Please, don’t lose out on the property of your dreams because you don’t know how to make an offer when buying a house. I’ve seen too many friends and relatives see their perfect home slip through their fingers because of a badly written, or poorly timed offer. Writing an offer when buying a house is a skill while crafting an offer to seal the deal is an art. Let me share my secrets and help you hook that home, and you’ll be moving in before you can say “I avoided a bidding war.”
How to make an offer when buying a home? Calculate your maximum bid for the home and the amount of your initial offer. Next determine your preferred timeline, which clauses to include, and any local legal requirements. Put all of this together, with the standard details required in all offers, into what’s called a “Purchase Agreement.”
These four lines make the entire process sound quick and simple. After all, how difficult can making an offer be? I’m sorry to break it to you but submitting an offer on a property can be a minefield riddled with legal, financial, and emotional pitfalls, some of which you probably don’t even realize exist. So, here’s my complete guide on “How To Make An Offer When Buying A House” and remember, don’t just read it, do it.
How To Make An Offer When Buying A House
To begin with, we’ll take a look at “Why Writing An Offer Is So Important” and then discuss what should be included in every offer when buying a new home. Once we’ve covered the basics, it’s time to find out how to craft that elusive creature “The Offer That Wins The Home.”
Finally, we’ll wrap up with the answers to the most frequently asked follow-up questions when someone asks me “How To Make An Offer When Buying A House” such as “When does an offer become legally binding?” “Can I back out of an offer once I’ve submitted it?” and “Should you include different items in seller markets and buyers markets?”
So, without further ado, let’s show you how to get that house.
Why Is Writing An Offer So Important?
When a seller is presented with your offer, they form an opinion of you as a buyer. From this point onwards, in their eyes, you will always be seen as something like “The fantastic couple who offered the full asking price,” or “The ones who can be flexible with the moving out date,” or even “That *ss who tried to lowball us.” Once this image has been created, there is little you can do to change it.
“I don’t care what they think of me” I hear you cry.
Well, you should. At least until they have signed on the dotted line and the house is yours.
Simple. Because the seller can choose not to sell the house to you. They are under no obligation to decide you are the best buyer for them, and, despite what most people think, money isn’t always the motivating factor in a sale.
Not only that.
But, you might not get another chance to raise your bid, or negotiate in other ways. Your offer may be one of many, and it is not unusual for a seller to go through a pile of bids, think “This one suits me best” and run with it. Today, many people just do not want to go through the time and trouble of juggling a handful of buyers, with counteroffer after counter-offer in an effort to find the elusive “Perfect Offer.”
Last, but by no means least, is the fact that your written offer will form the basis of the final sales contract. So the seller could look at your offer, say “Yes, OK, We’ll do that,” sign to indicate acceptance and BOOM your offer is now a binding contract and this is is the final sales agreement with no negotiation. The seller is under no obligation to change a thing and can hold you to everything in the initial offer.
This can come back to bite you for a number of reasons, for example:
- If you haven’t included a clause to say that the sale is dependant on you securing your mortgage, and you are unexpectedly turned down – which can happen even if you have a pre-approval – then you are still obligated to go through with the sale, or lose the earnest deposit that you included with the offer.
- You may have been told by the seller’s agent that appliances, fixtures, and fittings are included, but unless it is in your written offer, the seller is under no obligation to leave them. You are at the mercy of the homeowner as to whether or not they decide they want to or not.
- You have included an item you don’t really want in there, such as an early move out date believing the seller will ask you to change it and you can then use your agreement to change this, as leverage for something else. And yes, this type of “second-guessing” the seller behavior happens all of the time.
Therefore, in summary, writing the correct offer is important because:
- An offer forms the basis of, and can actually become the final sales contract.
- The seller may decide to sell or not to sell to you, purely on the basis of the opinion they have formed of you, by reading your offer.
Now you know why the offer is so important, let’s take a look at the basics that should be included in all offers.
What Should Be Included In An Offer? – The Basics
There are some elements that should be included in every written offer to purchase a property. This is the boring, unsexy stuff that requires little finesse but plenty of attention to detail.
Some information varies from state to state, so always consult a qualified real estate professional to ensure you have crossed all of the T’s and dotted all of the lower case j’s. Following this list of basic’s we’ll take a look at each element in detail and then talk about how to write that killer offer.
Must-haves in every offer when buying a house:
- The address of, and on some occasions the Tax ID and legal description of the property.
