Making an offer on a house represents one of the most significant financial decisions you will ever make. Whether you are a first-time buyer navigating unfamiliar territory or a seasoned homeowner looking to upgrade, understanding the mechanics of crafting a winning offer can mean the difference between securing your dream home and watching someone else get the keys.
The homebuying landscape has shifted considerably in recent years. With only 20% of homes receiving multiple offers nationally as of mid-2025 (down from 39% in 2023), buyers now have more negotiating power than they have had in years. Yet competition varies dramatically by region, with Northeast markets still seeing roughly one-third of homes attract multiple bids while Southeast markets experience far less competition.
This comprehensive guide walks you through every step of the offer process, from the essential preparation work to the final signature. You will learn exactly what goes into a purchase offer, how to determine your offer price, which contingencies to include (or waive), and how to handle negotiations like a professional. We also cover specialized scenarios including making offers as an unrepresented buyer and navigating purchases from for-sale-by-owner (FSBO) sellers.
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Find Your Agent NowEssential Preparation Before Making an Offer
The work that happens before you write an offer often determines whether that offer succeeds. Sellers and their agents can spot unprepared buyers immediately, and in competitive situations, preparation separates winning bids from also-rans.
Get Pre-Approved for a Mortgage
A mortgage pre-approval is non-negotiable in today's market. Unlike a pre-qualification (which only estimates what you might borrow based on self-reported information), a pre-approval involves a lender actually verifying your income, assets, employment, and credit history to commit to lending you a specific amount.
Pre-approval accomplishes several critical objectives. It tells you exactly how much house you can afford, preventing the disappointment of falling in love with homes outside your budget. It signals to sellers that you are a serious, qualified buyer who can actually close the deal. And it speeds up the closing process since much of the underwriting work is already complete.
Pre-Approval vs. Pre-Qualification
Pre-qualification: A quick estimate based on information you provide. Takes minutes but carries little weight with sellers.
Pre-approval: A verified commitment from a lender after reviewing your financial documentation. Takes days but demonstrates you can actually purchase the home.
Understand Your Local Market Conditions
Real estate markets vary dramatically by location and price point. Understanding whether you are in a buyer's market or seller's market fundamentally shapes your offer strategy.
Buyer's Market Indicators
- Homes sitting on market 30+ days
- Price reductions common
- Seller concessions available
- Room to negotiate below asking
- Multiple choices in your price range
Seller's Market Indicators
- Homes selling in days or hours
- Multiple offers common
- Sales above asking price
- Limited negotiating room
- Contingency waivers expected
Research Comparable Sales
Before making any offer, you need to understand what similar homes have actually sold for recently. Your real estate agent should provide a Comparative Market Analysis (CMA) showing recent sales of comparable properties. Pay attention to homes with similar square footage, lot size, condition, and location. Look at how the asking prices compared to final sale prices. This data informs whether a home is priced appropriately and guides your offer amount.
Know Your Budget Limits
Just because you are approved for a certain mortgage amount does not mean you should spend that much. Factor in all the costs of homeownership including property taxes, insurance, maintenance, utilities, and potential homeowners association fees. A general guideline suggests keeping total housing costs below 28-30% of your gross monthly income.
The Anatomy of a Home Purchase Offer
A purchase offer is a legally binding document when accepted. Understanding each component helps you craft an offer that protects your interests while appealing to the seller.
| Component | Description | Strategic Considerations |
|---|---|---|
| Offer Price | The amount you are offering to pay for the property | Based on market analysis, comparable sales, and property condition |
| Earnest Money Deposit | Good faith deposit showing commitment (typically 1-3% of purchase price) | Higher deposits signal serious intent; must be protected by contingencies |
| Down Payment | Portion of purchase price paid at closing (separate from earnest money) | Larger down payments strengthen offers and reduce borrowing costs |
| Financing Terms | Loan type, amount, and conditions | Cash offers strongest; conventional often preferred over government loans |
| Contingencies | Conditions that must be met for sale to proceed | Protect buyers but may weaken offer in competitive situations |
| Closing Date | Target date for completing the transaction | Flexibility here can make your offer more attractive to sellers |
| Inclusions/Exclusions | Items included or excluded from sale (appliances, fixtures, etc.) | Clarify upfront to avoid disputes later |
| Expiration Date | Deadline for seller to respond to your offer | Typically 24-72 hours; shorter timelines in hot markets |
Understanding Earnest Money
Earnest money serves as your good faith deposit, demonstrating to the seller that you are serious about purchasing their home. This money is held in an escrow account (typically by a title company or attorney) until closing, at which point it is applied toward your down payment and closing costs.
