Making an offer on a home | Housing | Finance & Capital Markets | Khan Academy

ruticker 02.03.2025 23:23:36

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So, let's say that this house has been on the market for a couple of weeks, and the asking price is **$310,000**. You think, "This looks like the type of house I could imagine my family living in." You would like to buy this house, but since it has been on the market for a couple of weeks, you think you could get a better deal. So, you decide to make an offer—let's say for a little bit less, **$300,000**. The question is: how do you or your agent go about actually making an offer? The way it works is that you don't just walk up to the seller or the seller's agent and say, "Okay, we're going to offer you **$300,000**." They don't know whether you're serious, whether you actually have the money to do it, or whether you're just wasting their time. To prove that you're not wasting their time, you create or fill out an **offer contract**. ### Offer Contract Components 1. **Property Information**: You would want information on the property, such as its address. 2. **Buyer and Seller Information**: This includes who is buying (yourself) and who is selling (the seller). This is just to clarify what the contract is about. 3. **Offer Amount**: You would state your offer, saying, "Okay, I'm going to offer **$300,000**." 4. **Earnest Money Deposit**: To show that you're serious about this offer, you typically include a deposit. The higher the deposit, the better, as it indicates your earnestness. Deposits usually range from **1% to 5%** of the home price. For example, **3%** of **$300,000** is **$9,000**. This check is written along with the offer contract and shows that you are serious. If you don't meet your end of the contract, the seller might be able to keep this money. ### Contingencies Now, you might think, "I'm not just going to buy this outright." You've toured the home, you like it, and it seems to be in good condition, but you want to ensure that it is indeed in good condition. To do this, it's typical to include some **contingencies** in your offer contract. - **Inspection Contingency**: You might want to inspect for termites, the foundation, plumbing, and electrical systems. If something comes up in the inspection that makes the house not what you thought it was, this allows you to get out of the contract and hopefully get your deposit back. - **Financing Contingency**: You may have saved enough for a deposit—let's say **$60,000**—but you will need to borrow the remainder. The bank may have pre-approved your loan, but that’s not the same as actually getting it. A financing contingency states that you want to buy the house but will need financing to do so. - **Insurance Contingency**: This is less typical but may be necessary if the property is in a flood-prone area and the insurance companies are not issuing new policies. - **Clear Title**: You would need to ensure that the title is clear to buy the house. These contingencies allow you to unwind the contract if certain conditions are not met. ### Market Considerations In a hot real estate market, where many people are bidding on the same property, it’s not uncommon to have fewer contingencies. Sellers prefer serious buyers, and if someone is willing to waive their contingencies, it makes their offer more attractive. However, in a more typical market, it’s prudent to include inspections, financing, and title contingencies. ### Closing Date Lastly, you would want to specify the **closing date** in the offer contract. For example, if the offer is made on **October 15, 2023**, and you want to close in two months, you might set the closing date for **December 15, 2023**. From the seller's point of view, a closer closing date makes them feel more confident that the transaction will happen. To make a tempting offer, you would have as few contingencies as possible and set the closing date as soon as possible. However, if it's not a super hot market, it's wise to include contingencies to protect yourself.

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