Found the home that you absolutely love? That’s great. Now it’s time to make an offer, which is one of the most pivotal parts of the homebuying process. Why? Because there’s a good chance several other homebuyers are just as interested as you, so you’re going to have to make your offer stand out. We've outlined the important steps that will show you how to make an offer on a house.
1. Get preapproved!
Unless you’re in the position to buy the home with cash, you’re going to need to find the right home loan. And to get a loan, it helps to get preapproved to borrow money. It will show the seller that you’re serious and capable of paying them, and give you a sense of how much you can afford. Once you’re preapproved, it’s time to get started on your offer.
2. Do your research
Don’t blindly offer to pay the asking price. Just because the seller thinks it’s worth $350,000 doesn’t mean it’s worth $350,000. Compare this house to the prices of similar homes in the area. Learn the history of the home: the sales history, how long it's been on the market, how quickly it's sold in the past, etc. This is important because it will play a role not only in how much you offer, but also in how you structure your offer.
Don’t forget to research the market. If it’s a seller’s market, you may pay more than the asking price to weed out competition. But if the house has been on the market for a while, it may make sense to offer less.
But like most markets, the real estate market can be unpredictable and can change quickly and frequently. Many factors such as location, crime rate, school districts, planned expansion, etc. can make a big difference.
But your own research can only get you so far. That’s why it’s wise to work with an expert in the field.
3. Consider hiring a real estate agent
While doing your research is important, it’s equally important to consider working with a real estate agent who knows the ins and outs of the market. With their invaluable knowledge, they’ll not only help you set your offer price, but also help you with your Residential Purchase Agreement, which is the legal document you present when making an offer on a house. We’ll get to that later.
4. Don’t stall
If you found a home you love, chances are, you’re not the only interested homebuyer. And if that’s the case, you’re going to want to send an offer with a tight deadline as quickly as possible to beat out other potential buyers. Your real estate agent can help you with this.
5. Prepare to put down earnest money
When you’re ready to make your offer, you’ll have to prove that you’re serious and financially able to buy the home. In addition to showing the seller your preapproval, you may want to provide them with a good faith check or “earnest money.” This is generally 1-10% of the purchase price, and is used for part of the down payment.
However, since they haven’t accepted the offer (yet), you’ll place that money with an escrow agent. That way, if the offer doesn’t go through, the money will be returned to you.
You’re ready to write your offer!
With the help of your real estate agent, you’ll draft a Residential Purchase Agreement. This binding legal document will include important information, such as the purchase price; the amount of earnest money you’re putting down, how it will be paid, and how it will be returned if the offer falls through; and the date and time of the offer expiration – among other things.
Some people will also write a personal letter to the home seller about what they like about the home and why they want to live there. Writing a strong, compelling letter that strikes a chord with the seller can make a difference. Because the seller most likely feels an attachment to the home, they’re going to want to sell it to somebody who appreciates it as much as they do.
Knowing all the ins and outs of how to make an offer on a house is no cakewalk, but if it’s a home you love, it’s worth putting the work in.
Now that you’re equipped with the knowledge of what goes into an offer, it’s time to get familiar with the home appraisal.