Making an Offer

Time to complete: 1-2 days

Once you’re sure you’ve found the house you want to buy, it’s time to make an offer. This is where the process can get complicated. A real estate agent will usually handle this for you, but if you’re serious about a house and want to save money by doing it yourself, we’ve laid out the entire process, step-by-step.

Decide on a price

Figure out how much you want to offer based on your budget and how much houses similar to yours sold for recently in the area. A real estate agent will usually do a comparative market analysis and get comps for you, but you can use the following tools as well

1. Zillow Estimator (free)
2. Redfin Estimator (free)
3. Homelight (paid)
4. HouseCanary (paid)
5. DIY Comparative Market Analysis: You can use this guide to do your own analysis using public information

Draft an offer

‍Find your state’s standard purchase agreement form and familiarize yourself with it. In most states, you’ll send an offer by filling out this form and sending it to the listing agent. (There are some states where there is a separate offer form and purchase agreement form, and attorneys may be required. You can find more info at the previous link.)

You can often find online guides to fill this out yourself, or hire an attorney or even a real estate agent to fill it out for you for a flat fee. Alternately, you can try using a legal form generator site like eForms or LawDepot to create the form by answering a number of questions.

If you’re trying to fill the form out yourself, here are the key bits:

1. Contingencies let you back out of the transaction with no penalty in case specific issues come up during the process. These provisions are generally meant to provide the buyer with protections against certain unforeseen circumstances. In competitive markets with lots of buyers, contingencies can make an offer less compelling to the seller and are often waived. That said, be sure to include whatever protections you think are important! The most common ones are:
   • Inspection contingencies trigger when a home inspector finds issues that may need to be addressed immediately or in the future (ex. leaks, roof or foundation issues, mold, etc) that are not covered in the home disclosures. You can also negotiate for repair concessions instead of backing out.
   • Financing contingencies trigger if your financing falls through - for example, if you’re unable to secure your mortgage loan from your lender.
   • Title contingencies trigger if any title-related issues are discovered - for example, if if it turns out there are unresolved legal or financial issues with the title such as unpaid taxes. You can also get title insurance during your closing process to prevent any future issues that may arise.
   • Sale of prior home contingencies tie the purchase to your prior home selling in a set amount of time. If your home fails to sell within the specified time period, you can withdraw from the contract.
   • Appraisal contingencies trigger if the appraisal given to you by  is significantly different than what you offer. Say for example that you offer $500,000 for a home, but the appraisal comes in at $400,000. The appraisal contingency gives you the option to walk away from the deal, which can help give you negotiating leverage to lower the price closer to the appraisal value. Without an appraisal contingency, you may need to violate the contract which can involve, among other penalties, losing your earnest money.
   • Insurance contingencies trigger if you’re unable to secure homeowner’s insurance.
2. Additional Requests & Concessions
   • This is where you can include anything not covered in the contingencies above - for example, if you’d like the seller to include certain appliances or to fix worn or damaged areas (ex. flooring, walls, carpeting).
   • This is also where you can request additional concessions (ex. money towards closing costs, etc).  
3. Timelines will be set on the purchase agreement for the completion of financing, contingencies, and all subsequent parts of the process. Make sure these are reasonable, as once the purchase agreement is signed these become legally binding; missing deadlines can result in penalties or the transaction falling through.
4. Earnest Money Deposit is good-faith money that you deposit to the seller’s escrow account to signal that the offer is “serious”. This money is to be paid at the time of offer acceptance. Earnest money is included in the vast majority of offers.
   • If the transaction goes through, this money goes toward closing costs or the home purchase. If you back out of the transaction for any reason not covered in the contingencies, the seller keeps this money.
   • The amount of earnest money ranges from $500 to 3% of the purchase price, and usually must be deposited within 1-3 days of the purchase agreement being signed. Make sure you have it ready to go when you send the offer.
5. Before you actually send the offer, double-check the listing to see if there are instructions for offer submission. Most of the time, you can simply email the completed paperwork to the listing agent as an official offer, but some listing agents may prefer you to submit an offer through an automated system or form. Follow their instructions.
6. Congratulations, you’ve officially submitted an offer on a house! The listing agent usually gets back to you within a few days.

Negotiate the offer

Time: 3-15 days

Your first offer may not always be accepted up front. That doesn’t mean all hope is lost! Real estate transactions very commonly involve a process of negotiation to settle on the final price and terms. Here’s what to do if your offer is rejected.

Gather information: Ask the listing agent for info on whether there are other offers and what they look like (cash only, faster closing times, etc.) to inform your updated offer. Take this info with a grain of salt, as the listing agent is motivated to get the highest price possible for the seller and will generally try to give the impression that there’s a lot of interest.

Improve your offer: You can try a variety of strategies based off of your budget and the information you’ve gathered, including:

• Increase your offer price
  • This is the most straightforward way to improve your offer. The highest offer is chosen a majority of the time. If you choose to do this, ensure that the updated offer is still within your budget.
• Waive contingencies or concessions
  • Sometimes, waiving contingencies can help your offer get accepted. For example:
    • If you’re very confident in your financing or the house is very new, you may want to waive the financing or inspection contingencies.
    • If you had a concession to repair a carpet but decide you’re ultimately OK with doing it yourself, waive the concession.
  • Always keep in mind your own interests when choosing whether to waive a contingency. Don’t waive a sale of prior home contingency if you need the money to buy your new home!
  • Try to get an indication from the seller or the listing agent on whether there are specific contingencies that they didn’t like.
• Expedite your offer timelines
  • Offering a quicker closing timeline can help make your offer more appealing to sellers who need funds to put into their next home purchase. Make sure you talk to your loan officer to ensure you’ll be able to meet any expedited timelines.
• All-cash purchase
  • If you can, making a cash offer gives you a significant advantage over other buyers offering the same price.
  • A cash offer gives the seller much more confidence that the transaction will close, because there is no need to wait for financing.
  • Getting a loan approved is also the step that usually takes the longest in the closing process, so it means the closing could be significantly expedited.

Consider counter-offers. Sometimes the selling party will make a counter-offer that modifies the price and/or terms of your initial offer. Make sure you read the counter-offer closely to understand what changes the seller is proposing. The listing agent should be able to walk you through them in detail. Pay close attention to:

• The offer price
• Changes to contingencies and concessions
• Changes to the offer timeline

Your options are to let your original offer stand, to take the counter-offer, or to counter-propose a new offer. Making it clear that you will not budge can result in the original offer being accepted in less competitive markets or if the seller is trying to sell as quickly as possible. If you think that the property isn’t that competitive, or that your offer is already very compelling, then this could be a good option. Alternately, if you’re very interested in the property and want to lock it down, you can try to improve your offer using the strategies laid out above and send an updated offer.