When you make an offer on a house, in some ways, it's the first serious step toward homeownership: You're telling the seller that you're interested enough in their property to literally put your money on the line. For a lot of buyers, the offer experience can often generate some anxiety around whether or not the seller will appreciate your offer enough to accept it ... and what to do if the seller decides to say "thanks, but no thanks."
To make sure that you're setting yourself up for success and presenting the best possible offer, one that makes sense for both you and the seller, you need to do some preparation in advance, and you need to mentally prepare for some back-and-forth at the end of the process. Follow these 13 steps to write an offer that's more likely to be taken seriously by a seller, and to help prepare you for the realities of the sales process.
If you're not planning on paying all cash for a house -- and few of us in today's market can afford to do that -- then you'll need to secure financing for your mortgage loan to ensure that you can pay the seller the agreed-upon amount at the closing table. This means you'll want to get that financing sorted out before you make an offer; a seller is a lot more likely to consider accepting your offer if they know that the mortgage loan is already in the works.
This involves a lot more than pulling up an app on your phone and entering your income while you're walking through a house for sale. Those platforms usually offer a prequalification, not a preapproval. A prequalification doesn't guarantee the amount of money that you can actually borrow to buy a house, and there's really no due diligence involved on the lender's part, so a seller would be completely within their rights to look with some amount of skepticism at an offer with a prequalification.
Instead, talk to a mortgage broker before you start seriously shopping and get preapproved for a mortgage loan. A preapproval will require quite a bit more work on your end -- you'll have to submit proof of income, previous tax statements, documentation of any assets and debts, and more to be able to secure a preapproval for a mortgage loan. But once you're preapproved, you know that you can get a home loan for the amount of money in the preapproval ... and the sellers will know it, too.
Research the market
Every real estate market is different, and if you want to make sure you're not overpaying for a house that you could have bought for less money, then you'll need to do some research so that you can make an educated decision about what you think is a fair price. By the same token, you don't want to submit an offer that's so low the seller is outright insulted (yes, this happens!) and refuses to negotiate with you.
Take some time to do a little bit of market research and get a sense of how attractive -- or unattractive -- the offer you're about to submit might be to a seller. A real estate agent can help you with this. In addition to home sale prices and price per square foot, you'll want to think about average days on market, list-to-sales prices, and other market numbers that can help you understand what kind of market you might be experiencing. For example, a longer median days on market number means that homes are taking some time to sell, and a seller might be more amenable to a below-asking-price offer. Shorter days on market mean that homes are selling quickly, and a seller will probably feel comfortable passing up your lower offer in hopes of getting something better.
Factor in the competition
When it comes to buying a house, there are two kinds of competition to consider. One is the competition that the home you're considering is up against -- what other homes are for sale nearby? Are there quite a few options that fit your needs, or is this property one of a very few that might work for you and your household? What are the listing prices for those other similar homes that are available, and how do they measure up against the house that you want to buy?
The other type of competition is competition from other buyers. In many markets across the country, there might be a number of mid-level and luxury homes available to buy ... but there just aren't very many entry-level homes for sale at all. If that's your situation and you really want or need to buy an entry-level home, then there might be quite a bit of competition from other buyers who are all trying to buy a limited number of available homes.
If the houses you're looking at tend to have a lot of competition on the market, that puts you in a good spot as a buyer -- a seller might be willing to cave on some of the contingencies or additional asks that you bake into your offer, or they might be more receptive to a below-asking-price offer. But if you as a buyer have a lot of competition from other buyers, trying to nickel-and-dime the seller is unlikely to work out to your advantage, and you might want to be as flexible as you can with the contingencies and offer the asking price or even a little bit over the asking price to make sure the seller is seriously considering your offer.
Weigh utilities and other costs
Being a homeowner is an excellent financial decision in many ways: You're building equity in your property with every mortgage payment, and you have a lot more control over remodeling and upgrading your house. But it also means you'll be responsible for any repairs that need to be made while you own the house, and if you're used to a rental package that includes utilities in the rent price, you might not be used to paying for individual utilities -- another cost of homeownership. Gas or electric services, water, internet, and other utilities you might want or need in your home are going to have to be paid out of your own pocket.
It's a good idea to spend some time calling around to figure out which companies could potentially service your home in terms of utilities; ask them if they can help you determine what an average cost per square foot per month for their utilities might entail (or just a flat monthly cost in terms of something like internet or cable services), if there are additional hookup or servicing fees, and anything else that can help you pinpoint how much you'll be spending every month to keep your house heated, lit, and comfortable.
Another monthly cost to package into your mortgage loan is the insurance and taxes on your house, typically paid with your mortgage loan. You can look up taxes for the homes you're considering online, and if you have an insurance agent, work with the agent to figure out what the cost of homeowners insurance would be on the house so that you can be sure you're factoring in all your monthly homeownership costs and can afford the property that you eventually will buy.
Learn about the HOA
Not every neighborhood has a homeowners association (HOA), but some do, and if the home you want to buy is in a neighborhood with an HOA, there are a few things you'll need to know before you decide it's a good fit for you. Most HOAs charge dues that residents pay to help accommodate for management costs and perhaps amenities -- some neighborhoods have a local pool or workout facility, for example, and this is how those "extras" get funded.
