It’s one thing to idly scroll through online house listings, or cruise your local open houses on the weekends. It’s something else entirely to make a real offer to buy a home.
Making an offer on a home is serious business. A purchase agreement is a legally binding document. Once you’ve submitted an offer to the seller, you’re legally bound by the terms of that offer. So it’s important to get it right.
We’ve got a rundown of the steps in the offer-making process, and some tips for making an offer the right way.
Making an Offer: the Basics
The actual offer process for buying a home is pretty straightforward.
As the buyer, you make a written offer. Then, the seller reviews your offer.
The seller may have several offers to review at once: they might wait a few days or weeks to see if additional offers come in. Or, the seller could respond to your offer right away.
The seller can choose to accept your offer, reject the offer, or send you a counter offer.
If the seller accepts the offer, you move forward with closing. In most parts of the country, you as the buyer would need to put a good faith payment or earnest money into escrow.
Then, you’d move forward with securing your mortgage financing, and your real estate agent and mortgage professionals would get to work ordering appraisals and title searches and scheduling final closing details.
If the seller sends you a counter offer, it would be your turn review the counter offer. You can decide whether to accept it, reject it, or negotiate further. Negotiations can continue until you and the seller reach a mutually acceptable agreement, in which case, you would move forward with buying the home.
Or, you and the seller could fail to reach an agreement. In that case, it’s back to house-hunting until you find another home for which you’d like to put in an offer.
While the offer process itself is pretty simple, it can be little intimidating, especially for first-time homebuyers. So we’ve got a few tips for how to put an offer together well.
Do Some Research Before Offering to Pay the Asking Price
A home is not a pair of shoes at a department store. You don’t have to pay the price listed on the tag. The seller’s asking price is just a starting point for negotiations: when you’re making your offer, you can choose to offer more or less than the price on the listing.
Of course, deciding on a fair price for your offer can be a bit tricky. Offer too little, and the seller could dismiss your offer outright. But if you offer too much, you could wind up agreeing to pay more than you needed to, or even worse, more than an appraiser will say the home is worth.
Your best bet? See what you can find out about similar recent home sales.
Have other homes in the neighborhood sold quickly for more than their initial asking prices? Then you should probably be prepared to offer more than the listing price, too. Have similar homes languished unsold for months and months? Then an offer well below the listing price might not be out of the question.
Home listing sites online can help you look at recent sales figures, but we’d recommend taking the time to solicit the help of a professional. A good real estate buyer’s agent can help you understand the market conditions in your area. Only you can ultimately decide what you’re willing to pay, but getting some advice on what to consider can make that decision easier.
Get Pre-Approved for Your Mortgage Before Making an Offer
Sellers don’t want to spend weeks and months working with a buyer, only to discover down the road that the buyer can’t come up with the funds to buy the home. (Trust us: it happens.)
That means that along with your offer, you’ll want to demonstrate that you can get financing for your home purchase. Plenty of seller’s agents won’t accept offers without proof of eligibility for financing.
Getting pre-approved for your mortgage can be quick and pretty easy. So when you’re getting ready to make an offer, go ahead and take a few minutes to get pre-approved. A pre-approval letter in-hand can show the seller that you are, in fact, serious and qualified.
Be Strategic About Contingencies
Contingencies are a big part of any offer. Essentially, contingencies are conditions that buyers and sellers need to meet for the deal to go through.
For example, most property purchasing agreements include a contingency that states that the sale is subject to a property appraisal. If the property appraises for much less than the agreed-upon selling price, a mortgage lender won’t be willing to loan you as much money. (Plus, you probably don’t want to spend more on a property than a professional says it’s worth.)
It’s also pretty common to include a contingency stating that the deal is off if you, the buyer, can’t obtain financing. That way, you don’t wind up obligated to buy a property if you have trouble securing a mortgage.
