How to make an offer on a home: The ins and out of earnest money deposits, common contingencies and pending properties

• • 1. Get pre-approved

    Pre-approval gives you direction on what homes you may be able to afford and how much you should save for a down payment. It’s good to have your pre-approval letter before viewing properties with your real estate agent. This letter helps target your home search to homes you’ll qualify for. Don’t wait until you’re ready to buy a home to get pre-approved—the earlier you begin the process, the better, so you can be prepared when you find the home you’re looking for.

  • 2. Find the right home for you

    Buying a new home is often the most significant financial purchase of your lifetime. With a real estate professional by your side, you’ll be better prepared to find the ideal home for your family, negotiate the contract and terms as well as make a competitive offer within your budget. After interviewing real estate agents and finding the right one with local expertise, it’s time to start your home search.

To avoid getting caught up in the moment, create your must-have and nice-to-have wish list of features for your home, and abide by those guidelines. Then attend open houses in your targeted neighborhoods to get a sense of what’s selling and how a home in your price range might compare to others in the area. Share your lists and findings with your agent, who will help you make informed decisions.

• 3. Do your research

  Real estate agents have access to information about what other homes have sold for in the area to ensure you don’t spend more than necessary. In addition, you can research the home listing to determine how long it’s been on the market. If it’s been on the market for months, there may be room to negotiate a lower offer. Lastly, find out if there are HOA fees and the average annual dues increase. It’s essential to know how much you’ll owe so you can factor that into the affordability of the home.

• 4. Decide on your earnest money deposit amount

  Including a home offer with an earnest money deposit (EMD) can help it stand above the rest in competitive markets. Also called “good-faith money,” earnest money is a deposit made in addition to the down payment to reassure the seller that you’re serious about purchasing a property.

• 5. Consider common contingencies

  Contingencies are common when buying a home. This means that certain conditions must be met by either the buyer or the seller before the sale can close. Contingencies offer protection to you as a homebuyer because they allow you to change your mind on a home sale if something that’s specified ahead of time in the contract doesn’t work out. Common contingencies include:

  • Inspection
  • Financing
  • Appraisal
  • Title
  • Home sale

  The seller may request concessions in the home price negotiation process. If asked, waiving the appraisal or inspection contingencies is not recommended. Those practices are in place to expose any issues with the home prior to sale.

• 6. Make a competitive offer

  Typically, your real estate agent will write your offer in the form of a purchase and sale contract and submit it to the seller’s agent, who will present it to the seller. Besides listing the contingencies and waived contingencies and the earnest money amount, your offer should include the following:

  • Property address
  • Buyer’s and seller’s name
  • Offer price and down payment amount
  • Requested seller concessions
  • List of fees and closing costs
  • Timeline of when you want to close, move into the home and when the offer will expire
  • Type of deed

  The National Association of Realtors^© also recommends including the “method by which real estate taxes, rents, fuel, water bills and utilities are to be adjusted (prorated) between buyer and seller” and the “provisions about who will pay for title insurance, survey, termite inspections and the like.” Your agent should be able to advise you on what’s necessary for your situation.

  Compete with all-cash buyers in competitive markets using Guild Mortgage’s BuyNow Advantage program option. BuyNow Advantage allows homebuyers to write a cash offer with no financing or appraisal contingency required. Sellers get the same security as an all-cash offer, and you get the financing you need.

• 7. Wait for the seller to accept, decline or counteroffer

  What happens after you make an offer on a home? The seller will proceed with one of three options:

  • If the seller accepts your offer as-is, the purchase and sale agreement becomes legally binding.
  • The seller also has the right to reject your offer without a counteroffer. They aren’t required to tell you why. The Home Buying Institute offers several reasons why sellers reject purchase offers. For example, they may have received a higher offer, you weren’t pre-approved first, your offer asked for too many concessions or the amount you offered wasn’t high enough.
  • If the seller makes a counteroffer, you can accept it, decline it or counter their counteroffer. Freddie Mac explains that it’s normal for sellers to respond with a counteroffer. Common negotiated items include the purchase price, closing costs, closing date, contingencies and earnest money deposit.

• 8. Don’t skip the home inspection

  Typically, when buying a home, a home inspection comes after you’ve made an offer and the seller has accepted it. While a professional appraiser inspects your property, an appraisal isn’t a replacement for a thorough home inspection. A home inspection can increase your confidence about a home’s condition. It can also reveal costly issues and allow you to ask the seller to fix problems before closing.

• 9. Finalize and sign the sales contract

  When the seller accepts your offer or counteroffer and your contract has been finalized, you’ll both sign it. Then, your real estate agent will provide your loan officer with a copy of your contract, and your loan officer will order an appraisal report.