Make an offer on a house in 6 easy steps

6 Steps to Make an Offer on a House
1: Decide how much you want to offer
2: Choose your contingencies
3: Determine the earnest money amount
4: Write the offer letter
5: Submit your offer and wait
6: Negotiate the terms of sale

Making an offer is one of the most important steps in the home buying process. It is the moment when you find out whether the home will actually be yours. From deciding how much to offer, to choosing contingencies and earnest money, and preparing for negotiations, there’s a lot to consider.

In this Redfin article we explain how to make an offer on a house in six steps. Whether you’re buying a house in Minneapolis, MN, or a townhouse in Austin, TX, here’s what you need to know about submitting an offer on a house so you have the best chance of having it accepted.

What to do before you make a bid

Before you make an offer on a home, there are a few things you can do to move quickly and confidently when you find the right home:

• Apply for a mortgage in advance: Most sellers won’t take an offer seriously without pre-approval, so having one will help you understand exactly how much house you can afford.
• Understand your local market: Knowing whether you are in a buyer’s or seller’s market can help you determine how competitive your offer should be.
• Determine a strategy together with your agent: Your real estate agent can provide insight into why the sellers are selling their home, local price trends and whether you are likely to face competition.
• Understand the most important parts of an offer letter: It includes your price, contingencies, earnest money deposit, closing timeline, and any seller concessions you may want to request.

Once you’ve checked these, you’re ready to write and submit your bid.

How to make an offer on a home

Now that you know what to do before making an offer, you can begin the steps of submitting an offer on a house.

Step 1: Decide how much you want to offer

If you’re already pre-approved, you probably have a good idea of ​​how much you can spend on a home. But the price you decide to offer will depend on many factors: the competitiveness of the housing market, the house itself, your budget, and more.

Housing market conditions

• Buyer’s market: There are more homes for sale than buyers. You may have the option to offer lower than the asking price of the house.
• Seller’s market: There are fewer homes for sale than buyers. You may need to bid above asking price to stand out from the competition.

Budget

Your budget is often the biggest factor in determining how much you can offer on a house. Even if you’re pre-approved for a larger mortgage, it doesn’t mean you should buy more than you can afford. Consider offering less than your mortgage amount to create room for negotiation.

The house

There are circumstances where it makes sense to offer an amount above or below the list price, and there are circumstances where you must meet the list price. Your broker can help you determine the right offer for you. Some factors include:

• Time on market: The longer the house is on the market, the more likely the seller is to consider a lower offer.
• Necessary repairs: Whether the property needs a lot of repairs or is turnkey can affect how much you bid.
• Similar properties in the area: Your agent can attract comparable properties, also known as “comps.” These are comparable homes that are for sale or recently sold in the area. This information provides insight into whether the home is reasonably priced.
• Competition: Competition for a home can greatly influence your offer. Talk to your agent about handling a bidding war or making a backup offer if the seller has already accepted one.

Step 2: Choose your contingency clauses

Contingencies protect you as a buyer by giving you a way to back out of the deal if certain conditions are not met. If you use a contingency to cancel the deal, you can usually get your money back.

Sellers prefer offers without contingencies, so use them sparingly if you can. The contingencies available depend on your location and the current housing market. These are the most common:

Step 3: Determine the earnest money amount

The third step is to decide how much you want to offer in earnest money. Earnest money is a down payment, usually 1-3% of the home’s sales price, that you pay after your offer is accepted. It shows that you are willing to buy the home.

If the sale goes through, this will be applied to closing costs. If you withdraw from the sale due to a reason stated in your contract, such as a contingency that is not met, the money will be refunded to you. The seller keeps the money if you withdraw from the sale for any other reason.

Step 4: Write up the offer letter

The offer letter refers to the legal offer document and not a personal letter to the seller. Personal letters to sellers are discouraged because they may violate fair housing laws.

