Anatomy of a Purchase Offer
A purchase offer (formally called a "contract" in Texas) has many components beyond just the price. Understanding each element helps you craft a stronger overall package.
Purchase Price
The amount you're offering to pay for the property. In Texas, this is typically negotiable from the listing price based on market conditions, property condition, and competition.
Earnest Money
A deposit (typically 1-3% of purchase price in DFW) that shows you're serious. This goes into escrow and is applied to your closing costs - but can be forfeited if you back out without a valid contingency.
Financing Terms
How you'll pay - conventional, FHA, VA, cash, etc. Cash offers are strongest; conventional with 20%+ down is next. FHA/VA loans have more requirements sellers may view as hurdles.
Down Payment Amount
The percentage you'll pay upfront. Higher down payments reduce lender risk and signal financial strength to sellers. They also mean smaller loans and lower monthly payments for you.
Closing Date
When you'll complete the purchase. Standard in Texas is 30-45 days. Faster can be attractive to sellers; slower may work if they need time to find their next home.
Contingencies
Conditions that must be met for the deal to proceed. Common ones include financing, appraisal, inspection, and sale of current home. Fewer contingencies = stronger offer, but more risk for you.
Earnest Money: How Much Should You Offer?
Earnest money is your "good faith" deposit that shows the seller you're serious. If you complete the purchase, it's credited toward your down payment or closing costs. If you back out without a valid reason, you could lose it.
Earnest Money Calculator
Recommended Range for DFW:
When 1% Works
- Slower market conditions
- Home has been listed 30+ days
- Few competing buyers expected
- You need to preserve cash
When to Go Higher
- Multiple offers expected
- Hot neighborhood/price point
- Home just hit market
- You really want THIS house
In Texas, you have an "option period" (typically 7-10 days) where you can back out for ANY reason and only lose your option fee (usually $100-$500), not your earnest money. This is your protection - don't skip it to make your offer look stronger.
Understanding Contingencies
Contingencies are your "exit doors" - conditions that let you back out of the deal and keep your earnest money if something goes wrong. The catch: more contingencies mean more ways the deal could fall apart, which makes sellers nervous.
For first-time buyers, keep all standard contingencies in place. The risk of waiving them far outweighs any competitive advantage. If you're in a multiple-offer situation, there are better ways to strengthen your offer than removing your safety nets.
Strategies to Strengthen Your Offer
If you're competing with other buyers, here are ways to make your offer more attractive without taking on unreasonable risk.
Increase Earnest Money
Going from 1% to 2-3% shows serious commitment. This money still goes toward your purchase, so it's not "extra" cost - just timing.
Get Fully Underwritten
Go beyond pre-approval to full underwriting before making offers. This means your loan is essentially guaranteed, making financing risk nearly zero.
Shorten Option Period
Instead of 10 days, offer 7 days. You can still do inspections and due diligence - just on a tighter timeline.
Increase Option Fee
Bump your option fee from $200 to $500 or more. This is non-refundable if you back out, showing you're confident you'll proceed.
Offer Flexibility on Closing
Ask the seller's preferred closing date and accommodate it. Many sellers value timing as much as price.
Appraisal Gap Coverage
Agree to cover a gap (up to X amount) if the home appraises below your offer price. Only do this if you have the cash reserves.
Reduce Seller Concessions Ask
If you were planning to ask the seller to pay closing costs, consider reducing or eliminating this request.
Include Pre-Approval Letter
Always include your pre-approval letter showing you're qualified for the loan amount. This is table stakes, but some buyers forget.
The Offer Timeline
Understanding the typical timeline helps you stay prepared and responsive. In competitive markets, speed matters.
Be Ready to Move Fast
- Have pre-approval letter ready
- Know your maximum budget firmly
- Earnest money funds accessible
- Clear schedule for quick tours
- Agent available evenings/weekends
Response Possibilities
- Accepted: Move to option period
- Countered: Negotiate terms
- Rejected: Seller chose another offer
- Multiple counter: Best-and-final request
- No response: Follow up through agent
Common Offer Mistakes to Avoid
Offering Your Maximum First
Starting with your highest possible price leaves no room for negotiation and may lead to overpaying if you could have gotten it for less.
Waiving All Contingencies
Removing all protections to "win" can result in buying a house with hidden problems or losing your earnest money if financing falls through.
Lowballing in Hot Markets
Offering 10-15% below asking on a competitively priced home usually just annoys sellers and wastes everyone's time. You won't even get a counter.
Being Slow to Respond
Taking days to respond to a counter offer signals lack of seriousness. In hot markets, sellers may move on to backup offers.
Forgetting Proof of Funds
Submitting an offer without your pre-approval letter or proof of funds makes sellers question if you can actually close.
Getting Emotional
Falling in love with a house before you own it can lead to overpaying, waiving important protections, or crushing disappointment.
About "Love Letters" to Sellers
You may have heard about writing personal letters to sellers explaining why you love their home and why they should pick you. Here's what you need to know:
Even well-intentioned letters can backfire. Mentioning your family, religion, occupation, or where you're from can make sellers uncomfortable about potential discrimination claims - even if they would have chosen you anyway.
What Works Better
Let your offer terms speak for themselves. If you want to stand out beyond the numbers:
- Be flexible on closing timeline (ask agent what seller prefers)
- Offer a rent-back if seller needs time to move
- Increase earnest money to show commitment
- Get fully underwritten to minimize financing risk
- Have your agent call the listing agent to discuss (relationships matter)
Build Your Offer Strategy
Use this interactive tool to map out your offer approach before you find the right home.
Offer Strategy Builder
Your Offer Summary
Your offer is competitive. Consider getting fully underwritten to move from "strong" to "very strong."