Finding a home is one of the most exciting parts of the homebuying process. To secure the home as yours, you’ll need to put together a solid offer that stands out from the rest.

Fortunately, you’re not in this alone: An experienced real estate agent can help. But we want to make sure you’re as prepared as possible in the steps leading up to the offer.

Read on to learn when and how to make an offer on a house and all the steps that are included in the process.

How to determine if you’re ready to make an offer

For many, the first step in the homebuying process is looking for a house.

But really, the first step should be getting preapproved for a mortgage.

If you head to a lender and get preapproved first, you’ll be ahead of the buying competition for the following reasons:

• You’ve already started gathering the necessary documentation to begin the lending process
• You’ll get an understanding of what you can afford and the loan products are available to you
• You’ll be able to make an offer on a home as soon as you find one
• You’ll put yourself ahead of the competition and show sellers that you’re a serious buyer

Once preapproved, you should find a trusted local real estate agent to guide you through the home search process and help you craft an unbeatable offer.

You can certainly make an offer on a home without an agent if you are comfortable, but first-time buyers especially may benefit from the assistance of an experienced agent.

How to make an offer on a house in 6 steps

Once you’re preapproved for a mortgage and have found a home you love, it’s time to build your offer.

Follow these six steps to help you make an offer that stands out to the seller.

Step 1: Decide how much to offer

First, you’ll have to determine how much to offer. 

This can be tricky, but performing some research on the home and comparable homes in the area will help. Ask your real estate agent to pull sales data on the other homes in the area to compare, or gather this information yourself.

Take a look at both how long the seller has owned the home, and how long it has been on the market.

There may be more room for negotiation if the home has been listed for a few months or more. On the other hand, if the home was only recently listed, the seller is likely to want the listing price.

Above all else, make sure it’s a price you can afford. 

Even if you qualify for a certain amount from your lender, it may not be the most affordable amount depending on your personal wants and goals.

Preparing a budget at the start of the homebuying process is the best way to understand what you can comfortably afford.

Step 2: Calculate your earnest money deposit

Earnest money or a “good faith” deposit essentially protect the seller in case the buyer backs out of the deal.

This is different from the down payment you pay to the lender. 

The deposit is usually 1% to 3% of the purchase price and is held in an escrow account until the deal is complete. Then, it’s applied to your down payment.

Paying a higher earnest money deposit can help your offer stand out to the seller, because a larger deposit shows you’re a serious buyer and have the funds to complete the sale.

Step 3: Determine any contingencies

Contingencies allow buyers to back out of a sale without losing their earnest money deposit or having to face legal obstacles.

Common contingencies include:

• Home inspection, if serious defects are discovered
• Appraisal, if the home’s value ends up less than the amount of the offer
• Financing, if the mortgage process is not successful
• Title, if there are complications with the property’s title

A less-common contingency is the home sale contingency which states that you’ll buy the house after your existing house sells.

In a seller’s market, contingencies—such as purchase dependent on the sale of a different home—will often be quickly rejected by the seller because the seller can easily find another buyer whose purchase offer is not contingent on the sale of your current home.

Step 4: Draft your initial offer

Once you’ve decided the amount of your offer, how much you will pay in earnest money and any contingencies, you can craft your offer letter.

If you’re working with a real estate agent, they will draw up the letter. 

However, should you decide to do it on your own, here is what’s included in the offer letter:

• Address of the property you want to buy
• Names of anyone who will be on the title
• Purchase amount you’re offering
• Earnest money amount
• Your contingencies and any requested concessions, such as repairs
• Items you’d like included in the sale (such as appliances, window treatments, etc.)
• Your mortgage preapproval letter
• Preferred closing date and when you’d like to move in
• List of closing costs and fees
• Offer deadline

The required items can vary by state, so be sure everything is accurate and included before sending.

Step 5: Negotiate the price and terms

There are three possible seller responses to a purchase offer:

• Accept
• Counteroffer
• Reject

Seller accepts

If the seller accepts the offer, you can move forward with payment of the earnest money and the terms of the sale contract. Head to your lender to continue the loan process and schedule your home inspection and appraisal.

Seller makes counteroffer

If the seller makes a counteroffer, you can then either accept the counteroffer, make another counteroffer or reject it and move on.

It’s possible to go through several counteroffers before you and the seller agree on the terms.

Aside from price negotiations, you also may want to change other aspects of the offer, such as one of the contingencies or the dates you suggested. This depends on any misunderstanding or disagreement that the seller has with your offer. 

Bear in mind that any contingency can be hard to navigate in a competitive market. 

Seller rejects

If the seller rejects, you can take everything you have learned from this experience and use it as you begin the home search process again. The right home for you is still out there.

Step 6: Sign your contract

When you and the seller reach an agreement, it’s time to finalize and sign the contract. Congratulations!

You will then send the contract to your mortgage lender and continue the mortgage process.

Apply for mortgage preapproval with Compass Mortgage

Now that you know how to make an offer on a house, you can confidently begin the homebuying process.

Get preapproved for a mortgage loan today with the lending professionals at Compass Mortgage. And ask us about Get Committed®, our unique program for a loan commitment which goes beyond preapproval to help you buy the home of your dreams.

Our team is defined by our core values: to treat everyone with love and respect, to act with integrity, and to go above and beyond in all that we do.

Compass Mortgage is “Home to a Better Mortgage Experience.” 

With our team, you can expect a simple, personalized experience from start to finish.

We look forward to helping you reach all your homeownership goals!

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