Making an offer: contingencies, earnest money, and getting accepted

What an offer actually contains

Every state has a standard residential purchase agreement (often provided by the state Realtor association). The exact form varies, but the structure is roughly the same everywhere.

• Purchase price

  The number that gets quoted in news headlines. Important, but not the only number that matters.

• Earnest money deposit (EMD)

  Typically 1–3% of the price. Held in escrow with the title company or seller’s broker. Goes toward your down payment at closing. You can lose it if you back out for reasons outside your contingencies.

• Down payment + financing

  How much cash you’re bringing, what kind of loan you’re using (Conventional, FHA, VA, USDA), and the interest-rate cap above which you’re no longer obligated. The seller wants to know your money is real.

• Closing date target

  When you want to close. 30–45 days from contract is typical. Faster closings (cash, 21 days) are stronger offers; longer closings can be a deal-breaker for sellers in a hurry.

• Contingencies

  Specific exits — financing, inspection, appraisal, sale of current home — that let you walk away with your earnest money refunded. The fewer and shorter the contingencies, the stronger the offer.

• Personal property included

  Refrigerator? Washer/dryer? Window treatments? Spell it out — what isn’t in writing isn’t included.

• Closing-cost concessions

  Asking the seller to credit you toward closing costs. Common in slower markets. Lender caps how much you can take depending on loan type.

• Inclusions and exclusions

  Built-in items you specifically want (a wall-mounted TV, the swing set, the chickens). Items the seller is excluding (the mirror in the dining room, the stair runner).

The contingencies, explained

Contingencies are the legal exits. Each has a deadline (called the "contingency period" or "objection period"). After the deadline passes without you exercising it, you’ve waived that right. Earnest money is then at risk if you back out.

Financing contingency

Lets you cancel and reclaim earnest money if you can’t get the loan approved. Required by virtually every loan-using buyer. Typical period: 21 days. Waiving the financing contingency makes your offer much stronger but puts your earnest money at risk if underwriting fails.

Inspection contingency

Lets you cancel or renegotiate based on home-inspection findings. Typical period: 7–10 days. You can also waive this — but inspectors find $5k–$50k issues all the time, so waiving is a gamble.

Appraisal contingency

Protects you if the home appraises for less than the purchase price. Without it, if the home appraises low, you must bring cash to make up the difference or lose your earnest money.

Sale-of-home contingency

For buyers who need to sell their current home before closing. Sellers hate this contingency because the timeline depends on a third transaction outside their control. Waivable but rarely accepted in competitive markets.

Title contingency

Lets you cancel if the title company finds defects (liens, easements, boundary disputes) that the seller can’t cure. Usually a baked-in protection rather than an optional item.

How much earnest money to put down

• Typical: 1–3% of purchase price

  On a $400k home, that’s $4,000–$12,000. Goes into escrow within 3 business days of offer acceptance.

• Strong offer: 3–5%

  Signals serious commitment. In a multi-offer situation, a higher EMD can break a tie.

• Cash buyers / luxury: 5–10%

  Sellers expect more skin in the game when the deal isn’t financed.

• Don’t exceed what you can afford to lose

  Earnest money stays at risk through the contingency periods. If your inspection contingency expires and the seller refuses repairs, you’re choosing between losing earnest money or buying a home with known problems.

How the negotiation actually goes

Most offers don’t get accepted at the first price. Here’s what the back-and-forth typically looks like.

• 1. You submit your offer

  Your agent emails the contract to the listing agent with a deadline (often 24 hours). Sellers may have multiple offers stacked — your agent should ask if there’s a deadline already set.

• 2. Seller responds

  Three possible responses: accept (rare on first offer), reject (no counter), or counter. A counter changes one or more terms — usually price, but could be closing date, EMD, or contingencies.

• 3. You counter the counter

  Each round, only one party "owns" the offer. When the seller counters, the ball is in your court. You can accept, walk away, or counter again.

• 4. Best & final

  In multi-offer situations, the seller may ask all offers for "highest and best" — your last shot. Don’t leave room you can’t live with regretting.

• 5. Acceptance

  Both sides sign. The contract is "executed." Earnest money goes to escrow within the deadline. The mortgage clock starts.

Strategies that win without overpaying

• Faster closing. Some sellers value 21 days more than $5,000 extra in price. Talk to your loan officer about how fast you can realistically close.
• Higher earnest money. Costs you nothing if the deal closes (it goes toward your down payment) but signals commitment.
• Letter to the seller — but be careful. Some buyers write a personal letter. This can backfire under Fair Housing law if it reveals protected characteristics. Some jurisdictions have banned letters entirely. Check with your agent.
• Cover the appraisal gap (partially or fully). A clause saying you’ll bring up to $X cash if the appraisal comes in low gives sellers confidence the deal won’t fall apart.
• Flexible closing date / lease-back. Some sellers need 30 days after closing to move out. Offering a free rent-back is genuinely valuable to a stressed seller.
• Pre-inspection. Inspect the home before offering and waive the inspection contingency in a clean way (you already know what you’re buying).

Common questions