Couple reading paperwork in new house.

In most markets, homebuyers must act quickly to get the house they want. (Getty Images)

On both sides of a real estate transaction, the purchase offer is the first formal communication that leads to the final deal. The offer combines financial details with the nuances of negotiation, and it's the first step in reaching an agreement and closing on a house.

To help you craft an offer on a home and understand the offer acceptance process, we’ve broken down the steps to both making and accepting an offer on a house. Here's what you need to know:

[Read: First-Time Homebuyer? Here's How to Buy Your First Home]

Making an offer on a house isn’t just about telling the seller how much you’re willing to pay. It's also important to provide proof that you’re able to pay that amount, establish a closing date and state how additional costs will be covered and what you expect of the seller leading up to closing. When submitting an offer, be prepared to provide earnest money, which can range from $500 to 10% of the agreed-upon price and shows the seller you’re serious about buying the house.

The first step to making an offer on a house is finding the house you want to purchase within your budget. The next steps are fairly easy, especially when your real estate agent walks you through the process.

Here’s what you should know about making an offer on a house:

  • Find a property in your price range.
  • When to submit an offer.
  • Making a contingent offer.
  • Competing against other buyers.

Find a property in your price range. While you shop for a home, stick with properties within your budget – a lowball offer on a house likely won’t get a seller's attention. If you’re unwilling to budge on what you want in a home, it may be best to hold off on buying and save up, says Pamela D’Arc, a licensed associate broker with Stribling at Compass in New York City.

“If I have (a buyer) who has certain criteria and they don’t have the budget to get that criteria in a quality building or neighborhood that would make them happy, I have absolutely told them to wait,” D’Arc says.

Alternatively, you may find that houses within your budget are receiving offers well above the price you can offer. In that case, you may lose out to buyers with deeper pockets. Keep looking, and perhaps widen your search to homes with different criteria.

When to submit an offer. Especially if you’re house hunting in a market where there are few available properties compared with the number of active buyers, submit an offer as soon as you’re sure you want to buy it. Even if you move quickly, there’s a chance you’ll have to compete with other offers.

“The first call I make when someone’s interested in a home is to reach the other agent – the listing agent – and find out if there’s any other offers that they have in hand, and if so how many,” says Jeff Plotkin, a Texas-licensed Realtor, attorney, certified public accountant and vice president of Habitat Hunters Inc. in Austin, Texas.

[See: Best Home Security Systems of 2020]

How much to offer. While the listing price provides some insight into the seller’s expectations, the value of the property and the work needed should play a larger role in your offer.

When you’re ready to make an offer, your real estate agent will likely show you the sale history of properties nearby to help determine the home's approximate value compared to the rest of the market. “I like to look at the last six months of houses that have sold in the same neighborhood, or very close proximity, of a similar size,” Plotkin says.

In addition to recent sales, factor in your personal needs. Consider the details this house checks off for you and the amount of work you’d have to do. Take into account details such as:

  • Proximity to work, schools and shopping.
  • Neighborhood amenities.
  • Age of major systems and appliances, including the HVAC, roof, plumbing and electric.
  • Deferred maintenance.
  • Renovations that need to be done.

While your agent will help you consider all the factors that lead to the offer price, you'll have to determine the price you're willing to offer. D’Arc says she’s learned to advise the buyer appropriately but “never give a number” to avoid making a decision the client isn’t happy with in the end.

Making a contingent offer. Once you’ve moved past the price portion of the offer, consider if other needs and conditions will be included. If you already own a home and need to sell it to pay for the new one, an offer contingent on the sale of your house is necessary.

This offer contingency can be a sore point for many sellers, especially in a seller’s market where other buyers may not have the same constraints. If your ability to purchase the house hinges on certain factors like selling your current house, include the contingency even if you’re worried it might mean the seller declines your offer. If your situation is more flexible, talk to your agent about other ways to construct the offer so it appeals to the seller and meets your needs.

Competing against other buyers. Low inventory in many housing markets in the U.S. makes competition among buyers a constant consideration for many homebuyers, particularly those who are house hunting for the first time. Many buyers are afraid of getting caught up in a bidding war and paying more than they can afford or losing out on the house of their dreams.

