Making an Offer on a House

If you’re a home shopper who’s made your way to this article, there’s a good chance you’ve already been pre-approved for a loan, searched houses online, viewed a few in-person, and narrowed down your choice to the home you really want. Perhaps now you’re ready to get down to business, making an offer on the house with the help of your agent.

Offer Structure

If you’ve been searching for a home for some time, no doubt you have a sense of home values in your area. The best chance of a successful bid will be the formation of a reasonable offer based on local housing price information.

But at this stage, you’ve seen only asking (listing) prices, not actual sales prices. Good news: if you’re working with a real estate agent, he or she will have access to sales prices via their subscription to the local Multiple Listing Service (MLS). What’s more, they can see what homes did not sell, which also indicates potential asking prices that were too high.

Market conditions also play a role. Hot or cold markets can move short-term prices up or down based on current demand. Prices for homes sold a month or two ago may not reflect today’s values. Beware of making lowball offers as they are often roundly rejected.

Offers should be made in writing, using a Residential Purchase Agreement (RPA). Using a legally-binding sales contract is the smartest way forward. RPAs include and the necessary pieces of information the law requires, such as:

  • Legal address of the property
  • Purchase price and terms
  • Details of the earnest money
  • Contingencies
  • Closing costs, including prorated taxes that may split between the buyer and seller
  • Duration of offer (expiration) and expected closing date

Time is of the essence. We recommend giving sellers 24 hours to answer. A stated time in which they need to respond to your offer helps reduce any gaming so that sellers aren’t sitting around waiting for better offers to come their way. Establish an expectation that you’re not interested in playing games.


Smart real estate offers include contingencies; conditions that must be satisfied before the deal consummates. They also protect your good faith deposit which you can get back if the conditions you stipulate in the purchase contract are not met.

For example, while you may have been pre-approved for a loan, you’ll want to include a contingency that final loan approval must be in place before the deal closes. What’s more, the deal may be contingent upon the home’s appraised value or certain repairs the seller must make. Here are some common contingencies:

  • Final approval for financing
  • Appraisals
  • Inspections
  • Completion of repairs
  • Sale of a buyer’s existing home
  • Expected move-in date

Escalation Clauses

What if the market is “hot” and sellers receive multiple offers at the same time? There’s a way to deal with that – it’s called an escalation clause. Escalation clauses spell out a willingness for a buyer to pay more than their offer price if other buyers outbid them. Clauses include an incremental bid over the competing offer along with a cap, or maximum amount the buyer will pay under any circumstance.

Here’s how it works:

  • Buyer offers $500,000
  • or $1,000 more than competing offers,
  • not to exceed a $525,000.

Earnest Money / Good Faith Deposit

When you put a written offer on a home, an earnest money deposit typically accompanies it. Earnest money is put down and made in good faith, to indicate to the seller that you are serious about buying the house. Good faith deposits essentially pull the house off the market for any other buyers. The amount of earnest money is typically 1 to 3 percent of the purchase price or whatever is prescribed by local custom.


If the offer is reasonable, a seller might accept it immediately. However, some negotiation is likely. Many times, small items like the move-in date needs to be sorted out; nothing that will throw the deal off course.

Conversely, the offer may be rejected, or the seller comes back with a counter offer. The number of times offers and counteroffers go back and forth between buyers and sellers has no limit, but rarely does this get out of hand. Here’s a breakdown:

  • You make an offer
  • Offer is accepted, rejected or countered by seller
  • In the case of a counter offer made to you, you can accept, reject or keep the ball in the air by countering again
  • Counter offers can go back and forth as many times as it takes until there is an acceptance or final rejection

When the buyer and seller have accepted the price and terms of a Residential Purchase Agreement, but contingencies remain (very common), the status of the deal is considered “active under contract.” At this point, it is more likely than not that the deal goes through. However, some the remaining items below can still jeopardize the outcome.

The Offer is Accepted! Now What?

