Whether you’re just scrolling through listings or you’re actively searching for a home to buy, you may be wondering how to make an offer on a house. The process can seem complicated and intimidating if you haven’t been through it before. But with a good real estate agent to help you and a basic knowledge of what’s involved, you’ll sail through it with confidence.
What Does It Mean to Make an Offer?
When you make an offer on a house, you’re saying that you want to buy the property, how much you’re willing to pay for it, and under what conditions. Your offer is a legal document that outlines all the terms of your proposed purchase.
An offer is not final until the sellers have accepted it. Think of the initial offer as a negotiation tool that starts a conversation. Normally, the seller comes back with a counteroffer that might include a different price, different conditions, or both. If everything goes well, the buyer and the seller settle on a price and conditions that work for both of them.
What Goes Into an Offer?
Before talking about how to make an offer on a house, it’s important to understand the components. Your agent will help you put together a formal Agreement of Purchase and Sale, which typically includes:
- Purchase price: the amount you’re offering to pay for the home.
- Deposit: a cash amount (typically 1 to 5% of the purchase price) that the buyer puts down to show that they are serious about a purchase. The deposit is held in trust and applied to the buyer’s down payment or closing costs when the deal closes.
- Closing date: the date that the deal goes through and the buyer gets the keys to their new home. Final financial transactions are also completed on this date.
- Conditions: Contingencies the seller puts in the offer. These can include:
- Financing (securing a mortgage).
- Home inspection (the home needs to pass an inspection for the sale to go through).
- Sale of current home, if applicable.
- Status certificate (for condos).
- Inclusions and exclusions: what the seller will leave in the house and what they’ll take with them. Appliances and light fixtures are some common inclusions.
- Irrevocable date: the last day the sellers have to make a decision about the offer.
How to Make an Offer on a House: Step by Step
1. Get Pre-approved for a Mortgage
Before you start touring homes, talk to a mortgage broker or lender and get pre-approved. A pre- approval tells you exactly how much you can afford and shows sellers that you’re serious about buying a home. When you actually make an offer, pre-approval makes that offer stronger because the sellers don’t need to worry as much about your financing falling through.
2. Decide on Your Offer Price and Terms
Work with your real estate agent to determine a fair price for the house. Your agent will check out recent comparable sales, note any potential issues or repairs that are needed, research the neighbourhood, and help you decide on an appropriate offer.
Your offer won’t depend solely on comparables and the condition of the home; market cycles also play a big role. For example, in a seller’s market where demand outstrips supply, you may need to offer above asking. In a buyer’s market, where there are many more homes on the market than there are buyers, you can safely make an offer below asking.
The seller’s motivation also matters when you make an offer. If the sellers are in a hurry to sell, for example, you can make an offer under asking. If it’s an elderly couple that’s downsizing, they might respond more favourably to a long closing so they have time to move. A seller with a strong sentimental attachment to their home might be influenced by a personal letter when you make an offer. Your real estate agent can play an outsized role here by reading between the lines in a listing and getting information from the seller’s agent.
3. Submit Your Offer
Your agent will present your offer to the seller’s agent. One of three things can then happen:
- The seller accepts your offer.
- The seller rejects your offer outright (they don’t want to see it again).
- The seller counters your offer with different terms (the most common situation).
If you receive a counteroffer, you have the same options: to accept it, reject it, or counter back with your own terms. This can go back and forth a few times before one party walks away or everyone lands on an agreement.
4. Firm Up the Offer
Once you make your offer and your offer is accepted, you need to complete these steps before the deal can close:
- Finalize your financing.
- Arrange for a home inspection if this is in your conditions.
- Have a real estate lawyer review all your documents.
- Remove your conditions in writing if they’ve been met (this is when your offer becomes firm).
- Arrange for home insurance.
- Contact utility companies to arrange for service hookup.
- Sign your final documents on the closing day and receive your keys.
How to Make an Offer Likely to Be Accepted
There is no guarantee that a seller will accept your offer, but you can improve your chances with these tips:
- Be realistic about price: if comparable homes are selling at or above asking, you’ll need to come in high, even if you think it’s more than the house is worth.
- Know the market: In a seller’s market, you might need to be more aggressive with your price and less aggressive with conditions. In a buyer’s market, you have more negotiating power.
- Be flexible on closing dates: if a seller needs to close quickly or has a longer timeline, be accommodating to make your offer more attractive. You may need to arrange bridge financing or find a place to live for a few months, but it can be worth it to get the house you really want.
- Don’t waive the home inspection: unless you’re buying a home in as-is condition or the market is extremely competitive, a home inspection is your safety net.
- Don’t get too attached: if you don’t get your dream home, there will be another one. Don’t make an offer based on emotions.
Can I Make an Offer on Multiple Houses?
Yes, you can make an offer on multiple houses at the same time, but it’s not generally recommended. When you make an offer, you’re entering into a legal agreement to purchase that home if the offer is accepted. So, if you made offers on three different houses and all three sellers accept, you now have to purchase all three properties. A better approach is to make an offer on one property at a time. If you’re genuinely interested in several properties, prioritize the one you’re most interested in.
Making an Offer
Learning how to make an offer on a house will seem overwhelming if you haven’t done it before. It’s complicated, stressful, and you’re making the biggest purchase you’ll ever make in your life. With the right real estate agent backed by a good agency, you’ll emerge from the process successfully, and you’ll have a better idea of how it works for the next time.