The typical earnest money deposit ranges from 1% to 3% of the purchase price, though amounts vary significantly by market. In highly competitive areas like Silicon Valley, sellers may expect 3% or more, which on a $2 million home means $60,000 or more at risk. In less competitive markets, 1% or even a flat amount like $5,000 may be acceptable.
Protecting Your Earnest Money
Your earnest money is at risk if you back out of the deal for reasons not covered by your contingencies. Always ensure your purchase agreement includes appropriate contingency protections, and understand exactly what would cause you to forfeit this deposit.
How to Determine Your Offer Price
Setting the right offer price requires balancing multiple factors: what the home is actually worth, what similar homes have sold for, current market conditions, your budget, and how much you want this particular property.
Start With Comparable Sales Data
Your agent's Comparative Market Analysis should be your starting point. Look for properties that have sold within the past 3-6 months with similar characteristics to your target home. Adjust for differences in square footage, lot size, condition, updates, and location. The goal is to understand the fair market value range for the home you want.
Assess the Property's Condition
A home that needs significant repairs or updates should command a lower price than a move-in-ready property. Consider visible issues you noticed during your tour and factor in likely costs for any updates you will need to make. This information becomes more concrete after a home inspection, but you can make reasonable estimates for your initial offer.
Consider Time on Market
How long a property has been listed provides valuable negotiating information. A home listed for 60+ days without an offer may indicate the price is too high, the property has issues, or both. Sellers become more motivated over time, potentially creating room for a below-asking offer. Conversely, a brand-new listing in a hot market may require an at-or-above asking price to compete.
When to Offer Below Asking
- Property has been on market 45+ days
- Comparable sales support lower value
- Significant repairs needed
- Seller appears motivated (relocation, divorce, etc.)
- Local inventory is increasing
- Limited competition for the property
When to Offer At or Above Asking
- Property just listed in hot market
- Multiple offers expected or already received
- Comparable sales support asking price or higher
- Exceptional features or location
- Low inventory in your target area
- You cannot afford to lose this property
Factor In Your Competition
Your agent may be able to learn whether other offers are expected or already submitted. This intelligence shapes your strategy significantly. With no competition, you have room to negotiate. With multiple offers, you may need to come in strong from the start.
Pro Tip: The Escalation Clause
In multiple-offer situations, consider including an escalation clause that automatically increases your offer by a set amount above any competing offer, up to a maximum price you specify. For example: "Buyer offers $400,000 but will pay $2,000 more than any competing offer up to a maximum of $420,000." This keeps you competitive without immediately paying your maximum.
Understanding and Using Contingencies
Contingencies are conditions written into your purchase agreement that must be satisfied for the sale to proceed. They protect you as the buyer by providing legal exit points if problems arise. However, each contingency you include gives the seller reason to prefer a competing offer with fewer conditions.
Financing Contingency
Allows you to back out if you cannot secure mortgage approval under specified terms. Essential unless you are paying cash or are fully underwritten and approved before making your offer.
Inspection Contingency
Gives you the right to have the property professionally inspected and negotiate repairs or price reductions based on findings. Can also cancel if major issues are discovered. Learn more about home inspections.
Appraisal Contingency
Protects you if the home appraises for less than your offer price. Without this, you must cover any difference between the appraised value and purchase price out of pocket.