Here’s what happens after your offer is accepted – the remaining steps carried out in the final phase of the home buying process.


An appraiser will visit the house and determine what it’s worth. Why does this matter? For home buyers that use financing (as most do), it’s important to know that lenders will not make loans in amounts that exceed the fair market value of the home. Buyers can pay more than the appraised value, but they will have to come up with the difference – in cash – between the purchase price and the loan amount. Example:

  • $500k proposed purchase price
  • $480k approved loan amount
  • $475k appraisal
  • Result: Bank will not lend more than the fair market value of the property

What’s more, loan program guidelines state a maximum loan to value (LTV) ratio. Some programs allow ratios as high as 97%, but let’s look at an example of similar transaction where a conventional loan, with a cap of 80% LTV, is used. Example:

  • $500k proposed purchase price
  • $400k approved loan amount ($100k down payment, 80 LTV)
  • $475k appraised value (84 LTV)
  • Result: Loan to value exceeds 80% maximum, the buyer would need to bring $120k to closing because the new maximum loan amount is $380k

These are two reasons why low appraisals can make deals go sideways, if not die altogether.


Not to be confused with appraisals above, inspections reveal the condition of the home, not the value of it. Inspections are not required unless VA or FHA loans are used. However, inspections are highly recommended as they can reveal flaws not easily identified by sight. You’ll feel better about buying a home that is in good condition where the plumbing, electrical systems and foundation (to name a few) perform as expected.

Even for new construction homes, inspections are a good idea. Inspectors will look for shoddy workmanship, incomplete work, or anything not built to code.

Legal Disclosures

The law requires that home buyers receive a certain number of disclosures that itemize any material facts that could affect their decision move forward with the deal. Each state has a certain number of required disclosure forms. Here are some potential issues that may arise:

  • Defects like mold, leaky roof, lead-based paint
  • Pest infestation – damages to wood caused by termites or carpenter ants
  • Natural hazards – seismic hazard zones, flood zones, fire risk

What’s more, sellers must divulge any known defects via a legal document called a Real Estate Transfer Disclosure Statement (TDS).

Title Report

Escrow companies will pull a title report showing the ownership history of the subject property and any encumbrances placed upon it such as liens. Title reports identify anything that would prevent you from owning the home free and clear when the deal closes and ensures that the seller owns the home and has the legal right to transfer title.

Lender Docs

Assuming you were already pre-approved for a mortgage, your lender’s underwriting team will take a final look before giving the “thumbs up” to proceed, known as “clear to close.” Your credit report is pulled again to make sure no new debts have been taken on since the initial approval.

A Closing Disclosure (formerly the HUD-1 Settlement Statement) is drafted showing all the transaction fees and impounds (like pre-paid taxes) down to the penny. If the final Loan to Value (LTV) is less than 80, mortgage insurance is ordered.

Order Insurance

Hazard insurance will also be ordered at this stage. Here’s why. Houses securitize (back) a mortgage. As the underlying asset, lenders want to protect the value of the property in case something goes wrong. Thus, lenders will require insurance coverage.

Depending upon the location of the property, flood and earthquake insurance may also be required.

Home warranties, which typically cover major systems (heating, cooling, plumbing) and appliances are not mandatory. However, many buyers choose to purchase a warranty to prevent unexpected out-of-pocket expenses.

Final Walkthrough

You’ll have the opportunity to make a final walk-through of the home before taking possession of it. Walk-throughs are not required, but recommended, to make sure nothing about the house has changed since the last time you viewed it. You have the right to review any agreed-upon repairs or double-check appliances, windows, plumbing, heating, air conditioning, etc.

Contingency Removal

If there were contingencies included in the purchase contract, the satisfaction of them would have also been specified in the RPA. Many common contingencies would be completed as a matter of routine, such as a home inspection, appraisal, final loan approval, etc. With contingencies removed, the status of the home changes to ‘pending.’ The only left to do is finalize the deal at closing.


