How to Make an Offer on a House: Making an Offer in 4 Steps

It can be challenging for prospective homebuyers (first-time and seasoned alike) to decide how much to offer on a house: too high, and you risk overpaying, but too low, and the seller may reject it. Here are some factors to consider when determining your offer:

1. 1. The comparative market analysis: Knowing the real estate market in your area is key to estimating the value of a particular property. Talk with your real estate agent about recent “comps” (or comparable homes in the local market). The most important information to note includes the asking price, the length of time the house was on the market, whether the seller had to reduce the price, and the home’s eventual selling price. Another best practice is to evaluate the current housing market: Is it a seller’s market or a buyer’s market? With the competitive market data, you can chart the average price for a home similar to the one you want to buy and determine a ballpark figure for its market value.
2. 2. The seller’s asking price: The seller’s list price isn’t typically a helpful number when trying to determine comparative market prices, but it can help you determine how much money the seller desires. If the asking price is sky-high, you may not be able to get a good deal; if the price is surprisingly low, you may be in for a bidding war with other interested buyers.
3. 3. Your pre-approved loan amount: Before you start house hunting, you may want to consider getting pre-approval for a loan. During this process, the lender will look at your financial portfolio—like your credit score and debt-to-income ratio (DTI)—and will give you a pre-approval letter showing how much money they’re willing to lend you. When making an offer on a house, you may not want to offer the total amount of your loan because it can signal to the seller that you don’t have any wiggle room. If interest rates rise even a little before you officially get the loan, you might not be able to afford your offer in the end. In addition, you’ll need money set aside for things like your earnest deposit, closing costs, and a home inspection.
4. 4. Other offers: If you know that the seller is currently talking to other interested buyers, you may want to avoid throwing out a lowball offer first. Otherwise, you can run the risk of being outbid by another buyer. While knowing if there are other offers isn’t common knowledge, your realtor may be able to talk to the seller’s agent to get the details.

If you’ve found your dream home at an open house and are ready to take the next steps, you’ll need to understand how the offering process works:

1. 1. Estimate the house’s worth. Your first offer is a significant number because it sets the tone for the rest of the negotiations and can signal to the seller that you’re serious about making a deal. To estimate the house’s worth, consider the comparative market analysis, the asking price, your loan amount, and other offers. Talk it over with your real estate agent, who should have a good idea of a reasonable first offer.
2. 2. Make your first offer. When you make your first offer, your realtor will submit an official letter to the listing agent. The offer letter has more than just the proposed purchase price. The letter includes details like the expiration date of your offer (usually 24–48 hours), financial information (like the down payment amount or loan amount), an earnest money deposit amount (money you pay to an escrow account to show you’re serious about the offer), contingency clauses (usually specifying things like inspection terms), and a proposed closing date.
3. 3. Begin the bargaining process. Sellers don’t typically accept first offers outright. Instead, the seller will either choose to decline your offer (though this usually only happens if your offer price was way too low) or respond with a counteroffer. Once this happens, you’ll sit down with your real estate agent and decide if you like the terms of their counteroffer or want to make a second offer. The bargaining process can go back and forth several times, and it all happens relatively quickly—offers and counteroffers typically have expiration dates of 24–48 hours.
4. 4. Start the contract of sale. If you and the seller have finally reached an offer that you’re both happy with, you’re one step closer to buying a new home. Once that happens, you can move on to the next phase of the home-buying process, which includes drawing up a purchase agreement and performing an official inspection.

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