- Sale price: Not price at which the property is listed, but the price you are offering to pay.
- Amount of earnest deposit you are offering: Earnest money or an earnest deposit should not be confused with the deposit amount for your mortgage. Earnest money is an amount you include with the offer which the seller can keep if you withdraw from the sale for reasons not covered in the offer. If the seller withdraws you get the deposit back. If the sale goes through the earnest deposit is deducted from the sale price.
- Terms and Conditions: These will be the elements specific to this deal such as the offer is subject to you securing financing for a specific amount, or the seller will leave all window coverings, things like that.
- Utility and bills adjustments: This is the method by which the buyer and seller agree to work out how utility bills, water, rents, taxes, and any other costs that are the responsibility of the property owner will be adjusted during the transfer of ownership.
- Details of who pays for what: This section details items such as who will pay for any repairs that are shown to be required as a result of a home inspection, whether the buyer or the seller will pay for title insurance etc. In some areas of the country, there are established customs of who pays for what.
- The seller’s promise to provide clear title: This ensures that the seller holds the title for the property and will transfer the title to you, upon completion, without any restrictions.
- Type of deed that will be granted: A property deed is a signed document that transfers ownership of a property from the seller (referred to as the granter) to the buyer (referred to as the grantee). There are four main types of deed, each of which has implications for the buyer.
- A closing date: This will be the date on which you propose the sale is completed, and you take possession of the property.
- Local legal provisions: These could be anything from the seller disclosing certain information about the property, to specific environmental inspections which must be carried out on the property.
An element that may be included, depending on the situation:
I’ll touch on this in more detail during the “How to make an offer that gets you the house” section, but it’s also worth mentioning here.
- A time limit on the offer: This can be a double-edged sword. It can prompt a seller to sign up quickly before you change your mind or it might cause resentment and induce the seller to reject your offer because they feel pressured.
What Should Be Included In An Offer? – The Details
Now you have a list of the elements you must include in an offer in order to protect yourself and meet your legal obligations, we can get down to the detail of each section, and why it is important.
The Address: This is a relatively obvious part of the offer, but there are little details that may trip-up an unsuspecting buyer. Be sure to also include the property tax ID and description. This makes it very clear that you are offering to buy the entire property, all of the land, and all of the structures, which are legally deemed to be included in the property. It also ensures you know exactly what you are getting.
Unsuspecting buyers have made offers on properties where they have listed the postal address and ended up in extended legal wranglings over pockets of land, or additional structures they thought were included. It is also no unknown for unscrupulous sellers to try and take advantage of this situation and attempt to hold onto elements of a property with the argument they were not explicitly referenced in the offer.
Save yourself the potential headaches and use the full legal property tax description, as well as the postal or street address.
Sale Price: A critical but straightforward detail to double-check, and then check again, before sending your offer to the seller. Ensure you have put the price you are willing to pay, and not the listing price if they are not the same. Also, make sure you have all of your commas and decimal dots in the right places. You don’t want to accidentally offer ten times more or ten times less than you intended to.
Amount of earnest deposit you are offering: I’ve already spoken about how the earnest deposit is not the same as the mortgage down payment you have saved for your home. An earnest deposit is designed to show the seller you are making a serious offer and take the process seriously enough to “put your money where your mouth is” so to speak.
Again, three things can happen with the deposit, which is made when the offer is accepted:
- The sale goes through, and the amount of your deposit is subtracted from the sale price, so you are not actually paying out any additional money for the home. For example:
You offer to pay $300,000 for a home. You offer an earnest deposit of $5,000 which the seller accepts. When the sale goes through you actually pay $295,000 for the home PLUS the seller keeps the $5,000 earnest money.
- The buyer breaks the contract and withdraws from the sale for a reason not allowed as part of the offer. In this case, the seller gets to keep the earnest deposit as a kind of compensation for their time and trouble working on a sale that has fallen through and having to put their house back on the market.
- The seller breaks the contract and withdraws from the sale. In this case, the earnest deposit is returned to the buyer.
The presence and acceptance of an earnest deposit do not necessarily preclude either side from taking additional legal action if the other party withdraws from the sale. It serves only as an indicator of the seriousness of the intent of the buyer.
In order to protect yourself, and your money, do not ever place your earnest deposit directly with the seller. Always ensure it is held in an escrow account until the sale is completed.
- Terms and Conditions: This element of the offer is one of the most important when it comes to protecting the buyer. The terms and conditions sections usually contain two different types of item – contingencies and personally important items.
