Gears icon with text, make an offer

You’ve done the most challenging part. You’ve combed through listings and toured kitchens, bathrooms, and all sorts of spaces on the hunt for the home of your dreams. And now you’ve found it — the house you’ve always wanted.

It’s time to make an offer. As a first-time homebuyer, you want to be smart with your approach to boost your chances of success, but you’re a bit perplexed on the moves to make. No need to look further — we’ve got you.

Determine your offer amount.

Ultimately, how much you pay depends on how much house you can afford and how much the sellers are willing to accept. Your offer should be reflective of your personal financial situation combined with market circumstances.

That’s why it’s a good idea to start by studying the local real estate market. (Chances are, you’ve already done a lot of this work as part of your home shopping.) Take a look at comparable listings on sites like MLS, Redfin, Trulia, and Zillow. Is it a hot market? If so, you’ll likely need to move quickly. Or is it a buyer’s market, meaning you can offer less than the asking price?

You can also ask your realtor to give you an idea of what they think the property is worth by providing comparables to similar homes in the area that have recently sold.

When formulating your offer, you should also think about:

  • The quality and characteristics of the home
  • Where the property is located
  • Any price changes
  • How motivated the seller might be
  • How much you want the home

A well-thought-out offer takes all of these factors into consideration and puts a price on them. For example, if you feel a house needs a lot of updating and the current real estate market is neither hot nor cold, you put in an offer with those renovation expenses in mind.

From how near you want to live to family to how you’re going to pay for your new home, here’s five things you should consider.

Make the official offer.

Once you’ve settled on an amount, take a deep breath while your realtor creates and submits your written offer to the seller via a purchase and sale agreement. What a realtor includes in a purchase and sale document varies by location, but it typically has the following:

  • The amount you’re offering
  • Earnest money — aka a deposit to demonstrate you’re serious about buying the home. It’s often 1 to 3% of the purchase price. (Speak with your agent to find out if the deposit is refundable if the deal were to fall through, and under what circumstances.)
  • The amount of your intended down payment
  • How you plan to pay for the property (all cash, finance with a mortgage)
  • Proposed closing date
  • Contingencies, which are the conditions that must be met for the sale to happen and can include passing inspection, financing approval, etc.
  • An expiration date for the offer so the process continues to move forward

As the saying goes, the devil is in the details, so it makes sense to be specific with your written offer. These details protect you as a buyer, but you don’t want to include too many since they could complicate the transaction.

Once received, the sellers will review your offer. You should be prepared for them to make a counteroffer. If they do, you’ll need to decide whether to make a new offer, stick with your original offer, or walk away.

The negotiation part of buying a house may last several rounds and can be a nerve-racking time. The important thing is to remain focused on how much you can reasonably afford to pay. Otherwise, you could be overstressing your financial situation with a mortgage payment that’s too high for your current income or a down payment that’s bigger than what you’re able to make. (Remember though, you don’t have to put down 20%.)

Our mortgage payment calculator can help you anticipate your future monthly costs.

When you and the seller agree to the terms, congratulations are in order! The property is now under contract and you’re on track to be a homeowner!

The Offer Letter

In a competitive market, a written offer may not be enough to seal the deal in your favor. Some buyers include a letter with their offer to help them stand out and make the buying process more personal and less transactional.

Some tips to remember if you decide to write an offer letter:

  • Be complimentary and tell the seller how much you love the home.
  • Don’t be afraid to get personal and appeal to their emotions.
  • Let them know how serious you are about purchasing.
  • Keep it short and sweet (less than a page).

Final Thoughts 

When buying a home for the first time, putting in an offer on a home can be tricky business. But with yours now accepted, you can enter the closing period with confidence. You still have several last steps in your homebuying journey, including an appraisal and home inspection, and finalizing your financing through a lender, like Ally Home. But the end — and a new set of keys — are in clear sight.

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