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How to Make an Offer on a House

October 27, 2020 · 5 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

How to Make an Offer on a House

You looked at a lot of houses. And we mean a lot. Some came close to checking off all your boxes, but none of them made you feel like you were home. Then your real estate agent said, “I know this house wasn’t on your radar, but let’s just go check it out.”

You go, maybe just to humor them, or maybe because your spidey sense starts to tingle. And the second you pull up to the property, you fall in love.

Hello, unicorn!

You’re ready to put in an offer #rightnow, but buying a home isn’t quite as easy as heading to the cash register with an amazing store find.

For both parties, buying and selling real estate can be a stressful, emotional transaction that makes it difficult to find the sweet spot. Here’s a guide for how to put an offer in on a house that can take you from homebuyer to homeowner.

Steps to Making an Offer on a Home

1. Determine Your Offer Price

A home’s listing price is often determined by comparing it to similar homes in the area that are for sale, then adjusting up or down depending on additional amenities or detrimental issues. But as the old saying goes, “A home is generally worth what someone is willing to pay for it.”

You might find a property that’s well priced. But chances are, when making an offer on a house, you’ll want to make some price adjustments if you feel that it’s priced too high or needs a lot of work.

There are lots of things to consider when trying to find the right offer price. While on your own personal home-buying journey, you might want to look into these common factors:

•   A common way to break down a listing amount is by price per square foot, but that often includes only the heated, livable spaces. It can (and should) be higher than average for the area if the home includes extra rooms, such as garages or attics, outbuildings, or land. Sometimes workmanship or permitting can play into these factors.
•   Check the home’s history on the Multiple Listing Service (MLS) . It records every single transaction related to the house, including previous buy and sell dates, price fluctuations, and how long the home has been on the market. It can give you a good idea of where the sellers are coming from.
•   Take a look at the other listings in the area that have recently sold. Is the price per square foot more or less? One key to an accurate read on the local market is to ensure you’re comparing apples to apples when it comes to the number of bedrooms, bathrooms, square footage, garage space and other amenities.

2. Incorporate All the Fees

It can also be important to take a look at other factors not directly related to the price of the property that could affect your overall cash flow. One big consideration is closing costs, which average around 2 to 5% of the total cost of your home depending upon location and other factors and include all the things that go along with the process, such as transfer tax, inspections and real-estate agent commissions.

Some of these costs are traditionally split by the buyer and seller, but if you’re short on cash, you may consider a higher offer price as long as the seller pays your portion of the closing costs.

It’s also important to estimate the amount of money you’ll spend making repairs or changes to the property once you move in.

That, again, costs money, so as long as the repairs are not related to health or safety issues which could have an impact on financing, one tactic could be to lower the offer price (and your monthly mortgage payments) in order to free up cash for future upgrades.

3. Determine Your Earnest Money Deposit (EMD)

Earnest money is a good faith deposit that the buyer places with the offer upfront, usually amounting to around 1% of the offer price, to show that they are serious. It’s held in escrow by the title company, and showing purchase intent is one way to help a buyer get to the top of the seller’s list.

Also referred to as “Earnest Money Deposit,” or EMD customs and laws can vary from state to state, even from county to county so it’s important to understand the laws surrounding EMDs in your state that determine when the money is (and isn’t) refundable.

4. Protect Yourself With Contingencies

The time between a signed offer and closing day is called the due diligence period, and it’s when the buyer will set up a home inspection, appraisal, and possibly a land survey or other inspections for specialty items, such as septic or pools.

But, since the contract is signed prior to any inspections taking place, including contingencies within the offer gives you an out in case you discover something during the process that’s a deal-breaker.

Here are the most common contingencies :

•   Financial: This lays out the specifics of the financing that will be used by the buyer, which must be fully approved by the lender within the contingency period. This protects the buyer in case financing falls through.
•   Appraisal: If the appraisal comes back lower than the agreed-upon price, the seller and buyer may find themselves renegotiating. In this instance, longer contingency periods are better in order to ensure that the home is really the right one for you.
•   Inspection: The buyer usually has 10 days after signing the contract to order an inspection, and the contingency remains in place until it comes back without uncovering any major issues with the property that were previously unknown.
•   Title: This is a legal document that shows the home’s past and present owners, as well as any liens or judgments against the property. If any title disputes are unable to be resolved before closing, you have the option to leave the sale.

In some situations, the list of other potential contingencies can be long. But once they’re all satisfied and lifted during the given timeframes, the option to buy turns into a binding commitment to purchase the home.

5. Submit a Written Offer

In real estate, the best way to make an offer official is to put it in writing. If you’re working with a real estate agent, they will have a form that you can fill out together that lists the offer price, contingencies, and covers all the state rules and regulations.

If you’re flying solo, it’s important to work with a real-estate attorney or title company in order to make sure your offer covers all the necessary legal language and is legally valid.

This concept goes both ways, too. As the buyer, it’s a smart idea to make sure all correspondence, counter-offers, and property disclosures are put in writing by the seller as well.

6. Move Ahead, Move On, or Move Things Around

Once you submit your written offer, one of three things is likely to happen. The seller can either sign the document as-is and enter a binding contract, reject the offer outright, or submit a counter-offer.

In this last case, the seller might counter back with changes that are better suited to them. (If your offer includes a price reduction to accommodate for repairs, for example, the seller might ask for the full asking price and offer a credit back at closing instead.)

This puts the ball back in the buyer’s court for approval, rejection, or another counter-offer, and it keeps going back and forth until both parties agree to the terms and sign the document. From there, the due diligence period begins.

What If You Change Your Mind?

The contingencies are there to give you a way out in the event of some unforeseen issue, but what if you just decide you don’t want the house?

Although the laws vary by state on this topic as well, in most instances a buyer is allowed to withdraw an offer right up until the moment the offer is accepted, However, once the offer document is signed by both parties, it’s considered a binding agreement.

At that point, the sellers may be well within their rights to walk away with your earnest money, it is recommended that you consult with your agent or attorney to understand the full consequences of changing your mind.

Get the Most Out of Your Mortgage

Getting approved for a home loan is one of those things that can add to the stress of buying a home, but it doesn’t have to be. That’s why mortgage loans offer competitive rates, no hidden fees, and as little as 10% down.

They also come with discounts for SoFi members and access to mortgage loan experts who can help along the way, so you can buy with confidence.


SoFi Home Loans
Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See SoFi.com/eligibility for more information.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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