Home Sale Contingency
Makes your purchase conditional on selling your current home. Useful if you need sale proceeds for your down payment, but significantly weakens your offer in competitive situations.
Title Contingency
Requires the seller to provide clear title free of liens, disputes, or other encumbrances. Standard in most transactions and rarely waived.
Attorney Review
Required in some states, this allows attorneys for both parties to review and potentially modify the contract within a specified period (typically 3-5 days).
Balancing Protection With Competitiveness
The fewer contingencies you include, the more attractive your offer becomes to sellers. However, waiving contingencies exposes you to significant risk. A balanced approach depends on your risk tolerance, the market conditions, and the specific property.
In competitive markets, buyers sometimes waive inspections, though this can be dangerous. A middle ground is to include an inspection contingency but agree in writing to accept the property "as-is" except for health and safety issues above a certain dollar threshold. This gives the seller confidence you will not nickel-and-dime them while still protecting you from major undisclosed problems.
Contingency Timeline Matters
Shorter contingency periods make your offer more attractive. If you can complete your inspection in 5 days rather than 10, or your financing contingency in 14 days rather than 21, you reduce the seller's uncertainty and risk. Work with your agent, lender, and inspector to understand the fastest realistic timelines.
Step-by-Step: Making Your Offer
With preparation complete and your strategy set, here is the actual process of submitting and negotiating your offer.
Work With Your Agent to Draft the Offer
Your real estate agent will prepare the offer using your state's standard purchase agreement form. Review every section carefully. Ensure the offer price, earnest money amount, down payment, financing terms, contingencies, closing date, and any special conditions are exactly what you intend. Ask questions about anything you do not understand.
Attach Required Documentation
Include your mortgage pre-approval letter, proof of funds for earnest money and down payment, and any other documentation the seller may want to see. A complete offer package demonstrates professionalism and preparedness.
Submit the Offer
Your agent delivers the signed offer to the listing agent or seller (for FSBO properties). Set a reasonable expiration time, typically 24-72 hours. This prevents the seller from "shopping" your offer indefinitely while continuing to show the property.
Wait for the Response
The seller can accept your offer as written, reject it outright, or (most commonly) submit a counteroffer. Be prepared for any of these outcomes. Do not assume silence means rejection; some sellers simply take time to consider.
Negotiate the Counteroffer
If the seller counters, carefully review what they changed. Common counteroffer items include price, earnest money amount, closing date, contingency terms, or included/excluded items. Decide what you can accept and what requires further negotiation.
Reach Agreement and Execute the Contract
When both parties agree to all terms, everyone signs the final purchase agreement. This creates a legally binding contract. You will then deposit your earnest money within the timeframe specified (usually 1-3 business days).
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Connect With a Top AgentWhat Happens After Your Offer Is Accepted
Congratulations, your offer was accepted! Now the real work begins. The period between accepted offer and closing typically takes 30-60 days, during which several critical steps must occur.
Deposit Your Earnest Money
Within the timeframe specified in your contract (usually 1-3 business days), you must deliver your earnest money to the escrow holder. This is typically done via certified check or wire transfer. Keep records of this transaction.
Complete Your Inspections
Schedule your home inspection as soon as possible. If issues are found, you can typically negotiate repairs, credits, or price reductions, or exercise your contingency to cancel the contract. Consider additional specialized inspections for pests, radon, sewer lines, or other concerns based on the property and location.
Finalize Your Financing
Even with pre-approval, your lender must now fully underwrite your loan based on the specific property. The lender will order an appraisal to confirm the home's value supports the purchase price. Respond promptly to any requests for additional documentation.
Review Title and Obtain Insurance
The title company searches for any liens, easements, or title defects. You will purchase title insurance to protect against future claims. Separately, arrange homeowners insurance, which is required by your lender before closing.
Complete the Final Walk-Through
Shortly before closing (often the day before or morning of), you will walk through the property to verify the condition, confirm agreed-upon repairs were completed, and ensure nothing has changed since your inspection.