Buyers can include all kinds of contingencies in their purchase offers. You can request repairs be completed or paid-for by the seller before the sale is final. Buyers can also make an offer that depends on the buyer’s ability to sell their existing home first: that way, they’ll have the money from the sale of the previous home to purchase this new home.
As a buyer, it’s best not to get too carried away with contingencies. In tight real estate markets, lots of contingencies can remove your offer from the running outright. If everything else is equal, most sellers will choose deals with fewer hurdles to clear.
Get A Professional to Look Over the Paperwork
So, how should you decide which contingencies are worth including? What terms and conditions belong in your offer? How to you protect yourself from shady sellers or too-good-to-be-true deals?
Putting together an offer is one situation where the help of a real estate professional is really valuable. Yes, you can find listings for homes all by yourself. But getting a real estate agent to help you draft and submit an offer is a smart move.
The seller’s agent probably won’t let you submit an offer that fails to meet minimum legal requirements. But it helps to have an advocate in your corner. Plus generally, buyer’s agents split commission with seller’s agents. So consulting a real estate agent to help you draft and submit your offer won’t even cost you money out of pocket.
Be Ready for a Counter Offer
Right now, most American cities are facing a bit of a housing crunch, especially on the affordable, first-home end of the market. There are more folks interested in owning a home than there are homes to go around. Since that is the case, many sellers are able to be a little bit choosy about what offers they’ll accept. So it’s not uncommon for sellers to respond to buyer’s offers with their own counter offers.
Just like buyer’s offers, seller’s counter offers can include adjustments to just about any aspect of the proposed deal. Perhaps the seller is just really attached to the refrigerator, and can’t bear the thought of leaving it behind. Or maybe the seller would like to make the deal, but wants to wait to transfer possession of the property until the end of the school year, so the kids won’t need to move mid-semester.
The most common counter offers concern price.
As a buyer, you’ll want to be prepared for counter offers from the seller. It can be easy to get emotionally attached to a particular home—this could be it! Your future home! Where you raise your children and host barbecues and sit on the porch watching sunsets when you’re old!—but don’t lose sight of your budget in the process. Sometimes, an extra few thousands dollars really is more than you can do. Don’t be afraid to walk away from a counter offer if you can’t swing it.
That said, being flexible where you can might give you a leg up on other would-be buyers. A few month’s difference in your ideal move-in date shouldn’t prevent you from buying a home you plan to live in for the next several decades.
But Also: Be Ready for an Acceptance
Remember: real life is not an HGTV home-hunting program. Yes, bidding wars happen in tight real estate markets. Yes, buyers and sellers can go back and forth on contingencies and price and move-in timelines. But if you put in an offer to buy a home, you should absolutely be ready for that offer to be accepted straight away.
Many homebuyers are a little surprised when a seller accepts their offer. If you can avoid being one of them, you’ll have a less stressful home buying experience.
So for example, if you know you’ll need to cash-out some investments for your earnest money or your down payment, get that ball rolling now. Turning less liquid assets into cash can take some time. You’ll need to be able to access those funds as soon as the seller accepts your offer.
Do some research and ask for recommendations for home inspectors or contractors early, so you’ll have names and numbers to call when you get the green light.
The Best Way to Be Ready for an Accepted Offer
If you’ve been pre-approved for your mortgage, then you won’t have too much to do in the way of finding documents or getting organized to get financing. (Yet another reason to get pre-approved for your mortgage early in the game.)
But even so, you’ll want to make sure you’re ready to pay attention and respond to phone calls and emails from your lender or mortgage broker for a few weeks.
Once your offer is accepted, the underwriters for your lender will get busy officially approving your mortgage. Sometimes, they’ll need signatures or updated documents or additional information.
For many homebuyers, making an offer is the point in the whole process where home buying starts to feel real. So if you’re ready to put in that offer (or almost ready) we’re ready to help you get your mortgage. Learn about how Morty makes finding the best mortgage easy. when you’re ready for your mortgage, you can get started here.