Bidding on a house works like this: you put together a written offer that states your price, your deposit, your timeline, and the conditions you need met, you back it up with proof you can pay, and your agent delivers it to the listing agent with a deadline for a response. The seller then accepts, rejects, or counters. Once both sides have signed the same document and it has been delivered back, you have a contract. The details below walk through each step, with the caveat that specific rules and customs vary by state and local market.
What You Need Before You Submit an Offer
Sellers want to see that you can actually close before they take your bid seriously. Two documents do most of that work.
A pre-approval letter from a lender states the maximum loan amount you qualify for. Lenders issue it after reviewing your credit, tax returns, and debt-to-income ratio, and the letter is typically valid for 60 to 120 days. Proof of funds, usually a recent bank or brokerage statement, shows you have the cash for the down payment and closing costs.
In many markets, sellers won’t review an offer that doesn’t include both. Getting these in hand before you start touring homes keeps you from losing a house to a buyer who moved faster.
What Goes Into the Written Offer
A real estate contract has to be in writing and signed to be enforceable, so the offer itself is a drafted document, not a verbal number. The core terms:
- Offer price. The dollar amount you’re proposing to pay.
- Earnest money deposit. Usually 1% to 5% of the purchase price, held in a neutral escrow or trust account to show you’re serious.
- Close of escrow date. Often 20 to 60 days after the offer is accepted.
- Possession date. When you actually take physical control of the house. This is usually closing, but the parties can agree in writing to an earlier or later handoff.
Nailing these dates down in the offer prevents arguments later about when keys change hands.
Contingencies That Protect You
Contingencies are conditions written into the contract that have to be met for the deal to proceed. If one fails inside its deadline, you can typically walk away and get your deposit back.
The home inspection contingency gives you a window, often 5 to 15 days, to have the property inspected. Depending on how the contract is written, you may be able to withdraw or renegotiate for repairs if the inspection turns up significant problems.
The appraisal contingency ties the deal to the property appraising at or above a set value. If it comes in low, you can renegotiate the price or cancel.
The financing contingency sets a deadline for you to secure final mortgage approval. If the lender denies the loan despite your good-faith efforts, you can exit without losing your earnest money.
In competitive markets, buyers sometimes add terms that cut the other way. An escalation clause automatically raises your offer, up to a stated ceiling, if the seller receives higher competing bids. An appraisal-gap term commits you to covering some or all of the difference in cash if the appraisal comes in below your offer. That clause can override the protection a standard appraisal contingency would give you, so read it carefully before you sign.
Disclosures and Addenda
Federal law requires sellers of most housing built before 1978 to provide lead-based paint disclosures, including an information pamphlet and an opportunity for the buyer to negotiate for a lead risk assessment or inspection.
Offers also commonly travel with addenda covering specific parts of the deal:
- The type of financing you’re using
- Timelines for professional inspections
- A condition that your current home sell first
- Which personal property, such as appliances, stays with the house
- Appraisal-gap provisions
How the Back-and-Forth Plays Out
Your agent delivers the signed offer to the listing agent. The document carries an expiration, usually anywhere from a few hours to three days out. Within that window the seller has three options: accept, reject, or send back a written counter-offer.
A counter-offer is treated as a rejection of your original bid combined with a new proposal, typically a different price, closing date, or contingency terms. You can then accept, reject, or counter again. The exchange continues until both sides sign the same version or walk away.
When a seller has multiple interested buyers, they may ask everyone to submit their highest and best offer by a set deadline. Response windows in these situations are often compressed, running from a few hours to several days, and buyers frequently decide whether to raise their price or waive contingencies to stand out. The seller can negotiate with one buyer or move among several until they land on terms they like.
A bid is generally considered accepted once all parties have signed the document and it has been delivered back to both sides. In some states, that signing kicks off an attorney-review period, or a separate phase in which a lawyer drafts the final contract, before the deposit becomes nonrefundable. Once that period passes or, where it doesn’t apply, once the signed document is delivered, you have a legally enforceable contract that governs the rest of the purchase.
When Your Earnest Money Is at Risk
Earnest money is generally refundable if you cancel inside the window of a contingency you included. If you walk away without a legal reason to exit, the seller can often claim the deposit. If the two sides disagree about who gets the money, the escrow holder may require a signed mutual release or a court order before releasing it.