Your agent will prepare the offer letter for you, but if you are working without an agent, be sure to include the following:

• Address of the property you are offering for sale
• Your name and anyone else’s name that will appear on the house title.
• Your offer price
• Any contingencies you want to include
• Any concessions from the seller that you request, such as repair or closing costs
• Your mortgage preference letter
• Items you want on sale, such as appliances
• Money deposit amount
• The date on which you expect the loan to be closed
• The date on which you expect to move
• Deadline for the seller to respond to the offer

Step 5: Submit your offer and wait

Once your offer is ready, your agent will submit it on your behalf. If the seller has received or is expecting other offers, you may have to wait a few days for a response. Some sellers may have a set deadline for submitting offers and begin reviewing offers after that date.

Step 6: Negotiate the terms of sale

It is common to negotiate with the seller and having an experienced real estate agent is crucial. Discuss in advance which aspects of the offer you are willing to negotiate and which are non-negotiable. Here are three scenarios you might face after submitting your offer.

Scenario 1: The seller accepts your offer

If the seller accepts your offer, continue with the next steps. This means that you sign the purchase and sale agreement, collect your money and apply for a mortgage.

Scenario 2: The seller makes a counter offer

The second option is for the seller to make a counter offer. It is up to you and your agent how you want to proceed. The negotiations are usually informal and help you reach an agreement – ​​or walk away from the deal.

Here are some things to consider:

• You do not have to negotiate the purchase price: The seller’s counter offer may be a higher purchase price than you offered, but that does not mean you have to accept it. You may consider negotiating repair costs or other concessions, such as covering some of the closing costs.
• Find out what the seller is looking for: Your agent will contact the sellers and their agent to determine what the sellers are looking for. Do they want you to remove contingencies? Were they looking for a higher price? This information can help you determine what to negotiate.

Scenario 3: The seller rejects your offer

The final scenario is that the seller rejects your offer. Maybe your offer was too low, or there was a cash buyer. If your offer is rejected, you can start looking at other homes on the market.

What happens after your offer is accepted?

Congratulations, your bid has been accepted. Here’s what you can expect as you begin the closing process:

• Sign the contract: Read it carefully to make sure there are no errors, and make sure you understand the details before signing.
• Secure your mortgage: You need to apply for your home loan. Your lender will conduct a more in-depth financial investigation, finalize your loan terms and order an appraisal to confirm the home’s value.
• Schedule your inspection and appraisal: Make sure you carry out a home inspection to uncover any problems with the property and arrange a home appraisal.
• Close your new home: Once all contingencies have been met and your mortgage is ready, you can sign the paperwork and close on the home. Your lender will transfer your money to the attorney or title company to complete your purchase and receive the keys.

Frequently asked questions about making a bid

How much should I put down?

Your down payment amount will depend on your loan type and budget, but here are some things to consider.

• 0% down – VA or USDA loans
• 3-5% lower – FHA and some conventional loans
• 10-20%+ down – Helps avoid private mortgage insurance (PMI) if you have a down payment over 20% and lowers monthly payments.

Although a larger down payment can lower your monthly costs, many buyers successfully purchase a home with less than a 20% down payment, especially first-time buyers.

What should I do if I am involved in a bidding war?

A bidding war occurs when a seller receives multiple bids in a short period of time. Because buyers compete with each other, they may increase their listing price, specify contingencies, or make other “concessions” to make their offers more attractive. Your agent can give you advice to help you avoid bidding wars when possible, and navigate them wisely when not.

How much is too low to offer on a house?

Making a lower offer on a house than the list price depends on several factors. Your broker has insight into what is too low in your area.

How long will it take for me to receive a response after I have placed a bid?

It is normal to hear back within one to three days of making an offer on a house. However, this timeline may vary depending on the number of offers the seller needs to review or other personal circumstances.

How long does it take to close on a home?

Closing on a home with a mortgage can take 30 to 60 days. There are things you can do to avoid delays and speed up the closing process.