Buying Process
How to Make an Offer on a House: A Step-by-Step Guide
Making an offer is the critical moment in any home purchase — too low and you lose the house, too high and you overpay. Understanding the components of a competitive offer, how to structure contingencies, and how to present the offer effectively separates agents who win deals from those who don't.
Components of a Strong Offer
Price
Determined by CMA, market conditions, and competition. In seller's market: at or above asking. In buyer's market: 2–5% below. In multiple offers: escalation clause ('I'll beat any bona fide offer by $X up to a maximum of $Y').
Earnest Money
Larger earnest money demonstrates commitment. In competitive markets, 2–3% earnest money (vs. the minimum 1%) signals serious intent. Some sellers prioritize offers with larger deposits as evidence the buyer won't walk away casually.
Contingencies
In seller's markets, buyers compete by shortening or waiving contingencies. Waiving inspection is high-risk. Better: short inspection period (5–7 days), pre-offer home inspection, or inspection 'for information only' with limited repair requests.
Closing Timeline
Ask the seller what timeline works for them. Matching a seller's preferred timeline (fast close, or flexible possession) can win against a higher-priced offer. A 21-day cash close vs. a 45-day financed close can be worth $5,000 or more to a motivated seller.
Making an Offer FAQ
Should buyers write personal letters with their offer?
Buyer letters ('love letters') are legally risky because they may reveal protected class information (family size, religion, national origin) that could expose sellers to Fair Housing liability claims. Many agents and attorneys advise against them. They're also prohibited by some listing agents. If you use them, focus strictly on the property, not the family or personal story.
What is an escalation clause and when should you use it?
An escalation clause automatically increases your offer by a set increment above any competing offer, up to a maximum. Example: 'We offer $400,000, escalating $2,000 above any bona fide competing offer up to a maximum of $420,000.' Use in competitive multiple-offer situations. Risk: it reveals your maximum to the seller, who may counter at your ceiling.
How quickly do I need to respond to a counter-offer?
Counter-offers typically have a 24–48 hour expiration, sometimes less in hot markets. Respond promptly — delayed responses signal lack of commitment and give sellers the opportunity to accept a competing offer. Your agent should be available to communicate counter-offer terms immediately when they're presented.
What happens to my earnest money if my offer is accepted but I need to back out?
If you exit for a valid contingency reason (inspection findings you can't accept, financing falls through, appraisal contingency), earnest money is typically returned. If you back out without a valid contingency — buyer's remorse, found a different home — the seller usually keeps the earnest money. Always ensure the right contingencies are in place before signing.