You’ve done your searching and have found the home of your dreams – Congratulations!

But don’t count your eggs before they hatch. It’s time to get serious and craft the perfect offer.

Any experienced real estate agent will advise you on best practices when placing an offer, but knowing what to expect before you even start searching might just change the way you save and how you make your bid.

First-Time Home Buyers Guide: Making An Offer  

1. Be Prepared

The best way to prepare yourself for offer time is to have as much cash in the bank as possible. The more money you have on hand, the more enticing your offer will be.

An all-cash buy means you don’t have to rely on appraisals or financing, and that the money will spend less time in escrow. This will generally mean a faster closing time and fewer worries for the seller.

For those of us who can’t afford a cash buy, the larger the down payment you can offer, the better.

If saving for a 20%+ down payment is a struggle, there’s still action you can take to make your offer more appealing – a mortgage pre-approval letter. A pre-approval (not to be confused with a pre-qualification) is a letter from a lender stating you are pre-approved for up to a particular dollar amount in financing.

If you’re going to need financing, you should get yourself a pre-approval letter early on in your search.

2. Don’t Dilly Dally

In most markets, time is of the essence. Even a few days’ times could mean the difference between securing your new home and more months of searching.

If you see a home that you like, tell your agent right away. This will allow them time to research what similar homes in the area have sold for (referred to as a “Comp”or “Comparatives” analysis). A great agent will also research other sales by the home’s listing agent to see if they can decipher any negotiating patterns of the agent.

3. Placing Your Offer

Once your agent has done their research, they’ll advise you on a range of possible offer prices, but it is entirely up to you to decide on the offer you’d like to make.

As much as possible, try to consider things from the seller’s perspective.

If you have less money for a down payment, you may be able to make your offer more enticing by increasing the bid or minimizing your contingencies as much as possible (more on this in just a moment). If you’re coming in with cash, you may be in a better position to negotiate, but a low-ball offer can upset a seller, even if it’s an all-cash bid.

If you’ve landed on a number, your agent will generate an offer letter for you and submit it to the seller’s agent (or directly to the seller, if they’re not represented.) This is a legally binding document, and if accepted, you are on the hook to follow through on your promises.

Failure to do so could result in losing a “good faith” deposit or even legal action against you.

When making your offer, you can include a personal note about who you are as a buyer and what you and your family love about the home. Adding this personal touch can pull at the heartstrings of a seller who might be hesitant to let go of their family’s home.

And once they’ve received your offer, the seller has three options: accept, reject, or counteroffer. Sellers will typically respond within 24 hours, but may occasionally need more time.

4. Offer Contingencies

Most offer letters come with a variety of contingencies. A contingency is a specific condition that must be met before closing, and is intended to protect you if, for example, a home inspection delivers some less-than-stellar news about the house.

Sellers typically prefer as few contingencies as possible, but in some cases a contingency can actually make an offer more appealing. For example, if a seller needs additional time to vacate their home, you can include a contingency that increases the wait time until closing.

The most common contingencies are typically regarding  financing, appraisal and inspection.

In the case of financing and appraisal, you can include a contingency that states your offer is contingent upon your receiving financing for the purchase. Lenders typically won’t finance a loan for more than what the home is appraised for, so if the appraised value is any less than the offer you’ve made, this contingency can give you the out. Home inspection contingencies also allow sellers to withdraw the offer or re-negotiate if the home is found to have major defects.

There are dozens of other contingencies you can include in your offer, regarding things like tenants vacating, the sale of a prior home, and much more. But the more conditions you place on your offer, the less likely a seller is to accept them.

Some agents will recommend that you waive contingencies all together, but doing so can put you at great risk, so make sure you do your due-diligence before you make your decision!

5. Facing Rejection

If your offer is rejected, don’t stay discouraged.

The vast majority of homebuyers will have an offer rejected before securing a home. Your offer could have been too low, had too many contingencies, or maybe you simply didn’t meet the financing or personal preferences of the seller.

Your agent should do their part to find out why your offer was rejected, so you can better prepare yourself for your next attempt.

6. Counter-Offers and Negotiation

An offer on a home can go through many rounds of negotiation. Your seller may want a condition changed, or may be trying to get the best price out of a bidding war.

It’s important to stay level headed and remember the budget you decided on at the start of your search, before you became emotionally invested in your potential home. While negotiations can be stressful, it’s good to keep in mind that a counter offer is a great sign, as it means you are still in the race and the seller is willing to work with you.

7. Acceptance

An accepted offer is definitely cause for celebration, but there is still a lot of work to do. Before you hit the closing table, you’ll need to secure your financing and go through appraisals and inspections.

Make sure you’ve anticipated your closing costs in addition to your deposit, and that all your documents are still on standby.

There are still a few hurdles to jump over and a lot of paperwork to sign before you get that pair of keys, but you can breathe a sigh of relief knowing you’ve successfully completed one of the most difficult parts of the process.

Congratulations, now you’re off to Closing time!

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In this First Time Home Buyer’s Guide series, we will dig deeper into each of these sections and give you the lowdown on what to expect and do each step of the way.

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