Contingencies are the clauses that cover variables in the process over which either the buyer or seller has no control. Think of them as your “Get Out Of Jail Free Card” for house buying. Many of them have specific timelines or dollar amounts attached to them to prevent the sale process from dragging out. There is nothing to stop you putting anything into the offer as a contingency, just remember that the seller does not have to accept it. Examples of common contingencies are:
The sale is contingent on the buyer obtaining financing for the sales price in the offer. This type of financing or mortgage contingency is usually accompanied by a specific number of days during which the buyer must secure financing. If they cannot secure a loan they can back out, without penalty. However, if this date passes and they still do not have a loan, and they have not formally withdrawn from the sale in writing, the buyer is obligated to continue with the sale.
This contingency protects you, and your earnest deposit if:
- Your financing unexpectedly falls through, which can happen even when you have a pre-approval.
- The lender offers you a smaller mortgage than you expected because of your circumstances, despite previous indications that you would qualify for X amount.
- An appraisal of the property comes in lower than the price you are offering and your lender reduces the amount of mortgage they are willing to extend to you.
If any of these happen, you can withdraw entirely from the contract during the specified time window, or attempt to negotiate with the seller. Just be very careful not to let any negotiation take you past the point where you cannot withdraw.
A clear title contingency in which the buyer can withdraw if it transpires the seller does not have sole ownership of the property and the legal right to convey ownership. This issue is most likely to occur in estate sales, where there is a documented “Right of First Refusal” or as the result of a parent’s death and a child, or another relative is selling the home, or where the house is being sold during a divorce and ownership has not yet been entirely, legally settled.
The sale is contingent upon inspection. This detail of this contingency can vary, but it will nearly always include that the home inspection must take place within a specified number of days, a number of days in which buyer has time to review the inspection documentation and that the buyer has the right to withdraw in response to the report. Possible buyer actions upon receiving and examining the report include:
- Deciding there is too much work, walking away without penalty and with the return of the earnest deposit.
- Accepting any defects listed in the report and proceed with the sale without further negotiation.
- Request the seller carries out repairs or ask for a price reduction from the seller to cover the cost of the buyer carrying out the repairs after the sale. If the buyer and seller can negotiate a settlement on this point, the sale goes ahead with an addendum to the contract detailing the terms. If they cannot agree the buyer can back out, without penalty and with the return of their earnest money.
- Ask for time to carry out further, more detailed inspections with regard to a specific issue raised in the report. For example, the home inspector may note that there is some evidence which may indicate a problem with the foundation. In this case, the buyer would ask for time to commission a specialist foundation inspection.
If the seller agrees, this is noted, and the contract remains binding until the additional report is received. Then the buyer goes back to point “a” in this list, and either moves ahead or withdraws, depending on the results.
A house sale contingency: Buyers who have not yet sold their current property may include a house sale contingency which states that the buyer has a specified period of time in which to sell their existing home. This allows a buyer to avoid the complex web of financial and legal issues that arise if they are trying to buy one house before selling their existing one. If they do not sell their property in the set period of time, the buyer can withdraw from the sale and have their earnest money returned.
This contingency is often countered with:
The sellers “kick-out” clause: This prevents the seller from being tied up in limbo with the house sale contingency. The kick-out clause says that the seller may continue to market the property that is under contract. If another qualified buyer then makes an offer, the seller gives the first buyer a set period of time, usually 72 hours, in which to move forward with the sale, or the seller can withdraw, return the earnest deposit and sell to the second buyer.
However. Be Careful With Contingencies They Can Backfire.
In a seller’s market, it is not unknown for offers with too many contingencies to be discarded, out of hand, because the offers with no strings attached were more appealing. So only include the contingencies that really matter, and protect you as a buyer.
If you need any proof that there are some strange contingency clause out there, look no further than:
- The buyers who made the sale contingent on the fact there were no ghosts in the two-hundred-year-old house on which they were making an offer. They even asked the home inspector to check to see if he felt anything strange while on the premises.
- Another buyer waived the requirement for a home inspection but demanded the sale be dependant on a favorable report from her feng shui consultant.
- The sellers that felt their dog was too old to move and should stay in the house. Any prospective buyers were told the sale had to include a clause that allowed the dog to stay in the home until the end of its life came about naturally or by euthanasia deemed essential by a qualified vet.
