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Sort of like marriage, homebuying is one part love, one part legal transaction—and it starts with a proposal. Making an offer on a house is a major step that combines strategy, paperwork, and a clear understanding of the process.
Real estate professionals can guide you through standard forms, disclosure rules, and key decisions. But even though your agent will take care of the heavy-lifting, it’s essential to know how offers work, which contingencies to include, and how to negotiate effectively.
Because there is an art to crafting a strong offer.
Determine how much cash you need—and have it ready
Lock in your budget before you make an offer you can’t afford.
Start by using an affordability calculator or a mortgage calculator to determine your buying power with current mortgage rates and your personal financial situation.
Having this information in hand will empower you to make an offer that’s not only financially responsible for you, but also attractive to the seller.
Get pre-qualified for a mortgage
Before you start shopping, you’ll need to be pre-qualified for a mortgage. Pre-qualification gives you a rough estimate of how much you might be able to borrow, based on a basic review of your finances and a credit check.
The next (and more important) step is getting pre-approved. A mortgage pre-approval is a formal commitment from a lender to finance your purchase up to a specific amount, pending final underwriting.
Pre-approval shows sellers you’re a serious buyer with financing already lined up. In competitive markets or times of economic uncertainty, a strong pre-approval letter can give you a major advantage—and may even be the deciding factor that gets your offer accepted.
Decide on earnest money
Earnest money is the deposit you put down with your offer. It shows a seller your written offer is a serious one, and the cash acts as a show of good faith.
A real estate professional or an attorney usually holds the deposit. The amount varies from community to community, but it typically ranges from 1% to 3% of a home’s purchase price. In competitive markets or for luxury homes, buyers can offer upward of 5% to 10% to show that they want to make a deal.
If your offer is accepted, your earnest money becomes part of your down payment.
Consider the contingencies
If your proposal says, “This offer is contingent upon (or subject to) a certain event,” you’re saying you will go through with the purchase only if that event occurs.
Including contingencies gives buyers important protection—but it can also make an offer less attractive to sellers. In a slower market, contingencies are expected and can save you from costly surprises.
But in a hot or competitive market, waiving some contingencies (like a home inspection or appraisal contingency) can make your offer stand out. Just be sure you fully understand the risks before giving up that protection.
Write your offer letter
Your purchase offer, if accepted as it stands, will become a binding sales contract—also known as a purchase agreement, an earnest money agreement, or a deposit receipt. It’s important, therefore, the offer contain every element needed to serve as a blueprint for the final sale.
The purchase offer should include the following:
- Property address and legal description
- Offered sale price
- Terms (e.g., all-cash or contingent on financing)
- Seller’s promise to provide a clear title
- Target closing date
- Earnest money deposit amount and handling terms
- How taxes, utilities, and rents will be prorated
- Who pays for title insurance, surveys, inspections, and related costs
- Type of deed to be granted
- State-specific requirements (e.g., attorney review, hazard disclosures)
- Buyer’s right to a final walk-through inspection
- Offer expiration date
- Any contingencies (financing, inspection, appraisal, etc.)
Make sure you cover everything. For example, if the sellers said they’d help with $2,000 toward your closing costs, include that in your written proposal and in the final contract—or you won’t have grounds for collecting it later.
Negotiate the final price and terms
Is the listed price the right price? A real estate professional can give you a comparative market analysis of the home’s value, or you can check local listings on Realtor.com® to see what similar properties sold for. Based on the home inspection, you might also ask for a lower price or repair contingencies if the home needs fixes.
You’re in a strong bargaining position if:
- You are an all-cash buyer;
- You have been pre-approved for a mortgage;
- You don’t have a house that must be sold before you can afford to buy.
In those circumstances, you might be able to negotiate discounts from the listed price. On the other hand, in a hot seller’s market, if the perfect house comes on the market, you might want to offer the full list price (or more) to beat out other early offers.
The seller’s response to your offer
A purchase offer becomes a binding contract once the seller signs an unconditional acceptance and you are notified. If the seller rejects your offer outright, the negotiation ends—there’s no obligation on either side.
If the seller agrees with most terms but wants changes (such as a higher price or a different closing date), you’ll receive a counteroffer. You can accept, reject, or counter with your own proposed changes.
Each revision resets the negotiation. The deal becomes binding once one side accepts the other’s terms without further conditions.
Withdrawing an offer
In most cases, you can take back an offer right up until the moment it is accepted.
If you want to revoke your offer, be sure to do so only after consulting a lawyer who is experienced in real estate matters. You don’t want to lose your earnest money deposit or get sued for damages the seller might have suffered by relying on your actions.
Counteroffers
When sellers receive a purchase offer, they must either accept it exactly as written or risk losing the buyer. Any changes made in a counteroffer open the door for the buyer to walk away.
Who covers specific costs—like termite inspections, surveys, or closing costs—is often based on local custom, but ultimately, it’s negotiable. Buyers and sellers can agree on how to split the following expenses:
- Property survey
- Buyer’s closing costs
- Loan points
- Buyer’s broker fees
- Repairs required by the lender
- Home protection policy
While sellers might assume some costs aren’t their responsibility, offering concessions—especially to first-time buyers short on cash—can help get a home sold faster.
Allaire Conte contributed to this report.