Standing out against competing bids may take a bit more work, but a personal touch and some strategic moves can give you an edge. Here are a few things D’Arc recommends:

  • Write a personal letter. It’s not recommended for every situation, but D’Arc says a personal letter to the seller can make an offer stand out, especially when the seller appears to have sentimental attachment to the property. Even if your offer price isn’t the strongest, tugging on the seller’s heartstrings can win you the deal, she says.
  • Include quirky numbers. Rather than rounding to the nearest hundred or thousand, offer something more specific. An offer of $345,255 instead of $345,000 registers as a higher number when it's just a difference of a couple hundred dollars. If you note you'll cover $1,905 of the seller's legal fees instead of $1,850, the difference in dollar amount may stick in the seller's memory. “Quirky numbers can sometimes be the difference,” she says.
  • Be flexible. A good real estate agent will try to get as much information about the seller as possible from the listing agent to structure an offer around those needs. If the seller’s moving out of state, a quick closing date could be more enticing. With the closing date in particular, it can give you a leg up to express that you’re willing to meet the seller’s needs.

Keep in mind that even if you lose out to competing buyers once or even a few times, eventually your offer will be the right one. Don’t get discouraged, and don’t shy away from making an offer on a house because you think you’ll lose out to another buyer. “Most people will still take their best shot – it doesn’t cost a thing to make an offer,” Plotkin says.



The Guide to Understanding Home Value

Here's a look at the process of calculating the value of your home and what it means for your home's sale price.

If you're a home seller, as long as your property is priced within the range of similar houses in the area and has been prepared for the market, you should attract serious buyers.

Whether you live in an area where multiple offers the first day on the market are common or you have to wait a few weeks, it’s important to be prepared and work with your listing agent as much as possible. You want to be sure your asking price, curb appeal and home's interior attract serious buyers and make them remember the property while they're touring houses.

Here's how you can make your property desirable and work toward a successful transaction once you've found a buyer:

  • Establishing an offer deadline.
  • Knowing your limit.
  • Finding the best offer.
  • Negotiating.
  • Accepting the offer.

Establishing an offer deadline. For the sake of organization and to help drive interest to your property, your listing agent may recommend establishing an initial deadline for offers when it goes on the market. An offer deadline should be just a few days in the future, so buyers don't have enough time to find another property.

This works best in a seller's market when your agent expects there to be more than one interested buyer right off the bat. If you receive strong offers, accept the one that appeals to you most – don't try to incite a bidding war.

Knowing your limit. When you're determining asking price for your home, you should have the same conversation with your real estate agent that a buyer would: Based on recent sales of similar properties, how much is this home worth?

Weigh the estimated home value with the amount you need to pay off your mortgage, be able to buy another property or simply feel like it was a worthy deal. Expect to receive offers below your asking price, and know how low of a price you’re willing to accept to move on with a deal. Factor in other details based on your needs, such as the closing date, and set your limits ahead of time to avoid making a decision based on emotions rather than logic.

Selecting the best offer. Once you’ve received an offer – or more than one – you have a lot to consider. The offer price is certainly a major factor, but you also have to look at other costs and expenses, the financial security of the buyer and whether the timeline works for you.

Calculate the bottom line for the deal. If buyer offers $500,000 for your house but asks you to cover all closing costs, you’d likely take home $5,000 to $25,000 less than $500,000, and that's not accounting for the real estate agent commission, which could be $30,000.

If sentimentality matters to you, consider a personal letter a buyer writes, but also be sure you’re not basing your decision on bias against a protected class. The Fair Housing Act prohibits discrimination based on race, color, religion, sex, disability, familial status or nation of origin. If it’s believed you turned down a would-be buyer for any of those reasons, you could face a lawsuit.

Negotiating. You may have an offer you like, but that doesn’t mean you have to accept every term. Here’s where negotiations come into play – whether you make a counteroffer, request a different closing date or offer to make some, but not all, of the buyer's requested changes to the home.

It’s important to be cordial and keep the buyer’s preferences in mind. Even in a seller’s market, offending the buyer could put you back in square one with your property still on the market.

In Manhattan, for example, D’Arc notes the market has cooled compared to a couple of years ago, and buyers have more power in negotiations. “Properties are on the market for longer now, and there’s generally more negotiability, and so buyers expect that,” she says.