Personally Important Items: This is not a legal or generic term “personally important items” is just my way of saying other things the buyer or seller wants to be tied down in the contract of sale. These can be incredibly diverse, but most revolve around sellers taking or leaving specific goods with them when they move.
Any item said to be fixed to the structure is deemed to be part of the property and, unless specifically addressed in the contract, is included in the sale. So the buyer may ask that:
- The curtains are included in the sale. As these are not physically attached to the structure, they are not automatically included. On the other hand, if the home has double glazing which has blinds integrated into the window unit, these would be considered as part of the home.
- The sellers take all of the fruit trees in the garden out before the new owners move in.
Meanwhile, the seller might ask:
- They take all of the plantings from the garden. – This happened in a case I know of where the sellers wanted to take their collection of Japanese maples trees with them.
- The buyers accept the house with any contents the sellers do not wish to take with them.
Again, only include items like this if they are critical to the purchase. Not only do they place an additional hurdle in the way of the sale but sometimes asking for things such as a price credit to replace a carpet you don’t like, or for the custom sofa to be included can cause issues with your finance. If you really want a particular item, consider negotiating with the sellers for that one thing, outside of your offer.
- Utility and bills adjustments: When you buy a home the handover from the old owners to the new invariably takes place in the middle of a number of billing cycles. You need to come to an agreement on when the property costs become the responsibility of the new owners and how things like the electricity bill will be worked out. The general arrangement is for monthly, quarterly or annual bills to be pro-rated. For anything that is charged through usage the buyer and seller usually agree for the meter to be read at a particular time on the day when the sale becomes final. The old owners pay for the utilities up to this point and the new owners after this point.
- Details of who pays for what: Whether the buyer or the seller pay for items such as home inspections, title insurance and the like, is usually dictated by local custom. WHat the seller is understood to be responsible for in one area of the country is not the same in another. For this reason, it’s always important to establish this “who pays for what” element in the offer. That way nobody is surprised to discover they are expected to pay for X or that the other party is not responsible for Y.
- The seller’s promise to provide clear title: This is a standard element of an offer. A clear title is one which conveys exclusive rights of possession, use, and enclosure to the new owner. The “CLEAR” element indicates there are no debts secured against the property, no public access issues, etc.
- Type of deed that will be granted: The property deed legally transfers ownership of the property from the seller to the buyer. It is like a guarantee of the quality of the title and protects the buyer from any issues which might arise in response to a defect, or clause in the deed of which they were unaware. There are four basic types of deeds that are used in private real estate:
- General Warranty Deed: This deed provides the buyer with the most protection. In a general warranty deed the seller makes a series of promises, called covenants. These covenants protect the buyer from any claims or demands by any person, with regard to the property up until the point where the sale becomes final. It also guarantees the seller has the legal right to make the sale and that any issues that might arise due to the seller’s mistakes with the title, will be the responsibility of the seller.
- Special Warranty Deed: A special warranty deed guarantees that the seller has not done anything during their ownership to “create a defect” in the property. Any issues that arise which can be shown to have started during the seller’s ownership will become the responsibility of the seller. Any issues which began before the seller’s ownership become the responsibility of the buyer.
- Quitclaim Deed: A quitclaim deed is basically a promise of“what you see is what you get, maybe.”With this kind of deed the seller is saying “here you go, I am transferring title, but there are no guarantees that I am legally entitled to do this or that the title is free of mistakes, defects, or omissions.
- Special Purpose Deeds: These deeds are usually used when a legal proceeding is involved in the sale. Similar to a quitclaim deed they absolve the person making the sale from any responsibility for the property or title. They come in a variety of forms such as:
- Tax Deed – Where the property is being sold to pay a tax debt.
- Executor’s Deed – When the home is being sold by the executor of an estate.
- Administrator Deed – Used when a person dies without a will and an administrator has been appointed to dispose of the deceased’s assets.
- A closing date: Often one of the most contentious parts of an offer and possibility, excluding terms and conditions, the one most likely to cause counter offer after counter offer.
- Local legal provisions: The existence of local provisions is one of the primary reasons for using a real estate agent, broker, or lawyer. They will ensure that everything that should be in your offer is in your offer, which may prevent the deal from falling through at a later point purely because their accidental exclusion makes the contract null and void.
Now you know the details of what should be included, why it should be included, and who might ask for it you have a decent level of background knowledge to take you forward into writing the offer that gets you the home you want, otherwise known as:
Making An Irresistible Offer When Buying A House
This section has been produced with the assumption that we are working either in a neutral market – where buyers and sellers are roughly equal in the power they have over the sale, or a sellers market – where there are more buyers than homes available and the seller has a slight, to significant upper hand in the transaction.
