The First Time Homebuyer's Guide to Making an Offer on a House

🏡 The First Time Homebuyer's Guide to Making an Offer on a House

By Julie Marion, First Time Homebuyer Workshop

Buying your first home can feel overwhelming, especially when it comes to the offer process. But fear not—today, we’re breaking down every aspect of the offer step-by-step, so you’ll be light-years ahead of the competition, however, please know there is a lot of grey area in each step, and this is where it can get tricky. Let’s dive in! 🚀

📜 What Is an Offer in Real Estate?

An offer is a formal, written proposal a buyer submits to the seller, outlining terms and conditions for purchasing the property. There are many ways to craft a winning offer. The result you, as the buyer, want is that your offer is accepted!  Getting through the process to the closing is a separate yet related process. Most first-time buyers don't even see the offer form until they say to their agent "I want to buy this house."  This document includes details such as:

• 💵 Purchase price
• 🕒 Timeline for the sale
• ⚖️ Contingencies (e.g., inspection or financing clauses)
• 📦 Special requests (e.g., repairs or appliances)

Once submitted, the seller can accept, reject, or negotiate the offer. If both parties agree on terms, the offer becomes legally binding, kickstarting the process of transferring property ownership. Sounds simple, right? Let’s unpack more details.

💡 Key Components of an Offer

1.  ⏳ Expiration Date

Offers usually come with a deadline, such as 24 hours. This creates urgency for the seller and ensures buyers aren’t kept waiting indefinitely. Conversely, if the seller has multiple offers, it allows them to move on and consider other offers.

2.  💰 Offer Price

This is the amount you propose to pay for the property. It could be:

• Above asking price (common in competitive markets 🏃‍♀️)
• At the asking price
• Below asking price

3.  🔑 Earnest Money Deposit

Often called good faith money or deposit money, this deposit demonstrates you’re serious about buying the house. The amount varies by state but is typically a small percentage of the purchase price. There are many philosophies to consider with this "good faith money" and it is a grey area. Depending upon the market, you may want to evoke certain strategies for the seller to accept your offer without hesitation. 

Key points to remember:

• The deposit is held in an escrow account. 🏦
• It’s credited toward the purchase price at closing.
• If a dispute arises, the money remains in escrow until resolved.

When you hire your real estate agent, which here at The First Time Homebuyer Workshop we do recommend that you hire this professional, you should ask them about the Earnest Money Deposit process and when you could potentially lose your money.  There is a list of questions you should ask this professional because you need to recognize this person is helping you complete the transaction. You want to make sure your values and how you want this process to go matches their work style and how they run their business. Every agent is an independent contractor and, technically is a "transaction coordinator" implementing your desires.  The process details, quality and thoroughness are up to you.

💡 Tip: Always have your checkbook ready or prepare for electronic transfers, depending on your state’s practices.

4.  🔍 Inspection Contingency

You have the option to hire a professional inspector to assess the property. Here’s what to expect:

• 🛠️ Federal law allows lead-paint testing for homes built before 1978.
• Inspections may uncover repair needs, safety issues, or environmental concerns (think water quality or termite damage 🐜).
• Based on findings, you can negotiate repairs, request a price reduction, or withdraw your offer.

📍 State-Specific Rules and Contingencies

The offer process may include additional contingencies based on your state’s laws, such as:

• 💧 Water Quality Tests (for properties with wells, homes with lead pipes)
• 🏠 Septic System Inspections
• 🫨 Earthquake Review
• 🔥 Fire Safety Compliance (Smoke Detectors and Carbon Monoxide Detectors)
• ⚗️ Methamphetamine Disclosure
• 🟢 Mold Disclosures
• ➡️ Stigmatized Properties 
• 🧭 & Others...

Environmental contingencies are there for a reason, people in the United States have gotten sick, really sick so these disclosures let you be aware of the toxins either from a community-wide perspective or site specific.  As far as the home inspection contingency, unless you are a home contractor or builder, we recommend you get a home inspection. If nothing else, the home inspector will give you a base point of the condition of the house and/or a list of things to do. This is a huge scientific area where professionals specialize in one tiny area of one scientific area and there are many, many areas to consider when buying a home.  Many of these issues are discussed while you are going to work, dealing with finances, your life pops up, and understanding, the process, risks both financial and health-related can be overwhelming.  

💵 Financing and Appraisal Contingencies

💳 Financing Contingency

This clause protects you if you’re unable to secure a mortgage by a certain date. If financing falls through, the offer becomes void, and your earnest money is returned.

In order to secure your funds be returned to you, should you need more time or are declined for the loan you must have a written request be submitted to the seller (sellers' agent) via your buyer agent in order to protect your money. Written extensions and documents agreed to by both parties are those that are valid. 

📉 Appraisal Contingency

The Appraisal Contingency is for the bank to make sure the bank does not loan more for a property than what it is worth.  Should the appraisal come back low it will be up to the buyer and the seller as how to address this situation.  In general, it ensures the home appraises at or above the purchase price. The Appraisal Contingency is a grey area of the homebuying process and some options if there is a snag include: 

• Negotiate a lower price with the seller
• Cover the appraisal gap with cash 💸
• Negotiate a combination of the previous points
• Withdraw the offer

💡 Pro Tip: Decide upfront how you, as the buyer, will handle appraisal gaps before you start house hunting. This decision reflects your priorities and financial strategy. 

📋 Additional Terms and Special Requests

Buyers often include additional contingencies or requests, such as:

• Repairs to be completed before closing 🔧
• Appliances or furniture to remain with the house 🛋️
• In some markets personal property can be included in the sale however, generally most real estate professionals advise to keep the transaction related to only real estate. There have been requests for season tickets to professional sports teams in some cases but usually, the transaction is related  to real estate and common items found in homes.

🚦 Closing Date and Deadlines

The closing date is the final step when ownership transfers to you. Think through what you will be doing and what other obligations you have personally.  Meeting deadlines along the way is critical to avoiding delays and penalties. Missed deadlines can lead to:

• Requesting an extension (which the seller must agree to)
• Financial penalties
• The deal falling through

💡 Storytime: Once, during a holiday season transaction, a buyer needed a loan commitment extension. While the seller graciously agreed, delays snowballed due to unforeseen seller family events.  The sellers requested an extension thinking, well we gave them one, certainly they will extend the same courtesy.  The buyers said no and it caused a lot of distress for the seller.  It’s a reminder that all extensions must be in writing and when proposing a timeframe around a holiday, clear communication and planning are key!

✏️ Homework: Take Action Today

Here’s how to start preparing:

1. Research environmental issues in your desired area. Are there concerns like lead in water 💧 or outdated septic systems?
2. Visit FirstTimeHomebuyerWorkshop.com to take our free mini-class, Homebuying Chaos Unwrapped.
3. Create a notebook 📓 for your home-buying journey. A physical resource can be a lifesaver during this complex process!

📝 Final Thoughts

The offer process may seem daunting, but with preparation, you can navigate it confidently. Remember: knowledge is your superpower 💪 in the home-buying journey. 

We at the First Time Home Buyer Workshop are to empower you to become the savviest CEO of your home-buying journey!

⏭️ Stay Tuned on the Blog

Stay tuned for another content post where we’ll tackle real estate disclosures—what they are, why they matter, and how to handle them. 🏠