How to make an offer on a house: terms, deposit, contingencies

What goes into an offer

The CFPB’s pages do not give a standard offer form: ask your agent or an attorney which form your state uses. An offer states the terms you are proposing. Each is negotiable, and the terms you agree on go into the contract:

Read what your contract says about each item before you sign. A deadline missed is a risk: the CFPB warns that if your purchase contract has a deadline, delays in giving your lender documents could cost you the home and your deposit.

Who helps you make the offer

Real estate agents “can represent the buyer or the seller, and sometimes both” (CFPB). State law may require an agent to disclose whom the agent represents and on what terms. The CFPB suggests asking whether your conversations stay confidential and how the agent is paid, and checking references and your state licensing agency for disciplinary actions. See the buyer agreement and real estate commissions.

Protect yourself with contingencies

A contingency is a condition written into the contract. If the condition is not met, the contract lets you cancel. The CFPB calls out two:

• Financing. It protects you if the loan falls through. The CFPB advises it.
• Inspection. The CFPB says that if your contract is contingent on a satisfactory inspection, you “have the right to cancel the sale without penalty if you are not satisfied with the results.” The inspector should be independent: the CFPB warns that an inspector paid by someone else “might underemphasize problems.”

An appraisal that comes in below the price gives you leverage. The CFPB says you “can often use the lower appraised value to negotiate a reduction in the sales price,” and that if the seller refuses you may be able to cancel, depending on the contract’s terms. Whether you can cancel without cost depends on what your contract says, so ask before signing. For all four common contingencies, see home purchase contingencies.

What happens after the seller accepts

Once the offer is accepted, the CFPB says it is time to choose a loan and a lender. You get a Loan Estimate from each lender you apply to, order the inspection, and move toward closing. The CFPB recommends comparing Loan Estimates from at least three lenders, and notes that a lender generally must honor a Loan Estimate for 10 business days. After you tell your lender you intend to proceed, you typically pay an application or appraisal fee and provide full documentation.

If the seller counters, the counteroffer replaces your terms. Compare the new terms with the old line by line. The contract you finally sign is the one that governs.

Where states differ

Federal sources do not set the contract form, the deposit, the number of days to inspect or whether an attorney drafts the contract. States and local custom do. Check your state’s pages for seller disclosure, whether an attorney is required at closing and closing costs. A real estate attorney or your agent can tell you how offers work where you buy.