First-Time Home Buyer's Guide
Chapter 4
putting an offer on a house

Tips for Making an Offer on a House

You’ve found the home of your dreams — now it’s time to make an offer! But how do you make an offer on a house? And how do you know how much to offer on a house so that it’s both fair to you and attractive to the sellers? Don’t fret — we’ve got some tips to help you navigate the often confusing waters of house bidding.

Keep these tips in mind as you put in an offer for the home you want. Remember that your real estate agent will also assist you in writing and submitting an offer when the time comes. Between the help of your realtor and by following the tips below, you’ll have plenty of know-how and confidence to make an offer.

Put in an Offer With Pre-Approval

There’s a difference between being pre-qualified and pre-approved for a mortgage. If you’re already pre-approved by a lender, then you know how much your lender is willing to give you for your mortgage. Knowing what you can afford is key, not only for making an offer on a house but for shopping within your budget. Another advantage of being pre-approved is that you will get a pre-approval letter from your lender, showing you’re ready to buy and have your financing lined up.

Make an Offer With Contingencies

Quite often an offer to purchase a home comes with some contingencies. Not having contingencies may make your offer more attractive, but in some situations they’re necessary. Examples of contingencies when bidding on a house include:

Home sale contingency. The most common contingency in a home offer is the sale of the buyer’s home. This means that the prospective buyer has to sell the home they’re living in before they’re able to buy a new one. Sometimes this can cause a delay — which the seller may want to avoid. However, for first time home buyers, this contingency isn’t an issue.

Inspection contingencies. While you can remove inspection contingencies to make your offer more attractive, you probably shouldn’t. Most buyers still want the property checked thoroughly by an inspector to make sure it’s sound and there aren’t any unexpected surprises. Having this clause is not likely to make your offer less attractive than others and you’ll appreciate the insight.

Have Earnest Money Ready

Buyers put up earnest money to prove that they’re serious about buying. It’s similar to putting a deposit on an item — you’ll get it back when you buy or you’ll lose it if you’re the reason the sale falls through. That’s a real simplification, but you get the idea. A typical earnest amount is in the range of 1-2 percent of the asking price, but different types of property and different markets may drive demand higher. You may also want to offer more in earnest when making an offer on a home to prove you’re ready to buy.

Confirm Legal Requirements

A home purchase can be tricky due to the paperwork and legal requirements — and they vary by city and state. If you have a realtor working with you, they’ll be able to provide you with the appropriate paperwork. If you don’t have a realtor you may benefit from having a real estate attorney to help you make an offer on a house.

Choosing How Much to Offer on a House

We’ll admit, choosing the right offer price is one of the most stressful decisions of the home buying process, but there are a few tips you can keep in mind to help alleviate the pressure and better guide your decision for how much to offer on a home.

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Know the Market

A big part of shopping for a home should be researching your target market. As you look around you’ll become familiar with local price trends. But, if you dig deeper, you’ll be even more prepared to make an offer on a house. Research the selling prices of recently sold homes in the area. These are known as home comparisons and give you a great idea of local home values.

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Understand the Seller’s Perspective

Try to learn what you can about the seller through open houses and speaking with realtors. If their home has been on the market a long time they might be willing to accept a lower offer to get rid of it. And, if they’ve already moved they also might be willing to accept even less to eliminate that extra mortgage. If seasonality plays into your region, this could make the sellers more motivated. There are all sorts of nuggets of information about the sellers that can help you be a better informed buyer so you know how much to offer on a house.

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Don’t Be Overzealous

You may want the home so much that you’re willing to offer more than the asking price. And in very competitive markets, this can be the trend. The problem is, if the housing bid is more than the appraised value you probably won’t get a mortgage. Lenders look closely at appraisals because they also want to make a smart financial decision.

Submitting Your Home Bid

Once your bid has been submitted, the seller will review the bid and either accept, deny or come back with a counter offer. If your offer is accepted, it’s important to remember that the deal isn’t complete until the papers have been signed.

It can be stressful to bid on a home you want only to be outbid or denied an offer. But remember — you’ve come so far in the home buying process. Be patient, positive and keep looking. Soon enough you’ll be turning the key to your first home!



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