Sometimes you might be lucky enough to find yourself in a buyers market – where there are more houses on the market than buyers and homeowners are having trouble selling. In this case, there are some clauses you might want to include.
So let’s get that offer started.
There’s nothing much to do for this point, except to ensure you have the correct address and property description according to the tax records.
The Price you are willing to pay
The price we are going to end up paying is the first thing most of us consider when buying a house. As buyers, we want to get as much house for as little money as we can. Meanwhile, sellers are looking to maximize the amount they get for their property.
However, don’t make the mistake of thinking that it’s all about the dollars. For some sellers, the money is only part of their decision making process, and other elements of the sale are just as, if not more, important to them.
For this reason, setting your first offer price is a tricky balancing act. You might get the chance to negotiate, or you might not. Putting in your best offer straight away may win you the prize, or it may result in you paying much more than you had to.
There is no single solution to the “should I lay everything on the table now or try and get the house for less?” conundrum, as every sale is different.
So what do you do?
Setting Your Price
My advice would always be to try and forget the asking price and instead calculate how much you will be willing to pay for the house. Then, hit the seller with that number, if they say no, walk away, and if they say yes, move forward and don’t worry about the fact you might have got it for less. You can always negotiate other savings later.
So, let’s calculate your price.
Do this before you put pen to paper or fingers to keyboard
A little research can go a long way in helping you to make an offer that secures the property you want, without paying more than you have to. This piece of behind the scenes preparation can be done quickly, and before you go to view a home.
First up we have:
Ask your agent about the seller’s motivation
In order to write an irresistible offer, you need to meet the specific needs of the seller. Without knowing the motivation behind the sale, you can’t structure your offer to fulfill the seller’s requirements.
For example, if the home is being sold because the seller is moving for work, they might find an offer of less money than they are asking for, but with a 30 day closing that allows them to move quickly, over an offer of asking price that is contingent on the buyer selling their current home.
Ensure you ask your real estate agent for “comps.” If you want to pay an appropriate price for a home, look through comparable properties which are currently for sale, or have been recently sold in the same neighborhood. Any decent real estate agent can provide you with a “comps report” providing you with this information in a quick to read and easy to understand format.
Use the comps to decide what would be a reasonable price for the property. This way you avoid insulting the seller with a rudely low offer or being drawn into overpaying.
Ask about the properties DOM This is how long, or the number of “Days On the Market” the property has been for sale. Your real estate agent can provide this information, and it is important because the longer a property has been on the market, the more receptive a seller might be to terms and conditions, or a price drop.
These pieces of information, along with the listing price, and your financial capabilities will dictate what price you should offer for the property. Once you have a reasonable price:
In a seller’s market:
Make your best offer and don’t get worked up about “I might have been able to get it cheaper.”
In a buyers market:
Decide if you want to save some money and either make your best price offer or risk starting with a lower price. If you take the second option, be prepared for a round or two of counter offers as well as sudden interest from other buyers.
In either case, if you are planning to submit an offer that is less than the asking price provides a reasonable explanation such as “the comps are all $50,000 less” or “Similar houses that are on the market for a similar price have a new and remodeled kitchen while this house does not.” This makes it more difficult for the seller to take offense or assume you are trying to lowball them.
It is a well-known phenomenon that a house can sit on the market for six months and as soon as one person makes an offer, other buyers seem to become interested at the same time. There is no logical explanation for this, but then again, who said life was logical?
This is the point at which you can include the sweeteners about your financial situation. If you can pay cash, then make sure you say that loud and clear in this section, as well as at any other point in the offer where it will make sense. Keep reminding the seller you have no financing to obtain or worry about, and as a result, are able to move quickly.
If you have a pre-approval letter, include that fact here. Highlight the information that you have submitted your details to your loan officer, and you are ready to move forward as soon as the seller signs.
The Amount Of Earnest Deposit You Are Willing To Offer
Imagine you are a seller and you have three offers that come in after an open house. Your home is on the market for $300,000, and all of the offers are much the same except for one thing. Buyer A is offering a $500 earnest deposit, buyer B is offering $1000, and buyer C is offering $10,000. Which one are you likely to accept?