Close on Your New Home
At the closing table, you will sign numerous documents, provide certified funds for your remaining closing costs and down payment, and receive the keys to your new home. Review our guide on closing costs to understand what expenses to expect.
Guidance for Unrepresented Buyers
Following the 2024 NAR settlement, buyers now negotiate their agent's compensation directly rather than relying on seller-paid commissions. Some buyers consider going unrepresented to avoid these costs. While this is legal everywhere, it significantly increases your responsibilities and risks.
What You Take On Without an Agent
Without buyer representation, you must handle every aspect of the transaction yourself: researching comparable sales, determining fair market value, drafting or reviewing offer documents, negotiating terms, coordinating inspections, tracking deadlines, and navigating any problems that arise. Approximately 36% of unrepresented sellers report making legal mistakes during their transactions, and buyers face similar risks.
If You Proceed Unrepresented
Consider hiring a real estate attorney to review all documents and advise on legal matters. Attorneys typically charge flat fees or hourly rates significantly less than agent commissions, but provide only legal guidance rather than the full-service representation an agent provides.
When making offers as an unrepresented buyer, you can use your state's standard purchase agreement forms (often available through title companies) or have an attorney draft documents. Be meticulous about every detail since there is no agent to catch errors or omissions.
Consider the True Cost of No Representation
Homes sold without any agent involvement typically sell for less than agent-assisted transactions. The value a skilled buyer's agent brings often exceeds their compensation through better negotiation outcomes, problem-solving, and market expertise.
Buying From For-Sale-By-Owner (FSBO) Sellers
FSBO properties represent approximately 6% of home sales. Purchasing directly from an owner who is not using a listing agent requires additional care and preparation.
Working With a Buyer's Agent on FSBO Properties
You can and should still use your own buyer's agent when purchasing FSBO properties. Your agent protects your interests, handles negotiations, and ensures proper documentation. Since there is no listing agent involved, you will need to discuss with the seller how your agent will be compensated, either through your own funds or by requesting the seller pay your agent's fee as part of the purchase terms.
If Both Parties Are Unrepresented
When neither you nor the seller has agent representation, both parties assume significant risk. Consider these protections:
Hire a real estate attorney to draft or review all contracts and handle the closing. Some states require attorney involvement regardless.
Get a thorough professional inspection and do not let the seller discourage you from exercising this right.
Verify the seller actually owns the property and has authority to sell. A title search and title insurance are essential.
Be cautious about what information you share. Remember that FSBO sellers are trying to maximize their sale price just as any seller would. Do not reveal your maximum budget, urgency to buy, or other leverage-reducing information.
Negotiating With FSBO Sellers
FSBO sellers have chosen to manage the sale themselves, often to save on commission costs. This creates both opportunities and challenges:
Some FSBO sellers price their homes lower since they are not paying listing commissions, potentially creating value for buyers.
Other FSBO sellers overprice their homes based on emotional attachment or lack of market knowledge. Use comparable sales data to support your offer price if you believe the asking price is too high.
FSBO sellers may lack experience with standard contract terms, timelines, and processes. Be patient but protect your interests. Do not let a seller's inexperience pressure you into unfavorable terms or shortcuts.
Without agent representation, FSBO sellers may be more likely to make disclosure errors or overlook required paperwork. Ensure all required disclosures are provided and all documentation is complete.
Common Offer Mistakes to Avoid
Even experienced buyers make errors that can cost them money or the home they want. Learn from these common pitfalls:
Financial Missteps
- Not getting pre-approved before house hunting
- Offering more than you can actually afford
- Underestimating closing costs and cash needed
- Making major purchases or credit changes during the process
- Setting earnest money too low to be taken seriously
Negotiation Errors
- Lowballing in a competitive market
- Failing to research comparable sales
- Revealing your maximum budget or urgency
- Being too rigid on non-essential terms
- Not considering the seller's perspective and needs
Contingency Mistakes
- Waiving inspection on properties with red flags
- Including unnecessary contingencies that weaken your offer
- Missing contingency deadlines
- Not understanding which contingencies protect your earnest money
Process Problems
- Not reading every document before signing
- Slow response times that frustrate sellers
- Skipping the final walk-through
- Failing to meet contractual deadlines
- Not keeping copies of all documents and communications
Frequently Asked Questions
Earnest money typically ranges from 1% to 3% of the purchase price, though local customs vary. In competitive markets, a larger earnest money deposit (3% or more) demonstrates serious intent and can strengthen your offer. In less competitive situations, 1% or a round number like $5,000 may be sufficient. Your real estate agent can advise on typical amounts for your specific market.
