How to Make an Offer on a House

What happens when you finally find the house you want to buy? How and when do you make an offer? And what should you do to boost your chances with the seller—especially in a competitive housing market?

How Do You Make an Offer on a House?

To make an offer on a house, you’ll work with your real estate agent to prepare a written offer that spells out your price, earnest money deposit, contingencies and proposed closing date. It’s important to have a good real estate agent on your team from the start of your home search because the way your offer is structured can affect your chances of getting the house you want. A good agent will know their way around the whole buying process.

What Should You Do Before Making an Offer?

Get preapproved for a mortgage before you go house hunting so you’ll have your letter ready when it’s time to make an offer. Once you find a house you like, use comps and your budget to decide what you can safely offer.

• Get preapproved first. A preapproval letter shows the seller a lender has already checked your finances, which makes your offer a lot more serious. Just remember: What a lender approves you for isn’t your budget. Your budget is what you decide you can comfortably pay.
• Study the comps. Ask your agent for a report on recent sales of similar homes nearby (called comparable sales, or comps). Comps show you what similar homes have recently sold for, which helps you make a competitive offer and avoid overpaying for a house.
• Run the numbers. Use our Mortgage Calculator to find the full monthly payment for the price you’re considering, including principal, interest, taxes, home insurance, private mortgage insurance (PMI), and homeowners association (HOA) fees. On a 15-year fixed-rate mortgage, that payment should be no more than 25% of your take-home pay. If the payment doesn’t fit your budget, lower your offer or keep looking.

What’s the Process When Making an Offer?

Making an offer takes four steps: decide you want the house, work with your agent to set the terms, sign and submit your written offer, then wait for the seller’s response.

1. Once you find a house you want, tell your agent you’re ready to make an offer.
2. Together, you’ll decide on your price and other terms, like your earnest money deposit, contingencies and closing date.
3. Your agent will prepare a written offer. After you sign it—in person or virtually—your agent will send it to the seller’s agent.
4. The seller will respond in one of three ways:

The seller accepts the offer.

Everyone is happy. Hooray! Once both sides sign the offer, you’re generally under contract and on your way to buying a house!

The seller makes a counteroffer.

You can either accept the counteroffer, make another offer of your own, or walk away.

The seller declines the offer.

You could then try to make a more appealing offer (if your budget allows) or move on to find another house.

How Do You Make Your Offer Stand Out?

You make your offer stand out by moving fast, matching the seller’s known priorities, and offering a price backed by comps that fits your budget.

• Be as quick as you can when submitting your offer—especially if the house hasn’t been on the market long. Know what you’re looking for in advance and assume you’re not the only person looking at the house—because you probably aren’t. You want to beat other buyers to the punch!
• Ask your agent about the seller’s stated priorities, like a preferred closing date. If they need a quick sale, for example, you may be able to offer a shorter closing timeline.
• Has the seller received any other offers on the house? Getting this information depends on how much the seller’s agent is willing to tell your agent, but it’s always worth a try.
• Your agent will also look at the local housing market, the condition of the house, and how long it’s been listed to help decide what your offer price should be. If the house needs renovations or there’s a reason it’s been sitting, factor that into your offer.
• If you’re selling your current home while you’re looking for a new one, put your house on the market before you start your new home search. You don’t want to find your dream house and have the purchase fall through because you don’t have a buyer for your current house lined up in time. Be sure you don’t purchase a new house until you sell the other one. A good real estate agent can help you navigate the process of buying and selling a home at the same time.
• Remember: Your offer should be strong from the start. Don’t throw out a lowball number or offer more than your budget allows. Since you could end up in a bidding war or get a counteroffer, know your walk-away number before negotiations begin.

Here’s how a strong offer stacks up against a weak one:

What’s Included in an Offer?

An offer is your written proposal to buy a house. It lists your price and the terms you’re offering—and it can become legally binding when the seller accepts it, depending on your state’s laws and the contract terms. That’s why you should have a real estate agent help you prepare it and, when appropriate, have an attorney review it.

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Your offer will usually include:

• The price you’re offering
• The amount of earnest money you’ll pay
• Your down payment amount
• Proof of financing, such as a preapproval letter
• Any contingencies, like home inspection, appraisal and financing
• Your proposed closing date
• Any seller concessions you’re asking for, like help with closing costs
• If you’re selling your current home, any home-sale contingency and its deadline
• Your offer’s expiration date

What Is Earnest Money?

Earnest money is a negotiated good faith deposit that shows the seller you’re serious about buying the house. The amount varies by local market and contract terms. It typically totals 1–5% of the purchase price, according to Freddie Mac.¹ At closing, it goes toward your down payment or closing costs.

In a hot market, a bigger deposit can help your offer stand out. Just don’t put up more cash than you could afford to lose if the deal falls apart for a reason your contract doesn’t cover.

Where Does Your Earnest Money Go?

Your earnest money is usually held in an escrow account managed by a neutral third party—like a title company, escrow company or real estate attorney—while the sale is pending. Neither you nor the seller can access it on your own. If the sale closes, the money is credited toward your down payment or closing costs. If the deal falls through under a contingency in your contract, you can typically get it back.

