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Finally, you’ve narrowed it down to that one house in the cul-de-sac, with the gorgeous front yard, big wooden double doors and wrap around porch.

You’ve been to three open houses of this property and it was decided this was “the one” before entering the first time.

If you’ve waited long enough and don’t plan on taking a fourth look around, you are ready to make an offer.

So, how does it even start? Do you just walk up to the seller and express your heavy interest in buying?

Here’s a tip, the number one mistake when making an offer is believing verbal transactions seal the deal. The truth is, written contracts are the ONLY way to finalize a deal.

Ever heard of the expression, “Can I get that in writing?” That definitely applies here, too.

Since this process does not start with a verbal agreement, where do you begin?

Here is how:

Making an offer on a house is essentially a three-step process, with three possible outcomes. You first start with:

  1. Writing an offer letter
  2. The seller either: accepts, declines or counters the offer
  3. What actions are taken next for each scenario:
    1. Accepts: you move forward with the process
    2. Counter: you either, accept their offer, or make a new offer
    3. Declines: you move on to a different home

If you’re ready to take on the responsibility of a home, congratulations! Be sure to check out this article on what you absolutely need to know about becoming a homeowner.

What happens during the offer process?

If you have found a house that you absolutely love and you need to live there, you can make an offer by starting with a written letter.

Written letters should not be simple or formatted on your own. If you are a first-time home buyer or are unfamiliar with this process, there are many things that need to be included in your written letter. Your real estate agent can provide you with a Residential Purchase Agreement that includes all of the necessary information.

Depending on the state, city and town you plan to live in, there are specific state or local laws that are required to address in your letter. Your real estate agent can help write and format your letter so all required information is included.

In some areas, a lawyer must be present and active during the paperwork process.

Along with your professional proposal, many realtors encourage their clients to write a personal letter as well. This has the potential to tug on the seller’s heart strings and could create an emotional appeal to accept the buyer’s offer.

However, do not rely on the personal letter to count as a form of a binding contract. This is nowhere near a legal document and does not include any required information about the actual transaction of the home.

What does a written letter typically include?


Not all offer letters are the same.

Like mentioned before, depending on the state and town the home is in, there are specific pieces of information that need to be included. The following list includes what most offer letters consist of:

  • Legal address
  • Legal property description
  • Details regarding the sale price and terms
    • Terms refer to if the transaction is an all cash deal or if the buyer is obtaining a mortgage for a given amount
  • The amount and terms regarding earnest money
  • The seller’s mandate to provide clear title to the property
  • Information regarding any buyer’s participation in closing costs and other fees
  • Information of how certain taxes and expenses will be prorated between the buyer and seller at closing
    • Some sellers help buyers with closing costs, broker’s commission and other fees
  • The date and time of the offer’s expiration date (preferably a short amount of time)
  • A projected loan closing date
  • Other state required provisions or disclosures
  • Any contingencies that the deal is subject to

What is a contingency?

Contingencies are “deal breaker” clauses in a contract that allow you to back out of buying a home if certain conditions are not met.

Some common contingencies include completion of a home inspection. Buyers typically request a home inspection so they know if there are any issues, hazards or concerns about the home.

Don’t pull a Ted Mosby, jump the gun and buy a house before the home inspection. Long story short, his home inspector found rats, leaks and fell through the ceiling. A little over dramatic, but extremely hazardous. A broken house and a potential lawsuit can all be avoided with a home inspection.

Check out this article on why home appraisals and home inspections are crucial.

Another contingency buyers include is the sale needs to be completed within a specific timeframe, usually at the same time as they are financing, obtaining a mortgage or securing a loan from their lender.

Be careful of what contingencies you list. Only include the absolutely necessary bases. If you start to list more, contingencies can prevent you from locking in a deal.

What is a disclosure?

A disclosure is required by law, instructing the seller that it is their responsibility to inform and reveal any and all property defects.

Sellers need to include information about the property and improvements made. The adjustments made or damages can affect the value of the home.

Some examples of content in disclosures are natural hazards, structural issues or other substantial defects.

