How to Make an Offer on a House

Here’s the lowdown on what it means to put in an offer on a home, what happens after making an offer, and our top tips for putting in a strong offer.

By Emily Southey | 10 minute read

Buying a home is far from easy, especially since finding a home you love is half the battle. The other half is the offer. Making a successful offer can be difficult, especially in a hot market where there might be other buyers vying for the same property. To help make the homebuying process just a little bit easier, we’ve put together this guide to making an offer on a house. 

–

What Does it Mean to Put in an Offer on a House?

An offer is a type of contract detailing the price you’re willing to pay to purchase a home, as well as any conditions that must be met in order for the detail to go through. Each offer is unique and it’s up to the homebuyer to decide what to include in their offer (usually with the help of a REALTOR® or real estate lawyer). Though buyers might have to present multiple offers to secure their dream home, keep in mind that since offers are contracts, if accepted, they are legally binding. So you must be prepared to meet the offer price according to the terms listed should the offer go through. Once both the buyer and seller have agreed to the terms of the offer, the agreement of purchase and sale (APS) is complete, and the process of closing the sale commences. Typical offers in real estate include the six elements below. 

–

Personal information

First, the offer must include the legal names of the buyers, the legal names of the sellers, and the address of the home you wish to purchase. 

–

Offer price and deposit

Next, the offer must include the offer price. This is perhaps the most important element of the contract. The offer price is how much money you’re willing to pay for the home, as well as how much money you’ll be putting down as a deposit.

–

Items to be included 

An offer to purchase a home should also list the items included with the sale. For example, if you would like the seller to leave behind certain things, like window coverings or a chandelier, you should specify that in your offer. 

–

Closing date

A closing date should also be listed in the office. This is the date that you wish to take possession of the home. Closing dates are typically between 60 and 90 days from the date the offer is made.

Expiration date

Another important date to include in your offer is its expiration. Offers are not available for infinite periods of time. Rather, they should have set expiration dates of between 24 and 48 hours from the time the offer is sent. (Please note that your REALTOR® may recommend an even shorter offer expiration date if the market is hot.)

–

Conditions

Lastly, your offer must include any conditions you would like met before the sale is finalized. Examples of conditions include a satisfactory home inspection, a financing condition stipulating the buyer must be able to obtain an adequate mortgage, or a home sale condition stating that your current home needs to be sold before the deal is done. It’s up to the buyer to decide what contingencies they want to include. Your REALTOR® can further advise you on the most common conditions buyers request, as well as whether including stipulations is recommended in the current market.

–

Tips for a Strong Offer

Now that you know what an offer to buy a home entails, we’re going to let you in on some of our best-kept secrets for making a strong offer. After all, putting in an offer does not guarantee you will get the home, especially in a hot market. If you want your offer to be successful, you’ll need to strategize to ensure your offer is as competitive as can be.

 –

• Get pre-approved for a mortgage: If you get pre-approved for a mortgage, your offer immediately becomes more attractive as it shows the seller that a lender is willing to loan you the amount you offered for the home. Getting pre-approved for a mortgage may take time, so it’s best to do this before you begin shopping for homes.

–

• Avoid including too many conditions: Though it can be advantageous to the buyer to make a conditional offer, too many conditions can turn off a seller. In a hot market, try to limit the number of conditions included in your offer. Speak with your REALTOR® and perhaps decide on the one that is most important to you. Be ready to act on that condition quickly if the seller accepts your offer. For example, if your offer is contingent on a home inspection, research reputable home inspectors in advance so you can call someone to arrange an inspection shortly after the offer is accepted.

–

• Carefully review all legal documents: Before you make an offer, carefully review all legal documents connected to the property. The last thing you want is to make an offer on a house and discover something unsavoury down the line. Have your REALTOR® and a real estate lawyer review all documents before making an offer.

–

• Commit to a strong down payment: In a competitive market, be sure to offer a sizable deposit or down payment. Though you may only be required to offer a 5% down payment on certain homes, offering above the minimum amount will make your offer more appealing to the seller.

–

• Offer a fast closing: Sellers generally prefer a fast closing, as it means there is less time for something to go wrong and a buyer to back out. For this reason, if you’re trying to make a strong offer, consider offering a fast closing. Typical closing dates are 60 to 90 days from the date the offer is made. To make your offer more attractive to a seller, consider a closing date of 30 days.

Conditional Offers and Firm Offers

There are two kinds of offers, conditional offers and firm offers. It’s important that homebuyers understand the differences between the two when purchasing a home. 

 –

The main distinction between a conditional offer and a firm offer is that a conditional offer has conditions attached, whereas a firm offer is free from any conditions. Firm offers are generally made by homebuyers who are dead set on a certain property or in hot markets where adding contingencies could mean the difference between getting the home and not getting the home.  As soon as a firm offer is accepted, the contract is binding and the buyers are legally obligated to follow through with the transaction.

 –

On the other hand, conditional offers include at least one contingency. This contingency must be satisfied for the deal to be legally binding. A conditional offer becomes a firm offer only if and when the conditions are met. Buyers tend to prefer conditional offers with good reason — it provides them with added protection. For example, conditional offers often include home inspections. Buying a home conditional on a satisfactory home inspection might protect the buyer against the cost of significant repairs. If a firm offer was made right off the bat and a home inspection was only conducted after the deal was done or not at all, the homebuyer could discover a major defect, such as a leaky roof, and be responsible for the repair costs. In contrast, if the offer was conditional on a home inspection and the home inspection reveals a major problem, the buyer can request that the seller resolve the issue before the date of possession or lower their offer price based on the cost of the repairs. 

–

What Happens After You Make an Offer?

After making an offer, the seller will either accept it, reject it, or make a counteroffer. If the offer is accepted, then you’ve bought yourself a home! If the seller decides to make a counteroffer, which is very common, then the negotiating phase begins. If you have a REALTOR®, they will act only on your behalf in the negotiations. If you’re the only bidder, then chances are you and the seller will be able to come to an agreement. However, if multiple bidders are involved a bidding war may ensure, and you will need to strategize with your REALTOR® to make sure you submit a competitive counteroffer. If there are multiple bidders, you should be prepared to increase your offer price and perhaps remove contingencies. If the seller declines your offer outright, you are allowed to put in another offer, but before doing so, you should ask your REALTOR® to find out why the offer was rejected. This increases your chance of a successful offer the second time around.

–

Purchase agreement

An offer to purchase is also called an agreement of purchase and sale (APS). It is a written contract signed by both the seller and buyer for the purchase and sale of a specific property. In the agreement, the buyer agrees to purchase the property for a specified price, so long as the agreed-upon contingencies are met. The purchase agreement is signed by both parties once the offer is accepted. 

–

Down payment

The offer you made will include the down payment you intend to make on the property. Once the offer is accepted, you must be prepared to make this payment. Therefore, you should never promise a down payment you can’t afford. In Canada, the minimum down payment for a home sold for $500,000 or less is 5%. For homes between $500,000 and $1,000,000, a 10% down payment is required. And for homes priced over $1,000,000, you will need to put down 20%. These are the rules, no matter where in Canada you’re buying a home and whether you’re buying a condo, townhouse, or detached home. 

–

Earnest money deposit

Earnest money is a deposit the buyer pays to the seller. It represents a buyer’s good faith to buy the home. Your promised deposit will also be listed in your offer. Earnest money deposits typically range between 1% and 10% of the purchase price. It is up to the buyer to decide how much of a deposit to make. This type of deposit ultimately gives the buyer extra time to obtain the necessary financing, as well as to conduct a home inspection, title search, or property appraisal.