You've put together a homebuying budget, researched properties for sale in your area, and found what appears to be your dream home. Making an offer on a house is the next step in the process, and the more prepared you are, the better.

Drafting an offer letter that gets accepted can be easier said than done, especially if it's a seller's market vs. a buyer's market. Before you get that far, there are a few things you can do to increase the chances of winning over the seller.

Get Preapproved

Mortgage preapproval means that a lender has done a cursory review of your financial situation, including your income and credit scores, and provisionally approved you for a home loan. A mortgage preapproval letter typically spells out how much you're able to borrow for a home loan, assuming you meet the lender's requirements. 

Preapproval doesn't guarantee that you'll be able to get a mortgage later, but it can serve an important purpose when making an offer on a house. Having a preapproval letter in hand shows sellers that you're committed to buying. If a homeowner is contending with multiple purchase offers, they may be more likely to accept one from a buyer who's already been conditionally approved for a loan.

"Short of an all-cash offer, nothing is more important than preapproval," says Sheila Trichter, an associate real estate broker with Coldwell Banker Warburg. Trichter told The Balance in an email that even buyers who make an offer above the listing price may fall short if they don't have preapproval to back it up. 

If you're interested in getting preapproved for a home loan, take time to compare lenders first. Look at the interest rates different lenders are charging as well as the qualification requirements for a loan. Also, check to see how long preapproval is good for, as preapproval letters typically expire within 30 to 60 days of being issued.1

Find the Right Agent

Working with a real estate agent can make your journey to homeownership easier since an experienced agent will understand the ins and outs of making an offer on a house. According to the National Association of Realtors (NAR), 87% of home buyers purchase a home with the help of a real estate agent or broker.2

An agent can act as an advocate on your behalf when negotiating the details of the offer. Your agent can point out things to the seller's agent that could make you a more attractive buyer. That includes being preapproved for a mortgage or being prepared to offer a larger earnest money deposit. 

Mihal Gartenberg, a real estate agent with Coldwell Banker Warburg, told The Balance by email that homebuyers should find an agent they have good chemistry with and who is willing to walk them through the buying process. That includes being willing to tell you the truth vs. what you may want to hear.

You can research real estate agents in your local area online. Friends, family, and coworkers may also be able to provide referrals for agents they've used in the past. Request references and trust your gut—avoid agents who don't appear to have your interests at heart. 

Research the Home and Neighborhood

When making an offer on a house, your agent may do some preliminary research on the home and the neighborhood. This research is designed to help the agent come up with a reasonable offer based on comparable properties or "comps." 

If you'd like to do this research yourself, here are some of the key factors to consider when comparing properties:

• What did the seller pay for the home you're interested in buying?
• How has the home's value changed historically?
• What are some past sales prices for similar homes in the area?
• What's the average cost per square foot for homes in the neighborhood?

You can use real estate websites to compare home values and compare that to the numbers your agent presents when working up comps. 

Also, consider the overall mood of the housing market in your area. Are home prices skyrocketing, dropping or holding steady? Are there more homes than buyers or vice versa? Looking at the temperature of the market can give you an idea of how many offers a seller might be fielding. 

Reduce Contingencies

Contingencies are conditions included in a home offer that would allow the buyer or the seller to cancel the sale if those conditions are not met. For example, the purchase of the home may be contingent on:4

• The home inspection and whether there are any major structural issues that need to be addressed
• Results of the appraisal and how the home's appraised value aligns with the purchase price a buyer has offered
• The buyer's ability to get mortgage preapproval or mortgage funding

Contingencies can protect you as a buyer. For example, if the purchase is contingent on the home passing inspection and the inspection uncovers a substantial crack in the foundation, then you may be able to get out of the contract if the seller is unwilling to make repairs. Adding too many contingencies, however, could test the seller's patience and make them less receptive to your requests. 

Gartenberg says buyers should talk to their agents about which contingencies to include, which ones to waive and what kind of risk that involves. "Each contingency protects you from something different, so be sure to understand what's going on," she says.

Don’t Forget Your Budget, But Don’t Lowball Your Offer

Sometimes, making an offer on a house that gets accepted all comes down to picking the right number. But it's important to weigh what you can afford against what figure a seller is most likely to accept. 

Setting an initial floor and maximum ceiling for the offer can keep you from going over budget. For example, say you want to spend no more than $350,000 on a home. You find a home for $365,000. You could make an initial offer of $332,500, 5% below your upper limit. At this point, the seller can make a counteroffer, which gives you an opportunity to negotiate and make a counter counteroffer up to your $350,000 cap. 

Trichter says buyers should figure out what the home is worth on the open market first. That can help you from offering a bid that's so low as to be insulting to the owner. At the same time, you should decide what the home is worth to you. "The number on each side should ideally be similar," says Trichter. 

Making an Offer on a House

Buying a home may be the largest purchase you ever make, so it's important to get it right. Knowing how to make an offer that gets accepted—and helps you stay within your budget—can make the process of becoming a homeowner less stressful. 

Frequently Asked Questions (FAQs)

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