How to Make an Offer on a House
You’ve found a house you love, now comes the tricky part: making an offer. Whether it’s your first time or you’ve been through the process before, it’s easy to feel a little overwhelmed.
How much should you offer? What do sellers really look for? And how do you make your bid stand out, especially in a competitive market? Don’t worry, this guide has you covered.
From getting your mortgage pre-approval to creating a winning offer, we’ll walk you through every step. Ready to take the first step toward your new home?
Begin by trying Rate’s Powerbid Preapproval today, you could be approved in as little as 5 minutes!
What to Do Before Making an Offer
Making an offer on a house can be exciting, but it’s not something to rush into. A little preparation up front can make the process smoother and give you a better chance of success.
Here’s how to get ready to submit a competitive offer and move one step closer to your new home.
Get Your Mortgage Approval
The first thing to tackle is your finances. Before you even start house hunting, it’s a good idea to get pre-approved for a home loan.
A lender preapproval shows sellers you’re serious and capable of following through on your offer. It also gives you a clear idea of how much house you can afford, which keeps you focused and avoids any budget surprises later.
When applying for preapproval, lenders look at your credit score, income, and debt-to-income ratio. A solid financial standing not only helps you qualify for better mortgage terms but also gives you an edge in today’s competitive housing market.
For first-time buyers, this is one of the most important steps to feeling confident in the home-buying process.
Connect With a Trusted Real Estate Agent
Next, find a real estate agent you trust. A good buyer’s agent will help you navigate the market, answer your questions, and guide you through each step of the process. Real estate agents can also provide valuable advice on the best way to approach your offer, especially in a seller’s market.
An experienced real estate agent also knows how to read the local market, spot trends, and compare similar properties to help you determine a competitive offer amount.
They’ll also communicate with the seller’s agent on your behalf, making the negotiation process easier to handle. For first-time buyers, having a reliable agent on your side can make all the difference.
Research the Local Market
Understanding the local housing market is critical before making an offer. Are you in a seller’s market, where homes sell quickly and often above asking price, or a buyer’s market, where you may have more negotiating power? Knowing the current conditions will shape your strategy.
Look at recent sales of similar properties to get a feel for market value. This research can help you avoid overpaying while ensuring your offer is competitive. Your agent can also share detailed information about the area, helping you make a confident, informed decision.
Determine Your Must-Haves and Deal-Breakers
Before diving into real estate listings, it’s important to know what you’re looking for. Make a list of your must-haves and deal-breakers, things like location, number of bedrooms, or whether the property needs significant repairs.
Being clear about your priorities helps you focus on homes that are the right fit and avoid wasting time on those that aren’t. When the perfect home comes along, you’ll be ready to act quickly and confidently.
Understand the Seller’s Perspective
A strong offer isn’t just about the price, it’s also about understanding what matters most to the seller. Do they want a quick closing date? Are they looking for fewer contingencies or a buyer who’s ready to move fast?
Tailoring your offer to align with the seller’s priorities can make it stand out. For example, including fewer contingencies, offering a higher earnest money deposit, or providing a shorter due diligence period can show the seller you’re serious.
These small adjustments could be the difference between your offer being accepted or passed over.
How to Make an Offer on a House: 7 Steps
Crafting an offer that stands out starts with understanding each part of the process, here’s how to get it right.
1. Find the Right House
Start by attending open houses and exploring real estate listings to identify the properties that you like and meet your needs. Pay close attention to factors like location, size, and amenities, but also consider practical details like the home’s condition and potential for necessary repairs.
Once you’ve found a house you love, your agent will help you put together detailed information about the property, including the seller’s preferences, the most recent sales of similar homes, and the overall market value. This research sets the foundation for creating a strong offer.
2. Consider Your Budget
It’s tempting to dream big, but staying within your financial comfort zone is important. Beyond the home’s price tag, remember to factor in expenses like the down payment, monthly mortgage payment, property taxes, insurance, and maintenance.
A mortgage broker or financial institution can help you calculate what’s realistic based on your financial situation and future goals.
Stretching your budget too far could leave you in a tough spot down the road. Instead, aim for a balance between affordability and getting the most value for your money. Sticking to your budget helps you stay in a stronger position throughout the negotiation process.
