How to Make an Offer on a Home: Step-By-Step

So let's say you've made the decision to buy a home and you're ready to get started with the process soon. Congrats! That's a huge first step. Now you want to know, "How do I make a successful offer on a house?"

The process of writing an offer can seem confusing, especially if you're a first-time home buyer. But making the actual offer on a home is just one step of a larger process — a step that should be fairly straightforward if you've put all the other pieces into place ahead of time.

1. Understand your mortgage options

Before you get to the part in the home-buying process where you're thinking of writing an offer, you should already have talked to a lender about your budget and mortgage options.

Selecting the right mortgage lender and getting Cash Approved™ (vs merely prequalified) allows you to shop the housing market with confidence.

There are many different types of home loans, and Denver-based Accept.inc makes it possible to upgrade most typical mortgage types into a cash offer! (Sellers prefer all-cash offers over offers based on simple pre-approvals -- so much so that a seller will often choose an all-cash offer over a higher bid. Taking advantage of this option could be the ace up your sleeve when it comes time to make an offer.)

2. Find a real estate agent

If finding a real estate agent to help you navigate the home-buying process wasn't your first step before selecting a lender, then this should be your next action item. Can you get through the home-buying process without hiring a real estate agent? We don't advise it. Taking the time to choose the right real estate agent is actually the smart play.

Because the fees for a buyer's agent come out of commissions paid by the seller, there's no extra cost to you to work with an agent. A savvy agent is not just there to help you find a house; they're there to strategize with you, negotiate on your behalf, and help you navigate (and avoid) any obstacles in your journey to becoming a homeowner.

Hiring the right agent is critical not only to the process of making a winning offer, but getting you past the finish line of the settlement process.

3. Discuss how to make a strong offer

Once you're ready to get serious, it's time to sit down with your agent and discuss your strategy for putting an offer on a house or condo. We recommend doing this before you find your dream home, because in a competitive market, it pays to move quickly. Don't wait until after you've found the home of your dreams to learn how the home-buying process works or what your budget is!

Talk to your agent about:

• What you're willing to pay and how much you can go over asking

• What you can afford on a monthly basis

• How much earnest money you're willing to put down

• Which contingencies you are able and willing to waive

• What your deal breakers are

• What things you're willing to compromise on

• Whether you're willing to negotiate or use an escalation clause

• Any issues related to timing

• How much cash you can bring to the table, either for a full cash offer or for a substantial down payment

One of the first things you should know: price is not the only factor when it comes to a seller accepting your offer!

Let's talk about what else can sway a seller (and the seller's agent who is advising them).

Consider that sellers want assurances that you're a serious buyer. A higher earnest money deposit (EMD) is one way to show you're motivated (and in a good financial position).

Dustin Pruitt, of EXP Realty in the Greater Portland Area, explains that a low EMD "communicates to the seller that the buyer is unwilling or unable to make the seller whole should they breach their contractual obligation."

A stronger offer is one that (also) keeps contingencies to a minimum, because each contingency represents one more opportunity for the deal to fall through. We've talked before about how cash buyers don't have financing and appraisal contingencies, but there are other points — and other types of contingencies — to consider in your offer strategy.

Even if you don't plan to waive the inspection contingency, what can you do to signal that you're a highly qualified and motivated buyer who is likely to seal the deal? Pruitt suggests cutting the inspection period down to half of the standard time in a highly competitive market: "A long or detailed additional inspection from a buyer indicates they are nervous about the house. The last thing a listing agent wants to do is tie up a house with a long inspection contingency only to have a buyer terminate." On top of that, consider limiting the types of inspection issues you'll consider a deal breaker. It'll give sellers more confidence in your offer if they know you'll only use the inspection contingency to terminate if the report reveals structural issues, for example.

For the same reason, Pruitt strongly advises against writing offers that contain a home sale contingency — a clause that the sale can only move forward when the buyer's own home is sold first. As Pruitt explains, these types of offers "are riddled with risk for a seller. What if the home doesn't sell, or the sale falls through? It's much better to figure out a plan with your Realtor® to not be a contingent buyer."

Besides cash and limiting contingencies, are there other ways to strengthen your offer? What about writing a personalized note to sellers to tug at their heart strings and clinch the deal? Although it used to be a common strategy to send a letter with personal details explaining why you deserve the house more, "real estate love letters" have fallen out of practice and the National Association of Realtors considers them to be a liability. So, instead of sending a heartfelt letter, let the strength of the offer speak for you.

4. Decide if you should make a bid

Now that you've laid the groundwork and have identified one or more homes you're interested in, decide whether it's a good idea to submit an offer (and on which home).

Hopefully you've already been spending a lot of time crunching numbers and understanding your budget, but it definitely won't hurt to verify again that your chosen home is in an appropriate price range for your budget and that you're comfortable with the monthly payments. Don't forget that your budget needs to include taxes, insurance, HOA fees, and other costs, not only the principal and interest payments!

If this is your dream home, chances are it might be someone else's too. You'll want to have your agent find out how many competing offers there are and if you're competing against (other) cash offers.

Next, have your real estate agent pull the sale prices of comparable homes (also known as "comps") from the past month or two. Is the list price in line with what the home is actually worth? If the list price is substantially lower than the comps, you can be sure the seller's agent is trying to generate high demand to spur a bidding war and the home is expected to sell for way above list price.

These details will help you and your agent decide if it makes sense to submit an offer and what to include.

5. Draft your offer letter

If you're ready to move forward, it's time to make an offer. And quickly! Don't worry about searching for "offer letter templates" in a search engine. Your agent will know what to do and work with you on the details.

Typically, an offer letter will include:

• The address of the property

• The price you're offering

• An escalation clause, if applicable, with details of how much you'll increase your bid in case of a bidding war

• The earnest money deposit you're putting down

• Whether you're making a cash offer or, in the case of a financed offer, how much you have available for a down payment

• Contingencies (such as financing, appraisal, home inspection, or home sale) which must be met before the sale goes through

• Target date for closing the sale

• Terms for prorating utilities, real estate taxes, and other bills between buyer and seller

• Who will pay for title insurance, inspections, and other necessities

• A termination date for when the offer expires

There may be some additional details to include, depending on your specific circumstances (or the seller's).

6. Wait for a response from the seller

Once your agent submits the offer letter, one of three things will happen:

• The seller accepts the offer (in which case, congratulations!)

• The seller rejects the offer

• The seller make a counter-offer

If your offer is rejected, that doesn't necessarily mean the end — you may be asked to come back with another, more appealing, offer if you have the means to do so ... or you can move on and look elsewhere for a new home.

A counter-offer might entail a change in the price, fewer contingencies, or other adjustments to the offer. The choice is yours whether to accept the counter-offer or walk away.

7. Finalize the contract

Once the seller accepts your offer, you will both sign the offer letter. You'll then produce the earnest money deposit and sign the sales contract.

Depending on your offer, you'll likely arrange your home inspection as soon as possible at this point to clear your inspection contingency.

Before you can take possession of the home, all the contingencies must be satisfied, including getting final approval of your home loan if you've chosen to go with a traditional mortgage.

However, if you wrote a cash offer, you can skip the financing and appraisal contingencies. That's because with an Accept.inc Cash Approved offer, your financing is already secured and the Value Check guarantees you won't run into any issues with the appraisal, which clears two major hurdles that threaten traditionally underwritten loans.

Once all the requirements of the contract are met, you'll sign the final paperwork and close on the house. It's time to break out the bubbly!

Want to write a cash offer that's 4x more likely to win than an offer using traditional financing? Get in touch with us and get Cash Approved™ today.