As a buyer, you need to carefully examine what the disclosure entails. You don’t want to commit to a home that doesn’t appeal to you.

Contingencies and disclosures protect both the buyer and seller during the process. Both need to be resolved or come to an agreement before completing the sale.

What is earnest money?

When making an offer, the buyer is required to put down a deposit, which is also known as earnest money. This deposit can be between 1% to 3% of the total purchase price.

When addressing earnest money, you need to list scenarios or circumstances where you would have to withdraw your money. For example, if you were to back out of the deal (for a valid reason) or the money is returned by the seller (if the buyers offer were to be rejected).

The amount required to put down varies on the location and the total value of the home. This money is also counted towards your down payment of the home.

Can the buyer negotiate the price?

If you, as the buyer, have speculation of the home’s price tag, your realtor can give you a Comparative Market Analysis (CMA) of the home’s value. You can also check local listings to compare similar properties and how much they’re selling for.

You can also negotiate the price based off the home inspection evaluation. You can ask for a lower price or request repair contingencies if the home needs fixing.

Before making any offer, it’s always a good idea to know why the seller is selling. This can benefit the buyer on how they can negotiate their offer. For example, if the sellers are getting a divorce, they most likely want to sell quickly, so they may be flexible and come to an agreement faster.

Consider the seller’s situation, knowing this information prior to finalizing the deal can help this process go smoother.

How can a seller respond to the buyers offer?

The seller can respond in three different ways to a buyer’s offer, they can either: accept, decline or make a counteroffer.

A binding contract is created when the seller receives your offer, accepts your proposal as is and signs an acceptance letter. Once the buyer is notified of the seller’s decision, it becomes a firm contract.

If a seller rejects your offer, better luck next time. It is not recommended to renegotiate your offer because there were most likely red flags in your written letter the seller did not agree with. Once the offer has been declined, the seller cannot change their mind and hold you to old terms.

If the sellers likes everything except the offering price or desired closing date, you may receive a counteroffer with the seller’s proposed adjustments.

As the buyer, you are allowed to accept, reject or make a counteroffer based on their offering.

Each time the buyer or seller makes any changes to the terms of the contact, either party can accept, decline or make another counteroffer. Be mindful and careful if making multiple counteroffers. You don’t want to make this a back and forth process.

Until one party finally agrees and signs an unconditional acceptance of the other side’s proposal, is when the document becomes a binding contract.

Can a buyer back out of an offer?

In most cases, yes, the buyer can back out of their offer right up to the moment it is accepted. And in some cases, if you haven’t been alerted of the seller’s acceptance.

If you choose to back out, it has to be for a valid reason, such as, you aren’t able to financially support yourself in the home or the damages in the home are too costly to repair.

Before backing out completely, be sure to consult with a lawyer who is familiar with real estate. You don’t want to lose your earnest money deposit or get sued by the seller for damages they may have encountered due to your proposal.

What if the property is a foreclosed home?


If the home is being sold as a foreclosure, be prepared for a longer offering process. Foreclosure happens when the homeowners of a home fail to keep up with mortgage payments. This property then becomes a real estate owned (REO) home.

When a home has reached the REO phase of foreclosure, it is common for homes to be in terrible condition due to lack of maintenance. The home could be sitting there for months, or even years. With little attention, the home can experience mold buildup, loose wires, deteriorated pipes or out of control weeds.

If considering buying a foreclosed home, you have the option to inspect before purchasing. However, keep in mind no repairs can be made that a contingency would request. The home would sell as is, so carefully analyze the home to make sure there are no outrageous damages or missing items, such as light fixtures, appliances, knobs or blinds.

Buying a foreclosed home is a lengthy process, with extra paperwork and a slower response rate. So, if you are a patient person, this may be a possible option for you. Cash buyers seem to be the most successful when completing this type of home purchase.

To ensure the best possible outcome when buying a home, write a thorough, detailed and accommodating letter to your potential seller. If you experience a counteroffer, you want to make sure you do as little of going back and forth. And always remember, a verbal commitment does NOT count as a binding contract. Nothing is set in stone unless it is written on paper.

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