The seller doesn’t gain any financial benefit from a more substantial earnest payment. Instead, it signals how serious a buyer is. If you only offer $500, that may not be a large sum of money for you to lose by walking away from the deal. If you offer to put $10,000 on the line, it says you are highly unlikely to back out. Therefore you are the better buyer.
Terms And Conditions
This is the section in which you get the most significant opportunity to have the seller fall in love with your offer. Here is where you can offer to be as accommodating as possible to the seller and make the entire purchase as smooth and stress-free for them as possible.
In particular, this is where your seller research pays off. For example:
If your seller wants a closing date in three months and you want to wrap up the sale asap but are in no hurry to move in, you might include a provision that allows them to remain in the home, rent free for a specific period after the sale has been completed. Removing the need to hurry out of the house and save money on living expenses is seriously attractive to some buyers.
For a seller in a hurry, you can offer to complete as soon as humanly possible and include the fact that you do not have an existing property to sell.
When you go to view the property, you should be provided with a list of any items the seller does or does not want to take with them. Show the seller you have taken the time to read this, and that their desire to remove the dining room light fitting and take it with them, or their wish to avoid clearing out the shed and instead leave it all there for you to deal with – whatever they have included, is fine by you. Not only does it show you are taking the sale seriously enough to go into every detail but it says “I care about you as a seller and I’m willing to work with you.”
Also, while you should try to minimize the contingencies, never leave yourself exposed by waiving your inspection or, if applicable, your need to secure financing. Even if you have pre-approval, you should hedge your bets and keep the “contingent on financing” clause. Unless of course, you are in a position where you can pay in cash. If you have this option, ALWAYS PAY IN CASH. Not only will it be beneficial for you, but this usually shoots your offer straight to the top of the pile because you do not need to include the contingent on financing clause.
In a buyer’s market, you have more flexibility. You can ask for a closing date that suits you, for the seller to pay home inspection, and similar fees, or something similar.
Many buyers take the opportunity to ask for mortgage points, credits for redecoration or other similar items. Do this at your own risk. Even the most desperate seller might turn down your offer if what you feel was bold, they see as brash.
Utility And Bills Adjustment And Who Pays For What
Ask your real estate agent about the local customs on these two points and try to be as generous as possible. If you are able to take on some of the costs that are traditionally the responsibility of the seller, it can go a long way towards sweetening the deal.
The seller’s promise to provide clear title
This is an essential item that should never be ignored. There is nothing you can do to make this any better as part of the offer.
The Type Of Deed That Will Be Granted
To some extent, you may not have control over this. If the property is being sold as part of a legal proceeding, you will have to accept the appropriate form of special title. In any other case request a general warranty deed and if the seller is reluctant to supply this discuss the issue with your real estate professional.
The Closing Date
If you do not have a preference and are in a position to be flexible, you could include a 60-day closing date with an additional note that you have included a closing date because you couldn’t not include one, but that you are very open to negotiation on this point.
If you do have a preferred date in mind just put this in without any other discussion points and keep your fingers crossed.
Local Legal Provisions
This will be entirely dependant on where you live and, again, you will have little wiggle room to make this attractive.
Give a Logical Reason Why Your Lowball Offer is Fair: Don’t insult the agent by handing over a list of comparable sales. The agent knows the comps. Show you have done your homework. Make notations on each sale that compares it to the subject property. Maybe the higher priced homes had remodeled kitchens. If the home you want to buy is not updated, then knock off a believable figure reflecting the remodeling work from the seller’s list price.
The Expiring Offer Clause
In some cases, a buyer will include an “expiring offer clause.” Basically speaking this says that if the seller doesn’t accept the offer within a specified time frame, the offer will expire. Sometimes this works in the buyer’s favor by inducing the seller to agree to the offer quickly in case they do not get a better one. On the other hand, some sellers feel resentful when a buyer tries to force them into a quick deal, and they decline or ignore the offer and then refuse to consider any other offer from the same buyer.
So use this with caution.
To Write Or Not To Write – That Is Another Question
Some would-be-buyers have adopted the practice of writing a letter, to include with their offer. The theory is that you may be able to make an emotional connection with the seller that will make your offer stand out, or feel more appealing. In some cases, this is entirely pointless – such as when a property if being sold as part of a legal proceeding and the “seller” has no connection to the property. The same goes for situations in which the sale is purely a business transaction, either by a house flipper or builder, or the seller just doesn’t care about who buys.