Accepting the offer. Once both the seller and buyer have reached an agreed-upon price and terms, it’s time to move forward with the deal. The next step is to go under contract and start the due diligence process.

Both parties will need to sign documents noting their intent to move forward with the transaction, along with the established closing date and any other terms or conditions necessary to complete the deal.

Real estate law varies from state to state, so ask your real estate agent for guidance on any other nuances specific to your area. In New York, for example, the due diligence period takes place prior to both parties signing the contract. In most other states, the due diligence period takes place during the first 10 days the home is under contract.



What Does 'Move-in Ready' Really Mean?

You may need to adjust your mindset before walking into a house advertised as move-in ready.

Moving past the offer and negotiation doesn’t guarantee the deal will go through. In the roughly 30 days or so it takes for most transactions to close following an offer, a lot of information can come up that requires additional negotiation and may lead one party to back out.

For buyers, the biggest factor is finances. Be sure to have your finances in order before you place an offer on a house, and be forthcoming with your lender about your income, any debt or other issues in your credit history. Getting preapproved for your mortgage before you start touring homes can help speed up the approval process because the lender will have already confirmed your credit history and financial background. Even with preapproval, however, avoid making any major purchases until after you close on your house.

The appraisal can also be a potential issue. If the property appraises for lower than the agreed-upon asking price, you may have to come up with additional cash or renegotiate the price with the seller.

For sellers, defects in the property discovered during the inspection can cause a lot of problems. A prelisting inspection allows you to learn about and make needed repairs before you put your house on the market.

At the end of the day, the under-contract or escrow period serves as time for the buyer or seller to discover everything necessary for the deal to take place. The earnest money submitted by the buyer typically goes back to the buyer if the deal falls through with cause on either side, like a low appraisal or major cracks in the foundation, though rules may vary based on state laws.

If you’re experiencing buyer’s or seller’s remorse, now is the time to express your misgivings and determine if the deal isn’t right.

8 Potential Headaches to Be Aware of Before Becoming a Homeowner

Be ready for things to go wrong.

The facia board is rotted and the gutters a re falling away from the house.  Look for other images in this series.

(Getty Images)

No one loves shelling out money for unexpected expenses, but sometimes that seems like a rite of passage in homeownership. “Most of the time, the unhappy surprises are simply due to people being unaware of the things that can crop up,” says Brad Hunter, chief economist for HomeAdvisor. First-time homebuyers in particular may not know what to expect after closing on a home, and there’s nothing worse than developing buyer’s remorse about one of the largest investments you’ll ever make. Here are eight headaches to prepare for if you’re looking to purchase a house.

A suddenly less-than-desirable location

A suddenly less-than-desirable location

Aerial View of school buildings and a track Central Texas near Austin

(Getty Images)

Buying a house across the street from a high school didn’t seem like such a bad idea when you saw how nicely renovated it was. But when you don’t have kids and Friday night football games are keeping you up later than you would like, you realize you should have made a pros-and-cons list regarding the location. Don’t let a charming interior override a location you dislike or a lot that will give you flooding problems. “If you don’t like your lot, don’t buy the house, because you cannot change that,” says Kim Wirtz, a Realtor for Century 21 Affiliated in Lockport, Illinois.

A high monthly mortgage payment

A high monthly mortgage payment

House keys over the hundred dollar banknotes against wooden background

(Getty Images)

One of the most crippling headaches to deal with is a monthly mortgage payment you find you can’t quite afford. Lysette Portales, a real estate agent with Century 21 Jim White & Associates in Treasure Island, Florida, says she stresses to clients that they should shop around for a mortgage with multiple lenders and inquire with each about different program options. “A lot of them might be able to do 100 percent [financing],” she says, noting that many homebuyers typically only know about a couple mortgage programs and settle for one without considering what would be most affordable option both now and down the line.

