15 Things To Consider When Making an Offer on a Home

When you make an offer to buy a property, you're making a binding commitment. Typically, you have to go through with the purchase or risk losing the deposit you make. And since your home is probably your largest asset, deciding to buy one is a big deal.

To make sure your offer protects your interest and enables you to buy a great home for the right price, here are 15 things to consider when putting it together.

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Obviously, you need to consider what the seller has the property listed for. But you should also research comparable properties to get an idea of the actual market value. This can help you decide what amount to offer for the property so you don't end up overpaying or putting in a lowball offer that's rejected right away.

ALSO READ: Waiting for Real Estate Prices to Fall Before Buying? Here's Why That May Not Be a Good Idea

You don't want to spend more than you can afford on a home, so you'll need to make sure your offer is well within your budget. Remember, there's a good chance the seller will make a counteroffer and you'll have to go up a bit in what you're willing to spend if you want the property.

Making an offer at the very top of your budget could doom you to failure if the seller comes back and asks you to pay more than you can afford.

It's worth looking at how long the house has been on the market as this can help assess how much demand there is for it. If the house has been listed but not sold for weeks or even months, it could be priced too high or have other issues. You'll be more likely to get a lower offer accepted in this case than if the house just went on the market a day ago.

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Take a look at the history of the home's list price. If the seller dropped it multiple times, it could suggest they are getting desperate to sell. Again, this is another situation where offering less than the current asking price might make sense.

You should aim to get an idea of market conditions in your area before making an offer. In many parts of the country, it was a strong seller's market last year -- but that is slowly starting to change in some areas as mortgage rates climb higher and demand drops.

If you are in a market where each home gets multiple offers, you'll obviously need to take a different approach when buying a home than you would if the desired market is less competitive.

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You'll most likely want to include an inspection contingency in your offer, meaning you are making the purchase conditional upon a satisfactory home inspection.

While offers without inspection contingencies are more likely to be accepted, waiving the inspection is a terrible idea. You won't have any clue whether there are problems with the home, and you don't want to buy it and find out later that major repair work is needed.

ALSO READ: Home Inspections for Buyers: Tips & Checklist

If you are getting a mortgage for the home, you may want to include a financing contingency. This would mean the offer is conditional on actually getting approved for a loan. Without this clause, you could lose your deposit if your financing falls through.

Chances are good that your mortgage lender will require an appraisal before agreeing to move forward with a loan. An appraisal determines the fair market value so the lender can make sure the home is valued highly enough to serve as collateral.

A low appraisal could mean you have to bring more money to the table, or you won't get your loan. As a result, you may want to include an appraisal contingency. In fact, you may want to include this even if you aren't financing the home -- an appraisal can help ensure you don't overpay.

ALSO READ: Home Appraisals: What to Know, How Much It Costs, and How It Works

You also have the option to include other contingencies or pre-conditions in your offer. For example, you could make your offer to purchase contingent on your current home selling. Just be aware that the more contingencies you include, the less likely your offer will be accepted.

You will have to make a deposit if your offer is accepted. This money will be put into escrow to go toward the home's cost if the purchase goes through. And it protects the seller -- because if you don't follow through, you could lose the deposit unless a pre-condition wasn't fulfilled.

A larger deposit increases sellers' peace of mind and your chances of getting an accepted offer. But it also means tying up more money and putting more cash at risk.

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You will need to specify in your offer what date you want to close on the home. This is when ownership officially changes hands. Circumstances may require that you close on a specific date.

For instance, you will need a place to move into, so you may need to close on the date your lease ends. However, being flexible and closing on the seller's schedule could increase your chances of getting an offer accepted.

ALSO READ: What Are Closing Costs?

Sellers want to know that you can afford to go through with the purchase. That's why including a mortgage pre-approval is very helpful when making an offer to buy a home.

A mortgage pre-approval letter can be obtained from your preferred lender by providing them with your financial documents. It can take some time to get pre-approved, though. So, ideally, you'll want to start the process before you begin looking for a home.

You can set a deadline for how long you are willing to wait for the seller to respond to your offer. You don't want to make this deadline too long because you'll be in limbo, unable to move forward on other houses until you hear back.

But you also don't want to make it so short that the sellers feel so much pressure that they simply don't act at all. If you have a real estate agent, your agent can help you decide on an appropriate amount of time.

ALSO READ: 3 Ways to Make Your Home Offers More Competitive

Sometimes, buyers include personal letters along with their offers. If sellers feel a personal connection with you, it can help sway them to pick your offer. This usually won't convince a seller to pick you if your offer is much lower than others -- but it can make a difference if the seller is deciding between two similar proposals.

Finally, you need to be sure you're committed to moving forward with your purchase. Once you've made an offer, you will have to go through with it unless the contingencies aren't met. Otherwise, you could lose your deposit -- and it would be unfair to a seller to back out after the fact unless there's a good reason.

So be sure to think carefully about whether the home is really right for you before you try to buy it.

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Making a competitive offer that includes the appropriate contingencies can protect your rights while maximizing the chances you're able to buy the home of your dreams. Be sure to think all these issues through before making your offer. Doing so will help ensure you end up in the right house with no regrets.

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