This is it, the moment for which you’ve been waiting. Closings typically take place at the offices of a title company and sometimes an attorney’s office. Just a heads up: there’s lots of paperwork. You’ll sign so many documents that your hand and wrist may be cramped when finished.

After the signing ceremony, down payment funds will be transferred (less the earnest money you’ve already committed) from your bank to the escrow company.


Those are the steps to making an offer on a home and the follow-up steps to complete a home purchase. The only thing left to do is get the keys and start moving into your new home!

Should I Remodel or Sell My Home As Is?

Homeowners who are preparing to sell are often faced with a dilemma about whether to remodel or sell their home in its current state. Each approach has its respective advantages and disadvantages. If you decide to remodel your home, it will likely sell for more; but the increased selling price will come at the cost of financing the remodeling projects. If you decide to sell without remodeling, you won’t spend as much money putting your home on the market, but the concern is whether you’re leaving money on the table.

Should I Remodel or Sell My Home As Is?

To answer this question, it’s important to understand the factors that could influence your decision and to work closely with your agent throughout the process.

Cost Analysis: Home Remodel vs. Selling Your Home As Is

Home Remodel

When you remodel your home before selling, you’re basically making a commitment to spend money to make money. So, it’s important to consider the kind of ROI you can expect from different remodeling projects and how much money you’re willing to spend. Start by discussing these questions with your agent. They can provide you with information on what kinds of remodels other sellers in your area are making and the returns they’re seeing as a result of those upgrades. This will help you determine the price of your home once your remodel is complete.

Then, there’s the question of whether you can complete you remodeling projects DIY or if you’ll need to hire a contractor. If hiring a contractor seems expensive, know that those costs come with the assurance that they will perform quality work and that they have the skill required to complete highly technical projects. Sell Your House Rocklin Ca

According to the Remodeling 2021 Cost vs. Value Report (www.costvsvalue.com1), on average, homeowners paid roughly $24,000 for a midrange bathroom remodel and about $26,000 for a minor kitchen remodel nationwide, with a 60.1% and 72.2% ROI respectively. This data shows that, for these projects, you can recoup a chunk of your costs, but they may not be the most cost-effective for you. A more budget-friendly approach to upgrading these spaces may look like repainting your kitchen cabinets, swapping out your old kitchen backsplash for a new one, refinishing your bathroom tub, or installing a new showerhead. Other high-ROI remodeling projects may allow you to get more bang for your buck, such as a garage door replacement or installing stone veneer. To appeal to sustainable-minded buyers, consider these 5 Green Upgrades that Increase Your Home Value. 

Selling Your Home As Is

Deciding not to remodel your home will come with its own pros and cons. By selling as is, you may sell your home for less, but you also won’t incur the cost and headache of dealing with a remodel. And since you’ve decided to sell, you won’t be able to enjoy the fruits of the remodel, anyway. If you sell your home without remodeling, you may forego the ability to pay down the costs of buying a new home with the extra money you would have made from making those upgrades.

Market Conditions: Home Remodel vs. Selling Your Home As Is

Local market conditions may influence your decision of whether to remodel before selling your home. If you live in a seller’s market, there will be high competition amongst buyers due to a lack of inventory. You may want to capitalize on the status of the market by selling before investing time in a remodel since prices are being driven up, anyway. If you take this approach, you’ll want to strategize with your agent, since your home may lack certain features that buyers can find in comparable listings. In a seller’s market, it is still important to make necessary repairs and to stage your home.

In a buyer’s market, there are more homes on the market than active buyers. If you live in a buyer’s market, you may be more inclined to remodel your home before selling to help it stand out amongst the competition.

Timing: Home Remodel vs. Selling Your Home As Is

Don’t forget that there is a third option: to wait. For all the number crunching and market analysis, it simply may not be the right time to sell your home.  Knowing that you’ll sell your home at some point in the future—but not right now—will allow you to plan your remodeling projects with more time on your hands which could make it more financially feasible to complete them.