Once both parties sign the purchase agreement, it becomes a legally binding contract. You can typically back out if a contingency is not satisfied (for example, the inspection reveals major problems or financing falls through). However, backing out for reasons not covered by your contingencies may result in losing your earnest money deposit and potentially facing legal action. Always consult with your agent or attorney before attempting to cancel an accepted offer.
Whether to offer below asking depends on market conditions, comparable sales, and the specific property. In a buyer's market with properties sitting unsold, offers 5-10% below asking may be reasonable starting points. In competitive seller's markets, below-asking offers are often rejected outright. Base your decision on data: what have similar homes actually sold for, and how does this home compare?
Your offer should include an expiration date and time, after which the offer is no longer valid. Common timeframes are 24-72 hours. In hot markets with multiple offers, shorter deadlines (24 hours or less) are common. The seller can respond before the deadline by accepting, rejecting, or countering your offer. If they do not respond before expiration, the offer expires and you have no obligation to proceed.
A rejected offer does not mean the conversation is over. You can submit a new, stronger offer if you believe the property is worth more than you initially offered. Alternatively, if you feel you made a fair offer and the seller is unrealistic, move on to other properties. Your agent can sometimes get feedback on why the offer was rejected, which helps refine your approach for future offers.
You are not legally required to have an agent to make an offer or purchase a home. However, the homebuying process involves complex negotiations, legal documents, and numerous pitfalls. Experienced buyer's agents add value through market knowledge, negotiation skills, and problem-solving that often exceeds their compensation. If you choose to proceed unrepresented, consider at minimum hiring a real estate attorney to review documents.
Several factors strengthen offers beyond just price: larger earnest money deposits show commitment; pre-approval (or better, full underwriting) reduces financing risk; flexibility on closing date accommodates seller needs; limiting contingencies (where comfortable) removes uncertainty; quick response times demonstrate seriousness; and covering your own closing costs reduces seller expenses. Your agent can help identify which factors matter most in your specific situation.
If the home appraises for less than your agreed purchase price, you have options depending on your contingencies. With an appraisal contingency, you can cancel the contract or renegotiate the price. Common solutions include: the seller reduces the price to the appraised value; you increase your down payment to cover the gap; or both parties meet somewhere in the middle. Without an appraisal contingency, you are obligated to proceed, covering any difference out of pocket.
Moving Forward With Confidence
Making an offer on a house combines art and science: the science of market data, comparable sales, and financial calculations with the art of negotiation, timing, and understanding human motivations. Success requires preparation, strategy, and often the guidance of experienced professionals.
Whether you are making your first offer or your fifth, remember that every transaction is unique. Market conditions change, seller motivations vary, and properties each have their own stories. The fundamentals covered in this guide equip you to navigate any situation, but local expertise from a qualified real estate agent tailors these principles to your specific market and circumstances.
Take your time with the preparation steps. Get genuinely pre-approved, not just pre-qualified. Understand your local market before you start making offers. Know your budget limits and stick to them. And when you find the right home, be ready to move decisively with a well-crafted offer that demonstrates you are a serious, capable buyer.
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Find Your Perfect AgentDisclaimer: This article provides general information about making offers on homes and should not be considered legal or financial advice. Real estate practices, laws, and customs vary by state and locality. Consult with licensed real estate professionals, attorneys, and financial advisors for guidance specific to your situation and location. Statistics cited are from sources including the National Association of REALTORS and industry research as of the publication date and may change over time.