3. Decide on Contingencies
Contingencies are built-in protections that let you walk away from the deal if specific conditions aren’t met. These are important for home buyers who want to minimize risks during a real estate transaction. Common contingencies include:
Home Inspection
A home inspection contingency allows the buyer to have the property inspected by a professional. This step identifies any structural or mechanical issues that might require costly repairs. If serious problems arise, you can negotiate with the seller for repairs or even walk away from the deal.
Appraisal
An appraisal contingency ensures the home price matches its market value. Lenders need an appraisal to determine how much they’re willing to finance. If the appraisal comes back lower than the agreed-upon price, this contingency gives you the option to renegotiate the price or withdraw your offer.
Financing Contingencies
A financing contingency protects you if your mortgage loan isn’t fully approved by the lender. This ensures you’re not locked into buying a house without the necessary funds. If financing falls through, the contingency allows you to back out without losing your earnest money deposit.
Talking about contingencies with your agent can help you decide which ones are necessary while keeping your offer attractive to the seller.
4. Determine Your Offer Price
Choosing the right offer amount is one of the most important decisions in the offer process. Factors like the seller’s asking price, market value, and recent trends in the housing market all play a role.
If you’re in a seller’s market, where competition is fierce, consider including an escalation clause. This allows your offer to automatically increase if a competing bid comes in higher.
Should You Offer Above Asking Price?
In a competitive market, offering above the asking price can strengthen your bid. However, this strategy isn’t always a good idea.
You’ll want to weigh your budget against the property’s market value and consult your real estate agent to avoid overpaying. Remember, your goal is to make a competitive and financially sound offer.
5. Earnest Money Deposit
An earnest money deposit, or good faith deposit, demonstrates to the seller that you’re serious about purchasing the property. The amount of this deposit varies but is typically 1% to 3% of the purchase price. It’s held in an escrow account and will be applied toward your down payment or closing costs.
Offering a higher earnest money deposit can make your offer more attractive to the seller, especially in a competitive housing market. But you’ll want to make sure the terms of your deposit are clear in the purchase agreement, including what happens if the deal falls through during the due diligence period.
6. Make a Purchase Offer
Your purchase offer is a formal, written offer that outlines the price you’re willing to pay, contingencies, and your desired closing date.
To stand out, you may want to add a personal touch, like an offer letter that explains why you love the house. Oftentimes, sellers appreciate a thoughtful gesture, especially when choosing between multiple offers.
Your agent will draft the offer and submit it to the seller’s agent. Once the offer is made, the negotiation process begins. A low offer might put you at a disadvantage, so it’s important to carefully check the property’s value and the seller’s priorities.
7. Negotiating the Offer
Once you’ve submitted your bid, the negotiation process begins. It’s a critical stage where flexibility, strategy, and understanding the seller’s priorities can lead you to a successful offer.
Responding to Counteroffers
If the seller counters your bid, take the time to evaluate their proposal carefully. You may need to negotiate the price, contingencies, or the closing date to reach a middle ground.
Flexibility is key here, offering a slightly higher price or adjusting the timeline could make your offer more attractive while still aligning with your financial decisions. Remember to lean on your real estate agent for advice so they can help you navigate this step with confidence.
Knowing When to Walk Away
Not every deal is worth pursuing and it’s important to know your limits. If the seller insists on a high price or refuses necessary repairs, walking away might be the best option.
A lowball offer could also backfire in a competitive housing market, so finding a balance between a fair bid and a lower price is crucial. Protecting your best interests is more important than rushing into a deal that doesn’t feel right.
Understanding Market Conditions
The housing market can vary widely depending on location, time of year, and broader economic trends. Whether it’s a buyer’s market or seller’s market, your strategy should adapt to current conditions.
A competitive housing market may require quicker decisions, while a buyer’s market could give you more time and leverage. Your real estate agent should provide you with insights based on recent trends to help you stay in a stronger position throughout the negotiation process.
What to Do After Making an Offer on a House
Submitting an offer is an exciting step, but it’s only the beginning. Each part of the process, securing financing, completing inspections, and negotiating terms, gets you closer to turning that dream house into your new home.
Want to make your offer stand out in today’s competitive housing market? With Rate's Pre-approval you could be approved in 24 hours. Start your journey today and take one step closer to the perfect home!
