How to Make an Offer on a House
An offer is a legally binding contract that includes the price you’re willing to pay for a piece of real estate and any conditions that must be met in order for the deal to go through.
Making an offer that works for both you and the seller requires some thought. It's not always a matter of putting in the highest bid.
What’s in an offer?
You’ll work with your real estate agent to submit an offer to the seller. The agent will organize all of the relevant information into an offer, have you sign it and present the offer to the seller’s agent.
A typical offer specifies the following:
Your information. This includes the legal names of the buyers and the address of the property for sale.
The price. How much you’re willing to pay for the house. This includes the down payment and the mortgage amount.
Deposit. A deposit is money you’re willing to put up as soon as an offer is accepted but before the deal closes. If you back out of the deal, there are some instances in which you get the deposit back. If the offer goes through to completion, it’s considered part of the down payment amount. A common deposit amount is 5% of the purchase price.
Items to be included. You can generally expect readily removable things to not be included in the sale, while items that are permanently affixed probably are. If there’s something you’d like the sellers to leave behind, you can always ask.
Land survey request. This step is optional, but is helpful in confirming the size of the property, and any easements or rights-of-way that could affect how you use it.
Closing date. This is the day when you want to take possession of the home, often 60-90 days after the offer is accepted. Being flexible on the closing date can make your offer more appealing to the seller.
The date the offer expires. The expiry date is often 24 to 48 hours from the time you put in the offer, but could be even less time in a hot market.
Conditions. If you want certain stipulations met before the contract is finalised, such as a satisfactory home inspection report or confirmed mortgage pricing, they must be listed clearly in the offer.
Submit your offer. Your real estate agent will include all of this information in the offer for you, and in most cases, they’ll have you sign the document digitally. Then, your agent will present the offer to the seller’s agent.
Including conditions in your offer
Aside from the purchase price, conditions are arguably the most essential part of an offer. Conditions give the buyer a chance to back out of the agreement if they’re not met.
Common conditions include:
Financing condition. This stipulates that the buyer must be able to obtain a mortgage for the amount they need and under terms they’re happy with. Remember: Even if you were pre-approved for a mortgage, you still need to go through a formal application process.
Subject to inspection. Many buyers will insist on a home inspection to finalise the offer. A home inspection can reveal whether any major repairs are needed. Including a home inspection condition may allow you to renegotiate a lower sale price to account for repairs or back out of the deal entirely.
Subject to legal review. If buying a condo, you and your lawyer will want to review the legal documents to ensure the reserve fund, status certificate, budget and other legal documents are acceptable.
Home sale. This contingency allows buyers a certain amount of time to sell their current home, if applicable, before they’re required to complete the purchase transaction.
Technically speaking, if any of the conditions aren’t met, the buyer can pull out of the contract without fear of losing their deposit. At first glance, including conditions seems obvious since it gives the buyers an easy out.
However, sellers can always choose to reject offers that come with a lot of conditions. In a hot real estate market, it’s common for buyers to limit their conditions or make an offer without any conditions at all. The choice of what conditions to include or waive should be made with input from your real estate agent to ensure a positive outcome.
Tips for making a strong offer
Offering to pay well above the asking price will probably grab the seller’s attention. But there are a few non-monetary ways to make your offer more attractive to the seller:
Get pre-approved for a mortgage. A mortgage pre-approval confirms that a lender has agreed to loan the amount you’ve offered.
Have a significant down payment. This is another way to signal that financing the purchase won’t be an issue as lenders look favourably on larger down payments.
Jump to the front of the line. Consider a ‘bully offer’ where you make a bid before the formal offer date. If you’re going to do this, be prepared to make an offer enough above the seller’s asking price that they’re willing to forego considering
Limit the number of conditions. You take on some risk here — waiving the inspection, for example, could lead to unexpected expensive repairs — but it lowers the risk for the seller, which could be a selling point.
Offer a flexible closing. This could mean a quick closing, an extended closing date or even a leaseback.
» MORE: Use our mortgage affordability calculator to set your budget.
What to expect after making an offer
Once you make an offer, the seller can choose to:
Accept it.
Make a counteroffer.
Decline it.
Ask for a revised (higher) offer. A seller with multiple offers may ask for a “best and final” offer from all parties.
If your offer is accepted, congratulations, you just bought a home! Now you just need to get everything in place for closing.
If your offer is declined, you could technically put in another offer, but you’ll likely want to look into why your offer was rejected in the first place. It’s possible that the seller is looking for a higher price, fewer conditions or faster closing.
DIVE EVEN DEEPER
Clay Jarvis