How To Make an Offer on a House

Make an informed decision. Market conditions change all the time, so make sure you know what comparable homes in your area have sold for within the last six months. Your county courthouse (and most local newspapers) keeps records of home transactions. Also, find out what the current homeowners paid for the house. If they bought the house 30 years ago, it probably doesn’t matter much. But if they bought it within the last several years and are listing it for a lot more, find out why. Have they done major upgrades, or are they trying to gouge you?

Determine your offer. You’ve (hopefully) been pre-approved by your bank already and have determined your budget. But make sure you know exactly how the monthly mortgage payment will feel. If you make an offer at the top of your budget, really think about whether you’re willing to give away 40 percent of your income for the next 30 years. It’s certainly worth looking at houses at the top of your budget, but you may want to avoid actually offering that amount.

Don’t insult the homeowners. On the other hand, some people make a ridiculously low offer on a home because the worst that can happen is that the homeowners will say “no,” right? But that’s not the worst that can happen. If a homeowner feels that your price is offensive, they’ll not only turn you down, but they might not enter into any further discussion with you. So if you love a house and are hoping to get it for a song, make sure you realize the gamble you’re taking. Some owners will take offense at even $100 below their asking price—and you can’t control other people’s reactions—but you know that putting in a half-price offer won’t endear you to them.

Use the correct form. Depending on the kind of home you’re interested in (new construction, manufactured home, residential home, etc.), there are different purchase contracts out there. A handshake deal may feel more friendly, but if you’re serious about a home, get the legal details lined up correctly. Ask a property attorney about which form you should use.

Put down a deposit. Most owners will ask for a good faith deposit—usually no more than a couple thousand dollars. This proves to the owner that you’re serious about the house. Don’t make out the check to the current owner, however. Enroll the services of an escrow or title company, which will ensure that you get your money back if the deal falls through.

Give up some of your financial info. Disclose which bank is providing your financing, and spell out how much your down payment will be (remember to include your deposit in this number).

Put all of the details in writing. This includes things like who pays which fees, when you receive possession, which appliances stay with the house, and all contingencies. That way, if your house doesn’t pass inspection, for example, you’re not on the hook for the purchase. Also, make sure you include an expiration date on your offer.

Try to remain emotionally detached. No matter how good your offer is, there’s no guarantee that it will be accepted. So try not to think of this house as the only house you’ll ever love. Even after you put in an offer, keep looking at other houses.

Prepare your counteroffer. Some prospective buyers make their first offer their best offer, but many people hold back a few thousand in case they receive a counteroffer. The first thing to keep in mind with a counteroffer is not to do anything in the heat of the moment. Take a breath and think through your options. You can accept the counteroffer; tell them you don’t accept and aren’t countering; increase your offer; or accept their offer if they throw in things like appliances, a home warranty, or closing costs. Most people don’t enjoy negotiating, and if you’re among them, make your second offer your final—and tell them so. The catch is that you have to mean it, or the owners won’t believe you when you say it a second time.