In many cases, the “love letter to a seller” has been the deciding factor. For instance:
“After seeing a number of properties that have not “spoken” to us in a significant way, we were delighted to discover your home, with its mixture of charm and warmth. We envision family gatherings within its open living area and drinking coffee while watching our children play in the pool.”
This sealed the deal for the buyer, even though the price they offered was significantly less than the other party. The second offer was from a builder, and the seller preferred the idea of another family being raised in their beloved home over it being torn down and the land developed. The buyers had discovered the other party was a builder while doing their research and used this to their advantage.
It doesn’t have to be a gooey, “I love your house” type affair either. Another winning letter said:
“We are not looking for a bargain, just a fair price for something nice. This would be a cash sale, and we could close quickly or at a convenient time for you. “
This showed the seller that the buyers were serious, respectful, and would be easy to work with. A winning combination if ever there was one.
If you want to write your own letter these are some of the things to consider:
Flatter the seller, but don’t go over the top. Let the seller know how much you love the house, and include specific elements that speak to you. This will also demonstrate that you are not just sending a generic letter but that this is specially written, from beginning to end, for them.
Always make sure you are sincere and truthful. You want to establish an emotional connection to the seller, so they see you as a person and not as a price point and not make them feel like you are a sleazy salesman sucking up to them for your own benefit.
Keep it focussed. You might be bursting with excitement over all of the things you love about the house, but the seller can only absorb so much. Don’t ramble on about 37 different things, pick two at the most and pour all of your passion into those.
Highlight your best features. No, not your fabulous glossy hair or your sparkly eyes! Focus on the point that you can be flexible with the closing date, that you’re a cash buyer, the fact you have no property to sell, sell your lack of contingencies. Whatever you can offer the seller, especially if you can’t offer the highest price.
Demonstrate Stability. Some sellers are reassured by the knowledge that the buyer has a reliable employment record, has been with their partner for a considerable time, has roots in the community, etc. Show you are a stable person who has a good reason for buying this home and that you are unlikely to withdraw from the transaction for any reason.
Utilize your research. Did you discover the seller is downsizing and moving away to be with their grown family? In this case, the family is probably important to them, and your desire to raise your own children in the house will make a connection. This also goes for anything you discover about other buyers. Don’t be direct, or disparaging about others but, as in the example above, a small nugget of information such as the fact that someone plans to demolish the house may be to your advantage.
Don’t be a downer. The seller doesn’t want to start reading your letter and hear about the five other houses you’ve lost out on, or how you have to get their home or the stress of house hunting is going to drive you over the edge. Keep the letter upbeat and positive.
Paint a picture – part one. In fact don’t just paint a picture, include one of you and your family, or even your dog if you had noticed the sellers also own one. It will further reinforce to the seller that you are an actual person instead of just another document to consider. Not only that but research shows that by connecting words with a picture we are more likely to retain that information – further reinforcing your offer.
Paint a picture – part two. Use your words to create an image of how you and your family are going to live in and enjoy the property. Describe happy family gatherings, your kids playing with the dogs on the lawn, or how the home office will be the perfect place for you to write your novel. Whatever you are imagining, share it but be sure to induce emotion. Don’t write something like “The woods nearby will be nice for walks.” Instead, paint that picture with “I can imagine our family walking the dog through the local woodland, smelling the pine in the summer and hearing the leaves crunch beneath our feet in the fall. We would have snowball fights with the kids in the winter and come back to your beautiful country kitchen to share hot chocolate and freshly baked cookies.”
Don’t talk about what you might change. You might see the built-in bookshelves as an ugly eyesore that will need to be ripped out asap, but they may have been a much-loved feature, enjoyed by the family for generations, installed by the seller’s deceased great-grandfather. Anything not to your taste you can change if the house becomes yours, but there is no need to risk insulting or upsetting the seller by letting them know what you don’t like.
End with a short but sweet summary. The seller may have dozens of offers to review and may not be inclined to sit and read letters from beginning to end. When someone skims a document, they pay most attention to the beginning, and the end so use your last paragraph to reiterate why you would be the best buyer for them.
Sign off like a person. This is a personal letter, from one human being to another, not a piece of business correspondence. Don’t end with “Regards, P. Steele” or “Yours Sincerely, Mr & Mrs. Wells.” You want to be you. So finish off with some thanks for the opportunity to buy the home, and for the time they have taken to read your letter. Then sign off with something like “Yours hopefully, Cameron, Sam, and the entire Wells family.”
