4 Things You Should Know Before Making an Offer on a Home
Introduction
Making an offer on a home requires a strategic approach to balance competitiveness with financial responsibility. By preparing in advance and working closely with your real estate agent, you can increase your chances of securing your dream home while staying within your budget.
This guide outlines four key factors every buyer should consider before making an offer, ensuring a strong and well-informed bid.
Key Concepts
What Makes a Strong Home Offer?
✔ Pre-Approval Letter – Demonstrates serious intent and financial readiness.
✔ Budget Awareness – Ensures affordability beyond just the loan amount.
✔ Negotiation Readiness – Prepares you for counteroffers and contract adjustments.
✔ Contingencies – Protects buyers from unforeseen financial or structural issues.
💡 Tip: A well-prepared offer increases your chances of securing the home while protecting your financial interests.
Data Insights: Home Offer Trends
📊 Homes in competitive markets receive an average of 3-5 offers.
📉 Studies show that:
✔ Buyers with a pre-approval letter are twice as likely to have their offers accepted.
✔ Homes that undergo negotiation typically sell for 1-3% below the original asking price.
A smart home offer is both competitive and financially responsible.
4 Key Factors to Consider Before Making an Offer
1. Know Your Limit & Show You’re Serious with a Pre-Approval Letter
✔ Before making an offer, understand how much home you can afford.
✔ A pre-approval letter from a lender confirms your borrowing limit and signals to sellers that you are a serious buyer.
💡 Tip: A pre-approval letter isn’t a loan guarantee—it depends on the home’s details and expires after a set period.
2. Keep Your Total Budget in Mind
✔ Your pre-approved loan amount is the maximum you can borrow, not necessarily what you should spend.
✔ Consider leaving room for negotiations when making your initial offer.
✔ Avoid making an offer too low in a competitive market, as it may discourage sellers from considering your bid.
💡 Example: If a home is listed at $350,000 and you’re pre-approved for $400,000, you might start with a competitive but reasonable offer while maintaining room to negotiate.
3. Prepare to Negotiate
✔ Once you submit an offer, the seller can:
- Accept it.
- Reject it.
- Submit a counteroffer (requesting a higher price or changes to terms).
✔ If a counteroffer is made, work with your agent to adjust your offer strategically.
💡 Tip: Sellers may negotiate closing dates or request a higher deposit—be prepared to discuss compromises.
4. Consider Contingencies as a Safeguard
✔ Contingencies protect buyers from potential risks before finalizing the sale.
✔ Common contingencies include:
- Home Appraisal Contingency – Ensures the home is valued correctly.
- Home Inspection Contingency – Allows a professional inspection before closing.
💡 Why It Matters: Without a home inspection contingency, you could end up contracted on a home with hidden repair costs.
Common Misconceptions About Making an Offer
❌ “The pre-approved amount is my homebuying budget.”
✅ Consider additional costs like taxes, maintenance, and closing fees.
❌ “Sellers always accept the highest bid.”
✅ Some sellers prioritize flexible closing dates or fewer contingencies.
❌ “Lowball offers are a smart strategy.”
✅ In a competitive market, too low of an offer may be ignored completely.
Practical Applications: Strengthening Your Home Offer
✅ Obtain a pre-approval letter to prove financial readiness.
✅ Make a competitive yet realistic initial offer based on market trends.
✅ Be prepared to negotiate and adjust your offer strategically.
✅ Include contingencies to protect yourself from financial risks.
By following these steps, you can make an informed, well-prepared offer that increases your chances of securing your ideal home.
📖 Next Steps: Explore our step-by-step homebuying guide for a comprehensive look at the purchasing process.
4 Things You Should Know Before Making an Offer on a Home
Making an offer on a home is a delicate balance. By being prepared, knowing what to expect and working closely with your real estate agent, you can be confident in putting together a strong offer.
You have your heart set on buying the home, but you need to also be realistic with your budget — without putting in an offer too low for the seller to take seriously. Here are four pieces of advice to keep in mind as you get ready to make an offer.
Know Your Limit and Show You’re Serious with a Pre-Approval Letter
If are in the market to buy a home, one key piece of information you should know is how much you can spend. Knowing your loan limit can help you set your budget.
Going through a pre-approval process with a lender will tell you the maximum amount you are qualified to borrow, which comes in the form of a pre-approval letter.
The pre-approval letter is not a loan guarantee, because the lender still needs details about the home and specifics about your loan. The letter also has an expiration date, so make sure you know how long the letter is good for.
The pre-approval letter is also a helpful tool in making an offer: a best practice is to provide the seller with your pre-approval letter to show you are a serious buyer.
Keep in Mind Your Total Budget When Making Your Offer
The amount you are pre-approved for is simply the maximum amount your lender is willing to loan you, not necessarily how much you should spend.
For your initial offer, you want to make sure you leave room in your budget for negotiations, while ensuring you don’t bid too low. If you go all in on your first offer, you might not have room in your budget to increase the price if the seller responds with a counteroffer. On the other hand, if your first offer is too low, it may indicate to the seller that you aren’t a serious buyer, especially if the housing market is competitive, which can lead to you losing the home.
Your real estate agent can help you make a competitive offer while making sure you stay within the range of what you can afford.
Prepare to Negotiate
Once you submit your offer, the seller has three options: accept it, reject it or counter it. If the seller accepts and signs your initial offer, you enter a binding contract. That’s why it is important to make sure your offer is realistic for your budget.
If the seller provides a counteroffer, your agent will work with the seller’s agent to negotiate. Common counteroffers ask for a higher purchase price or to change the date of closing. Working with the counteroffer is your best chance to secure the home.
Discuss the details of the counteroffer with your agent to determine how you should adjust your offer to accommodate both your and the seller’s desires.
Consider Contingencies as a Safeguard
Consider writing up your offer to include contingencies, which are conditions that must be met before the purchase is finalized. These can help you avoid costly surprises down the road.
For example, making your purchase contingent on a home appraisal will ensure that the sales price is in line with the value of the home.
A home inspection contingency gives you the opportunity to have the entire home you’d like to purchase examined by a professional before you close on your contract. Without this contingency, you could be contracted on a house you can’t afford to fix.
