Once you find the house you want to purchase, your real estate agent will prepare an offer. Offers typically have at least three components: the purchase price, the closing date, and how long the offer is good for.
To determine an appropriate offering price, your agent will look at "comps" – similar houses that have sold in the neighborhood. Other considerations are how long the house has been on the market and whether there are other buyers making a competing offer. In a slow housing market, it is common to offer less than the asking price. Conversely, in a hot market, where it is not unusual for there to be multiple offers on one house, it is common to offer more than the asking price.
Many offers have additional components:
Concessions: Costs that the seller pays for the buyer, which reduce the amount of money the seller receives. Typical concessions include closing costs and cash back for repairs or renovations.
Inclusions: Refers to what stays in the house. If you want the appliances, blinds, chandeliers, or anything else, make sure to put it in the offer.
Contingencies: Conditions that must be met in order for the sale to go through. A home inspection, financing, and an appraisal are common contingencies.
Once the offer is written, your agent will present it to the seller. Along with the offer, it is customary give the seller earnest money, usually one to three percent of the purchase price, also called a good faith deposit. The money will go in an escrow account, kept separately from the seller until the transaction is complete.
The seller will accept, counter, or reject the offer.
Accept: If the seller accepts the offer, the house is taken off the market, and you are under contract. The only way to legally cancel the contract is if a contingency is not met. Otherwise, if you walk away from the house, you lose your earnest money deposit.
Counter: When sellers counter, usually it is with a higher purchase price, but they can also counter on the closing date, concessions, inclusions, and contingencies. You can accept the counter or respond with your own counter.
Reject: When a seller turns down the offer completely, you can submit a new offer with the hope that this new offer will encourage either an acceptance or counteroffer from the seller