One word of warning, if you are considering writing a “love letter” ensure you are honest and genuine. Sellers will quickly see through it otherwise, and it could be counterproductive.
When Should You Submit An Offer?
There is no cut and dried answer to this question, but I can give you some guidelines. If a home has been on the market for some time and there are no other offers you can probably afford to take your time.
In the case of a fabulous home that pops up on the MLS on a Friday, has an open house on Sunday and you just know it is going to be snapped up before you can say “Please don’t let there be a bidding war” move quickly.
Some sellers will invite buyers to submit offers up until a specified date at which point the seller will open up all of the offers, go through them, and decide which one is most attractive to them. If this is the seller’s plan, you only have to make sure you put your best bid forward and keep your fingers crossed you are the lucky winner of the dream home.
Is An Offer Legally Binding?
As soon as the seller has signed to say they have accepted the offer, it becomes a legally binding contract between the two parties. This is why it is so important to ensure everything that you need in the final sale document is in your written offer.
Can You Withdraw From An Offer You Make On A Property?
Up until the moment the seller signs, you can withdraw your offer without a problem. This is true even if you have a verbal “yes.” The offer does not become a legal contract until both parties have signed the document.
Once the seller has signed, it is possible to withdraw, but it is much more difficult to do so. If you have taken my advice and put all of the essential contingencies in place, there is a good chance you can withdraw once you have received the home inspection report, but this is by no means a guarantee.
If a seller has a number of similar and suitable offers on the table, they may be kind enough to allow you to withdraw without penalty, but the further down the road you are in the property buying process, the more difficult and less likely this becomes.
It is for this reason that you should not submit offers on multiple properties at the same time, unless you are happy to forego your earnest money and, possibly face a lawsuit from the seller.
What Happens Once The Offer Is Submitted?
Once you have given the offer to the real estate agent, or the seller’s agent if you are going it alone, it will be presented to the seller. There are four possible responses:
- The seller simply ignores your offer. This can happen. It most places the seller is under no obligation to even reply. If this is the case, you will have to ask your real estate agent for clarity. Are they considering it, or have they refused? If you cannot get any kind of response, and there is no timeline for acceptance included in your offer, withdraw the offer in writing, and date the withdrawal to ensure you do not have a “live” offer out there that could be accepted.
- The seller gives a straight no. In this case, you can ask if it is worth submitting another offer or if the property is no longer available. If you can submit another offer, ask what it is that the seller did not like and see what you can do about meeting their needs. Again, ensure you have their refusal in writing or officially withdraw your offer.
- The seller comes back with a counteroffer. As soon as the seller makes a counter-offer, your original offer is “dead,” and you are under no obligation to continue with the sale or communicate any further with the seller. You are free to decline the counter offer and walk away, accept and sign the counter offer at which point the counter offer becomes legally binding, or submit your own “counter” counteroffer. With the submission of each counter, no matter if it is from the seller or the buyer, the previous version becomes null and void, and the party that submitted it is under no obligation to proceed.
- The seller says yes and the sale goes ahead. Congratulations you’ve got yourself a house. Well, not quite, don’t get too excited. There are still plenty of things that can happen to stall or end the process, but for now, you can bask in the warm glow of success
How to make an offer when buying a house is both a science and an art. It requires precision and creativity. While there are a number of items that will be standard in an offer, there are elements over which you have control:
- Terms and Conditions:
- Contingencies which are the “get out” clauses
- The personally important items
- How the utility bills and other financial issues related to the property are divided between the buyer and the seller.
- Who pays for which costs during the sale process.
You can also consider submitting a letter to the seller if you feel this might be appropriate in the circumstances.
By being generous and creative in these elements of your offer. Research the needs and motivations of the seller and do your best to make the sellers experience as positive and stress-free as possible, while protecting yourself and your money.
Want more information? Check out my book The Ultimate Homebuyer’s Handbook.
This book will walk you through your entire real estate purchase. Everythnig you need to know about buying your next home.
Geoff Southworth is the creator of RealEstateInfoGuide.com, the site that helps new homeowners, investors, and homeowners-to-be successfully navigate the complex world of property ownership. Geoff is a real estate investor of 8 years has had experience as a manager of a debt-free, private real estate equity fund, as well as a Registered Nurse in Emergency Trauma and Cardiac Cath Lab Care. As a result, he has developed a unique “people first, business second” approach to real estate.
This article has been reviewed by our editorial board and has been approved for publication in accordance with our editorial policy.