Items that are on their last legs

Items that are on their last legs

A man uses a flashlight to help him see the hot water heater in a dark closet

(Getty Images)

Whether it's the roof, water heater or furnace, aging home systems will need replacement. And that may end up being sooner than you’d like, especially if you didn’t pay close attention to the age and condition of the roof, plumbing, electric and heating and cooling systems when your inspector pointed them out. HomeAdvisor’s 2015 New Homeowner Survey found that 75 percent of homeowners face an unexpected emergency within a year of purchase. To expect the unexpected, Hunter points to the survey’s recommendation that homeowners plan to spend 1 percent of the home’s purchase price on unplanned repairs. Maintaining at least that much in your emergency fund will help keep you from dipping into other savings from year to year.

Old systems

Old systems

An old air conditioner unit, in need of updating, sitting in tall weeds

(Getty Images)

It’s important to pay attention to a home's aging big-ticket items before you even make an offer. “A lot of homebuyers are distracted by how cute a home can be,” Portales says, adding that she makes it her job to point out the age of the roof, air conditioning unit, water heater and more to buyers. Then when it comes time to calculate an offer, you should factor in the cost of those pieces that will need immediate replacement when determining how much you think the home is worth.

An air conditioner that's not the same

An air conditioner that's not the same

During hot summer night with air conditioning system breakdown trying to find a way to sleep in the refrigerator. Very dark atmosphere. Picture fades to black on left.

(Getty Images)

Wirtz says one of the things in a home that seems to always break or have issues within the first year of its purchase is the air conditioner. But it’s not always because it breaks down – she says it simply might not be as effective as the new homeowner wants it to be. “It may not be cooling like they’re used to,” Wirtz says. You can either learn to deal with a little less cooling, bring in an HVAC pro to inspect and fix any problems or research any DIY fixes that might get it cooling better – like air conditioner cleaning spray.

Unseen leaks

Unseen leaks

An old pipe breaks in freezing weather in Baku, Azerbaijan

(Getty Images)

Home inspectors aren’t able to see through walls, so the discovery of a pipe leak isn’t uncommon after you’ve moved into the home. But this is one repair you want to make as quickly as possible. “When there’s water that is not stopped, it can create mold – and mold remediation is extremely expensive and extremely difficult,” Hunter says. Mold growth in your home can cause serious health problems, so it’s imperative to address any moisture issues as quickly as possible to avoid it becoming any more dangerous, let alone more expensive.

Surprise renovation expenses

Surprise renovation expenses

Contractor discussing renovations

(Getty Images)

Fixer-uppers are all the rage these days, as many homebuyers are willing to take on renovation projects in exchange for a slightly lower price tag. But when budgeting for your renovations, leave plenty of room for the discovery of existing problems once your contractor looks behind the walls. The HomeAdvisor survey found 51 percent of homeowners spent more time on home projects than they expected. “Even if you have a fully vetted, well-reviewed contractor … they still might uncover issues that maybe a previous contractor left incomplete,” Hunter says. He recommends leaving around 10 percent extra space in your budget for surprise problems of any kind.

Problems that pile up

Problems that pile up

Mold grows on a wall next to a damp stained wood door.

(Getty Images)

All too often it feels like the problems in a home have a snowballing effect, but you don’t have to go broke tackling them all at once. “Day one, [homeowners] won’t have to tackle all those projects,” Hunter says. “They can use the list of items found by the home inspector as a checklist and prioritize the items on that list and create a budget.” You should immediately address those problems that create a health or safety issue, such as a broken step or leak in your roof that could lead to mold. But replacing an older dishwasher can wait until next year, when you have more room in your home repair budget.

Read More

Updated on Aug. 6, 2020: This story was published at an earlier date and has been updated with new information.

Tags: real estate, housing, housing market, home prices, new home sales, existing home sales, pending home sales

Devon Thorsby is the Real Estate editor at U.S. News & World Report, where she writes consumer-focused articles about the homebuying and selling process, home improvement, tenant rights and the state of the housing market.

She has appeared in media interviews across the U.S. including National Public Radio, WTOP (Washington, D.C.) and KOH (Reno, Nevada) and various print publications, as well as having served on panels discussing real estate development, city planning policy and homebuilding.

Previously, she served as a researcher of commercial real estate transactions and information, and is currently a member of the National Association of Real Estate Editors. Thorsby studied Political Science at the University of Michigan, where she also served as a news reporter and editor for the student newspaper The Michigan Daily. Follow her on Twitter or write to her at

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