How to make an offer on a home that will win

The demand for housing has been high the past few years, which means the average borrower has had to compete with multiple offers on the same home.

Even if the market is not currently competitive in a given local area, it’s important for home buyers to understand what it is that makes their offer stand out from the rest.

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How to prepare to make an offer on a house: 5 steps
Apply for pre-approval today with Compass Mortgage

In this article, we’ll show you how to prepare to make an unbeatable offer on a house in five steps, from loan pre-approval to contingencies.

How to prepare to make an offer on a house: 5 steps

Making a great offer on a house involves some thoughtfulness and preparation.

The good news is that many of your competitors aren’t going to take the time to perform these steps, so you already will have an edge.

By working closely with your home buying team—including your trusted mortgage lender and real estate agent—you can pull together an unbeatable offer letter that doesn’t compel you to continually increase your bid in order to win.

Let’s get started.

1. Apply for pre-approval

Many buyers think the first step in the home buying process is finding your dream home.

Finding your home should actually be the second step—after you have found a lender who can provide you with a loan pre-approval.

Getting pre-approved for a loan serves two essential purposes:

  1. You get to look at your loan options, including your loan type, mortgage amount, interest rate and available terms. You can then plug your loan estimate into a mortgage calculator to get your estimated monthly payment. 
  2. You prove to sellers and your real estate agent that you’re a serious buyer who can afford the home.

Many sellers today won’t even look at offers that don’t come with a pre-approval letter. They want to make sure that the deal won’t fall through once you’re deep in the process of securing the home.

Without pre-approval, the seller has to trust that you have the money and can qualify for a mortgage. Most are not willing to take that chance—especially in the current market.

Compass Mortgage offers the Get Committed®, a program which gives buyers an extra edge over the competition, going a step beyond pre-approval.

Get Committed provides a fully underwritten loan commitment and locks in your interest rate before you even find the property you want to buy.

A loan commitment essentially has the power of a cash offer on a house, showing the seller you’re fully approved financially and that your deal isn’t likely to fall through.

Once you’re pre-approved—and especially if you have a loan commitment—you can confidently move ahead with an exact understanding of the home price you can afford.

2. Look into the local housing market

Work with your agent to check out recently sold and comparable homes in your local market that are a similar style and size to the one you want to purchase.

Take a look at how long the home has been on the market and the condition of the home. Ask your agent about the competition in the area, which could affect the purchase price of the home as well.

3. Make your best offer

In a buyer’s market, when home inventory is high and demand is low, buyers are more likely to get away with a lower offer.

In a seller’s market, you must bring your best offer to the table. 

You did your market research, so you now know the competition in the area and what kind of offer you should be prepared to make.

Don’t ignore your budget to win a bidding war, but make sure you have realistic expectations. Your best offer is still only the highest amount you can comfortably afford.

Your real estate agent also can ask the seller’s agent for any insights on the competition and asking price.

4. Cut the contingencies

Contingency clauses allow buyers to back out of a real estate contract if certain conditions are not met.

Both the buyer and seller must agree on these contingencies before it becomes binding.

Common contingency clauses include the following:

  • Home inspection contingency
  • Appraisal contingency
  • Sale contingency
  • Title contingency

To make your offer on a house more appealing so the seller accepts it, you can cut down or eliminate your contingencies.

For example, if you don’t include an appraisal contingency, you’re telling the seller that even if the home appraises for less than it’s worth, you will still move forward with the sale.

A lender won’t loan you any more money on your mortgage loan than what the house is worth; so if you agreed to pay a purchase price of $300,000 on an appraised $295,000 home, you must make up the difference.

If you decide to cut your contingencies, you have to make sure you’re prepared and can cover any extra costs.

Performing your market research and working closely with your homebuying team will help you make the best decisions.

5. Include an escalation clause

If you can comfortably afford the home you’re eyeing but know there’s stiff competition, you can include an escalation clause in your offer.

Rather than putting in the highest offer outright, an escalation clause will bump up your offer over the competition’s until you reach your specified limit.

For example, if you are making an offer on a home with an asking price of $250,000 but can afford up to $265,000, you can write in your offer that you’ll pay $2,000 above any other offer price, up to your limit of $265,000.

An escalation clause gives you the chance to win the bid on a house with multiple offers without having to offer too much too soon. If you were wrong about the amount of competition, you will not lose any extra money.

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Apply for pre-approval today with Compass Mortgage

In a competitive market, it’s more important than ever to choose a lender who is a true mortgage partner.

The Compass Mortgage team will treat you like family. We truly care about your financing needs and promise to be your advocate throughout every step of the lending process.

We can put you in the best position possible to win the home you want with our Get Committed® loan commitment program, putting you ahead of even pre-approval.

Before you even look for the perfect home, apply today to start the process for a loan commitment. Once you beat the competition with your offer, we can get through the closing process in as little as 15 days because we already have secured the financing for you.

Get Committed today to stand out from the competition and make an offer that the seller accepts.