnest money deposit is the amount you pay upfront and risk forfeiting if you walk away from the purchase. It comes out of your down payment and is typically 1% to 2% of the total purchase price. (Cash buyers must also submit an earnest money deposit, so don’t sleep on this step.)
A bigger deposit can be more enticing to sellers. It shows that your offer isn’t just talk — you’re willing to back it up with cash and have the resources to do it — so it’s worth being strategic about this part of your offer.
The contingencies of your offer letter protect you from losing your deposit in the event that something happens to make you want to (or need to) walk away from the home sale. Consider it your evacuation route, should the unexpected happen — like if the appraisal doesn't match the sale price or comes in low.
Common contingencies include:
You can make a non-contingent offer when you buy and sell with Orchard.
The main points of your offer are outlined, now, it’s time to formalize them in writing. You may consider making a personal appeal to the homeowner. You might compliment the house, its characteristics, or describe how you envision building your life there. These details can help you stand out from the crowd in a bidding war scenario.
Unless you’re buying your house without a realtor, your agent will craft the offer letter on your behalf. Once they do, you’ll finalize it together before sending it to the seller or the seller’s agent.
Once a seller reviews your offer, they can do one of three things: accept, reject, or counter your offer. It typically takes a few days for your offer to be accepted on a home.
The ball is back in your court if the seller makes a counteroffer. You can accept the offer as is, decline it and move on with your house hunting journey, or counter it with a counteroffer of your own.
If you choose to counter, be prepared for several rounds of negotiation. Keep in mind that it’s not just the price on the table — contingencies, closing date, and all the other terms and conditions are up for debate, and they can be equally powerful bargaining chips.
Unfortunately, not every offer gets accepted. If your offer is rejected, you’ll have to move on.
In June of 2021, listed homes received an average of 3.4 offers, according to the National Association of Realtors. That means for every house on the market, two to three buyers walked away with a rejected offer.
Take the learnings from your experience and apply them to your next offer — try a higher earnest money deposit or offer over asking price. You can also work with a power buyer, like Orchard. Get started today.
The seller has accepted your offer, but it isn’t official until both parties — the buyer(s) and the seller(s) — sign the purchase offer agreement. This agreement turns your offer letter into a legally binding contract that will dictate the terms and conditions of the home sale.
Once everything is in order, sign on the dotted line. You’re one step closer to being a homeowner and now the closing process begins.
As you go through the process of crafting your offer letter, you may find that you have additional questions about making an offer on a house. Here are answers to some of the most commonly asked ones.
A strong offer on a house is one that is competitive and reasonable. This typically means offering close to or above the asking price, having a pre-approval letter from a lender, and being willing to negotiate other terms such as the closing date or contingencies. Additionally, having a personal connection with the seller, such as sharing similar interests or having a shared history, may also increase the likelihood of acceptance.
To make an offer on a house, you will need to work with your real estate agent to draft a written offer that outlines the terms and conditions of the purchase. This typically involves providing information about the purchase price, any contingencies you would like to include, the closing date, and other important details. Once your offer is drafted, you will submit it to the seller or their real estate agent for review.
While you don’t strictly need a real estate agent to buy a house, having one will help — and their expertise will really shine when writing an offer letter. Outside of that, you’ll need:
No, but it will help — especially in a seller’s market. At this time you may, however, have to give a proof of funds letter, which shows you can cover the down payment and closing costs.
You can walk away, but you may lose your earnest money deposit.
It will come down to the terms you outlined in your offer letter. Are you protected by any of your contingencies? If not, you’ll likely have to forfeit your deposit. Avoid this situation by only putting an offer in on a house you’re serious about buying and carefully crafting your contingencies to cover you in the case of unforeseen circumstances (like a house with foundation issues).
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