You'll also want to make sure you know the rules of the HOA and are prepared to follow them so that you don't run afoul of your neighbors or end up paying penalty fees or fines because you broke a rule. Some HOAs mandate how long a car can be parked in your driveway, when you can water your lawn, and how long your grass should be, and it's important to remember that you're signing up to follow those rules when you decide to move into the neighborhood. Make sure that you can live with the rules that were there before you moved in!
You might ask about how often the HOA meets, how to join the board, how residents can give input or feedback, and generally how to get involved. Being an active member of your local HOA is a great way to meet your neighbors and make new friends in the area.
Decide how attractive the house is to you
Sometimes you know a home is absolutely perfect for you and your household, but in many cases, you're going to be making compromises here and there. Perhaps the house isn't quite as big as you'd hoped, or maybe it's closer or further away from gas stations, grocery shopping, or other facilities and amenities. How badly do you want the property, and how much longer are you willing to spend looking for a house before you decide to make bigger compromises?
Sit down with the other decision-makers in your household and make a list of the homes you've seen so far, including what you liked and disliked about each of them. Which one (or ones) come the closest to your ideal? Do you think they're worth the asking price? Why or why not? How much would the seller have to shave off the asking price to entice you to make an offer, if anything? Know how you feel and where you stand about the different places you're seriously considering so that you can write an offer that feels good to you.
Ask your agent for advice
Most of us don't buy or sell a house every day, and it can be difficult to know whether what we're thinking is reasonable or realistic -- or way off-base from what most buyers in the area are doing. But there's one person involved in the transaction who spends a lot of time helping both buyers and sellers negotiation: Your real estate agent. When you've evaluated the homes you've seen and come to some conclusions about what you think is fair, run your thoughts by your agent and ask for their advice. That's why you hired them, after all, and they should be more than happy to help you put together an offer that's both fair and competitive.
Your agent can help you determine whether the price you want to offer is fair and what else you might want to consider asking for (if anything) in your offer. They'll know what's common and what's quite uncommon in terms of requests, and they can help you kick off a transaction that will go as smoothly as possible.
Prepare any earnest money
Some sellers will ask for earnest money to show the buyer is "earnest" about purchasing the home -- and other sellers might not ask for earnest money, but they may be swayed by an offer to provide earnest money, especially if that helps the buyer stand out from other buyers vying for the house. Another good question to ask your agent is whether earnest money is common in the area and whether they think the seller might be enticed to accept your offer over someone else's if it includes earnest money.
To that end, think about how much you might be willing (or able) to spend on earnest money and get those funds together. You'll need to be prepared to deliver the money via a cashier's check to the seller when your offer is accepted, so get it ready to send out the door when you write your offer.
Some mortgage loans will require certain contingencies -- for example, most lenders won't move forward with a loan without an inspection and appraisal of the home; after all, the lender will want to make sure that the investment they're making via the loan is backed by an asset that's worth at least what they're lending you, and they'll also want to make sure the home is habitable and doesn't have any glaring issues that could prevent buyers from living there. And as a buyer, there might be some contingencies you want to bake into the offer, too.
Real estate agents write offers pretty frequently, so ask your agent about what needs to be included and what might be optional in terms of contingencies, if anything. Let them guide you and help you understand where you might be able to show some flexibility (and win sellers over) and where you really need to hold firm in terms of contingencies.
Determine your terms and conditions
There are other ways to sweeten your offer besides flexibility with contingencies, and depending on how competitive the market is, you might want to take advantage of some of those terms and conditions. If you really need to know sooner rather than later whether the seller can accept your offer, for example, then you might want to include something in the offer that stipulates how long the seller has to think about it before accepting, declining, or countering your offer so that you can keep the ball rolling.
Other terms and conditions might include who pays for closing cost -- the buyer or the seller -- and which appliances will be included in the sale. These terms can vary from state to state and even market to market, but if you as the buyer would really rather not shop for a new fridge and think the washer and dryer are absolutely perfect, then you can ask the seller to leave those behind even if it's not common in your state. Perhaps there's a piece of furniture that you thought really tied the living room together? Whatever the case, talk to your agent about what you need to know to include some of those "extras" in the offer.
Submit the offer
Submitting the offer is possibly one of the most nerve-wracking parts of the home-buying process, but it obviously has to happen if you're going to have a chance at owning the house. Go over the offer again one last time with your agent and make any tweaks or changes that might be necessary to help make the offer more attractive to the seller, or that will help you get across the finish line as a homeowner. After that, it will be up to your agent to submit the offer to the seller's agent and inform you of any responses.
Don't be discouraged if the seller doesn't accept your offer immediately or doesn't accept your offer as-is. It's quite typical for a seller to come back with a counter-offer -- maybe they want a little bit more money, or perhaps they're just not willing to leave behind that furniture you wanted, or maybe they want to negotiate who pays for closing costs. A counter-offer is still a win of sorts in the sense that it's not an outright rejection; the seller heard what you had to say and is willing to compromise, so meet them at the bargaining table and figure out where you can be a little more flexible and where it's really not possible to budge. If the house is already at the top of your loan limit or budget, but you can offer some concessions elsewhere, communicate that to your agent and ask them to help you write a new offer that might just be the one that gets accepted by all sides.
Writing an offer takes a lot of thought and consideration if you want it to be seriously considered and accepted, which is one reason why it's smart to enlist a real estate agent to help. If you follow all 13 of these steps and take your agent's advice to heart, you'll be on your way to the closing table and a proud homeowner before you know it!