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If you're interested in buying property, you need to know how to make an offer on a house. If you have a real estate agent, they'll walk you through this process. But it's still helpful to understand the steps. If you don't have an agent, you'll have to submit offer paperwork on your own.
How do you make an offer on a house?
You make an offer by submitting a written document outlining the terms of the transaction. Submit the offer directly to the sellers, or the sellers' agent (if they have one). Making an offer on a house means committing to buy the property if the offer is accepted.
There are standard forms used for offers. The document is usually called a Purchase and Sale Agreement or Real Estate Purchase Agreement. However, make sure your contract complies with state laws. Typically, your real estate agent provides these forms. If you don't have an agent, you can get the forms online or hire a lawyer.
Specify all the terms and conditions of your agreement to buy the property in your offer. Typically, you should make it contingent upon certain things occurring -- like getting a satisfactory inspection and appraisal. You may also want to make it contingent on getting an affordable loan after you apply for a mortgage.
Remember, a purchase offer becomes a legally binding contract if accepted.
8 steps to putting in an offer on a house
Here are the steps involved in putting in an offer on a house:
1. Find a property to purchase
Start with one of the best real estate and home-buying apps to view homes for sale in your area and decide which ones to view in person. If you make an offer and it is accepted, you'll be making a legal commitment to buy that home.
2. Decide how much you want to pay
You may offer the full asking price -- or make a higher or lower offer depending on your local market. Research comparable sales to decide on a fair offer.
3. Get the necessary forms
You can get a standard Real Estate Purchase Agreement for your state from your real estate agent or online. Or you can hire a lawyer to draft an agreement.
4. Decide what contingencies to include
Contingencies are things that must happen for the sale to go through. At a minimum, consider making the purchase contingent on a satisfactory inspection. Also consider making it contingent on a home appraisal and mortgage approval.
5. Identify the home sellers
If you're buying a foreclosed property, the seller may be the bank. Or it may be an estate if you're buying from a deceased person. If it's anyone other than an individual owner, that adds complexity. Consider talking with a lawyer.
6. Gather funds for your earnest money deposit
Generally, if your offer is accepted, you'll need to make an earnest money deposit. This shows a seller you're serious about buying their home. You'll have a few days (usually three or four) to make your deposit once your offer is accepted. The earnest money deposit is typically a percentage of the sale price.
7. Write up your offer
Include the property address, your full name, the seller's full name, your offer price, contingencies, the earnest money deposit amount, the desired inspection period, how closing costs will be split, what personal items will transfer to your ownership with the property, and the date you want to close.
8. Submit your offer and a mortgage pre-approval letter to the seller
Sellers typically want to see proof of mortgage pre-approval before accepting.
What does a real estate offer contain?
A real estate offer contains all the details that will govern the sales transaction. A written offer should include:
- Contact details: This includes the full names and contact information of the buyer and seller.
- The property address: This is the address of the place you want to buy.
- The sale price: Use a mortgage calculator to make sure it's within your budget.
- Contingencies: These conditions must be met before you go through with the purchase, like a satisfactory inspection, appraisal, and loan approval.
- The amount of your earnest money deposit: This is the amount you put in escrow (a special account for your deposit until the sale closes or the contract ends). If contingencies aren't met and you don't complete the sale, you'll get the money back. If you back out without justification, you could lose your deposit.
- The period the offer is valid for: The seller must accept within this time frame. Otherwise, your offer will be withdrawn.
- The transaction timeline: Specify when you'll make your earnest money deposit. Also include the inspection period (often around 14 days) and the date you'd like to close on the property.
- Terms and conditions: If the seller pledged to give you a credit toward closing costs or to leave certain personal items with the property, include this in the offer.
- Details on prorated costs: This clause explains how to split property taxes, utilities, rents, and other property-related expenses.
- Information on who pays closing costs: Closing costs are transaction fees (like title insurance) that are paid to the mortgage lender. They are usually 2% to 5% of your home's purchase price. Your offer should say if you or the seller will pay these.
A real estate offer becomes the Purchase and Sales Contract when the seller accepts it. That contract determines each party's rights and responsibilities. If an agreement between the buyer and seller isn't in the offer, it's not legally binding. To learn more about the ins and outs of buying a home, our first-time home buyer guide can help.
What's next?
Making an offer is just the beginning. The seller will either accept your offer, counter it, or reject it -- and their response determines what happens next.
What happens if your offer is accepted
If your offer is accepted, you're legally bound to follow through with the terms of the purchase contract. Make your earnest money deposit.
If your offer included contingencies, such as an appraisal contingency, work on meeting those conditions. You'll need to schedule inspections and appraisals within the time allowed. After each condition is met, you'll acknowledge that in writing so the sale will no longer be conditioned upon it occurring in the future.
If a problem develops with any of the conditions of the sale, such as an issue in inspection, negotiate a resolution with the seller or cancel the contract. If you decide to move forward, you'll finalize your mortgage loan approval and prepare any money you have to pay on the day of your closing.
What happens if your offer is rejected
If your offer is rejected, the seller may make a counteroffer. You can negotiate to see if you can reach acceptable terms. If the seller just declines your initial offer, you could make a more attractive offer. Or you could move on to a different property.
One reason it's helpful to work with a real estate agent is because an agent can help you make an appropriate offer for your local housing market. Your offer might have been rejected because the seller received a higher offer. Even if you didn't think your proposal was a lowball offer, if you're in a competitive market, others may offer higher than you would expect.
Even if your offer is rejected, don't feel too discouraged. Rejected offers are a normal part of the home shopping process. Keep your head up and keep searching for your dream house -- and you just might land it.
Still have questions?
Here are some other questions we've answered:
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FAQs
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To make an offer on a house, get or draft a Real Estate Purchase Agreement or Purchase and Sale Agreement. There are standard forms available. Make sure they comply with your state's regulations. Specify all of the terms and conditions of the sale. They include the purchase price, the transaction timeline, and contingencies. Contingencies are things that must happen for the sale to go through, like a satisfactory inspection.
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You can make an offer on a house without a real estate agent. But make sure you understand your rights and obligations. If accepted, your offer will be legally binding.
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A real estate offer letter contains all the details that will govern the purchase transaction. This should include:
- The purchase process
- Property information
- Who is responsible for prorated property expenses and transaction costs
- The price you'll pay for the property
- A timeline for when the sale will happen
- Contingencies that must be fulfilled for the transaction to go forward (like inspections, appraisals, and home loan approval)
- Anything the seller promised, such as a credit toward closing costs
Our Mortgages Expert
Christy Bieber is a full-time personal finance and legal writer with more than a decade of experience. She has a JD from UCLA as well as a degree in English, Media and Communications with a Certificate in Business Management from the University of Rochester. In addition to writing for The Ascent and The Motley Fool, her work has also been featured regularly on MSN Money, CNBC, and USA Today. She also ghost writes textbooks, serves as a subject matter expert for online course design, and is a former college instructor.
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