What Contingencies Should You Include in Your Offer?

Most offers should include three standard contingencies: a home inspection, an appraisal and financing. Contingencies are conditions that must be met before the sale can move forward. They can help protect your earnest money if the deal falls through for a reason covered by your contract. Your agent can help you choose protections that make sense for your situation without loading your offer up with extras the seller may resist. The most common contingencies are:

• Home inspection contingency: Gives you time to get a home inspection. If the inspector finds major problems, you can ask for repairs, negotiate the price, or walk away.
• Appraisal contingency: Protects you if the house appraises for less than your offer. You can renegotiate, cover the gap with cash, or walk away, depending on your contract.
• Financing contingency: Can let you back out and keep your earnest money if you can’t secure a mortgage by the deadline in your contract.
• Home sale contingency: Makes your purchase depend on selling your current home. Sellers see it as a risk, which is one more reason to sell your house before you buy.

How Do You Negotiate a Home Price?

You negotiate a home price by using comps, knowing your walk-away number, and weighing the whole offer—not just the price. Closing date, contingencies and closing-cost requests can all be part of the negotiation. Negotiating is worth trying, but make your first offer one you’d be comfortable having accepted. In a competitive market, don’t assume the seller will counter instead of choosing another buyer.

Here are other ways to negotiate the overall offer:

• You might agree to a closing date that suits the seller. But don’t give up protections you need just to make your offer more appealing.
• In a competitive market, a seller may counter by asking for a larger earnest money deposit while keeping your offered price. Only agree to a larger deposit if you understand the added risk and your contract still protects you.
• You might ask the seller for a credit toward your closing costs. Keep in mind that the seller may ask for a higher purchase price in return.
• A strong cash offer can be a good bargaining chip against offers with financing contingencies—even if those offers are slightly higher.

Don’t worry: A good real estate agent will be able to guide you in the right direction on these ideas!

Negotiating After Your Offer Is Accepted

Negotiations can continue after the seller accepts your offer if the home inspection or appraisal changes the deal.

Let’s say the inspection reveals a few minor issues you want addressed before closing, but the seller doesn’t have time to make repairs because they’re moving out of state. At this point, you could ask for something in exchange for taking care of the repairs yourself—like a credit from the seller or an appliance included in the deal.

And what if the appraisal from your mortgage lender comes back with a value that’s less than the agreed-upon sale price? The seller isn’t obligated to lower the price. You can ask them to reduce it, cover the gap with cash, or—if your contract includes an appraisal contingency—walk away.

Can You Withdraw a Home Offer?

Yes, you can withdraw a home offer, but whether you keep your earnest money depends on your contract’s contingencies and timing.

Before the seller accepts, you can usually pull your offer with no penalty. Just have your agent withdraw it in writing.

Once you’re under contract, contingencies can be your safety net. If you back out for a reason a contingency covers—and meet the deadlines in your contract—you can typically get your earnest money back. If you back out because you changed your mind or missed a contract deadline, you may lose that money.

That’s why you want your agent to walk you through every deadline in the contract before you sign it.

How Do You Know if You Can Afford to Buy a House?

You can afford to buy a house when your down payment and your monthly payment both line up with these guidelines: First, you should be able to make a down payment of at least 20% (5% down is okay if you’re a first-time home buyer, but you’ll have to pay private mortgage insurance). Second, your monthly payment (including principal, interest, taxes, homeowners insurance, PMI and HOA fees) on a 15-year fixed-rate mortgage should be no more than 25% of your take-home pay.

If you’re not in a financial position to afford a new home, stay at your current address and work hard to increase your income. If you already own a home, build more equity before you sell.

What Should You Do in a Bidding War?

In a bidding war, make your strongest offer up front, keep it within your budget, and let your agent do the talking.

Unfortunately, if your dream home is also another buyer’s dream home, you could find yourself in a bidding war. This is when the seller receives more than one offer at the same time.

Here’s what could happen:

• The seller could ask the buyers with the highest offers to come back with their best possible offers by a set deadline. The seller will look them over and come to a decision.
• The seller may choose the offer with the terms that work best for them—not necessarily the highest price. That could mean a faster closing date, fewer contingencies or stronger financing.

Here are a few ways to strengthen your offer without stepping outside your budget:

• Ask your agent whether an escalation clause is allowed and makes sense for you. It can raise your offer by set increments up to a maximum amount if the seller receives a higher bid.
• Paying in cash may make your offer more attractive because there’s no mortgage financing contingency and closing may move faster.
• Increase your down payment or earnest money deposit only if it fits your budget and you understand the added risk.
• Include your preapproval letter with your offer. It shows the seller a lender has reviewed your finances, though it’s not a guarantee of final loan approval.

Handle negotiations through the agents. It helps keep the terms clear, documented and focused on the offer.

Why Do You Need a Real Estate Agent to Make an Offer?

You need a real estate agent to help you prepare and present a competitive offer, manage deadlines, and negotiate with the seller. A written offer can become legally binding once it’s accepted, so make sure you understand the terms. From searching for the best home to putting in that offer, a top-notch agent can analyze the market, assess the house, and work with you to present your strongest offer.

Frequently Asked Questions