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When you find a home you’d like to buy, your next step is to submit an offer to the seller. But an offer isn’t just a piece of paper with a number on it. Instead, it’s filled with all types of terms and legalities that both you and the seller should fully understand before you sign it. 

Once the seller approves your offer, you’ll both sign off on it and the deal is sealed once all conditions are met. The question is, how do you make an offer on a house, and what’s involved in the process?

Types Of House Offers

There are two different offers when buying a home: firm and conditional offers. 

Firm Offers 

An offer that has no conditions is referred to as a ‘firm’ offer. Once both buyer and seller sign the agreement of purchase and sale, the sale is final and the deal is sealed. 

When a buyer makes an offer void of conditions and the seller accepts the offer, the buyer cannot back out of the deal and is now legally required to follow through with the transaction.

Firm offers are more common in competitive real estate markets where inventory is very tight and buyers are plentiful. In a market like this, there are tons of buyers competing for the same homes. In this case, buyers must ensure that their offers are as attractive as possible to the seller, and this often entails putting in a “clean” offer that’s void of conditions.

Should You Make A Firm Offer? 

In a multiple offer situation, a firm offer can give a buyer an edge over other buyers. Sellers prefer firm offers because there’s little chance for the offer to fall through. Since there are no conditions that must be fulfilled or waived — such as financing or home inspection conditions — there’s less risk of any issues that would otherwise arise from the presence of these conditions. 

Buyers who make an offer with no conditions must ensure that they have the finances to afford the purchase and are prepared to accept any potential issues with the home that a home inspector might have identified prior to the deal closing. For this reason, the buyer is assuming more risk.

Conditional Offers

A conditional offer is one that includes conditions. In order for the transaction to go through, these conditions must either be fulfilled or waived before their respective due dates. To be valid all conditions must be met prior to the transfer of title to the property.

The sale is only complete after all conditions are met. If the conditions are met, the offer is considered “firm.” 

Should You Make A Conditional Offer? 

Generally, it’s best to make a conditional offer as it is meant to protect the buyer. For instance, a financing condition gives the buyer time to secure a mortgage before committing to the sale. If the buyer cannot get final mortgage approval after putting in an offer, they can back out of the deal without being subject to any consequences in most cases. 

In the same way, a home inspection condition gives the buyer some time to have the home inspected by a professional. If any significant issues are uncovered that the buyer is not comfortable with, they can walk away from the deal without repercussion. 

Lookout Why You Should Never Skip A Home Inspection In Canada

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Lookout Why You Should Never Skip A Home Inspection In Canada
Why You Should Never Skip A Home Inspection In Canada

What’s Included In A House Offer? 

Certain things are typically included in an offer, such as the following:

  • Offer price
  • Deposit amount
  • Closing date
  • Conditions (ie. financing or home inspection condition)
  • Chattels included (ie. property that is not attached to the home)
  • Equipment that is owned vs. rented
  • Number of buyer visits permitted before closing
  • Condition the home is to be left in
  • Property survey (if applicable)

When Do You Make An Offer On A House?

Under normal circumstances, you can put in an offer on a home at any time after a home has been listed for sale. In other situations, sellers may establish a specific offer date in anticipation of multiple offers coming at the same time and in hopes of driving the price higher. During this time, the seller can pick which offer to accept. 

Ultimately, your offer’s submission depends on how the seller chooses to handle them. 

How To Negotiate A House Offer? 

When you put in an offer on a home, you’re free to do some negotiating to keep the price as low as possible while ensuring the offer price is fair. 

Your negotiating power will be influenced by current housing market conditions. For instance, if it’s a seller’s market — which is characterized by low inventory and high demand among buyers — you won’t have as much power. On the other hand, in a buyer’s market — which means there are plenty of houses to go around to meet slow demand — you’ll have the upper hand. 

Keep in mind that the offer price is not the only thing that can be negotiated in an offer. Other factors can be negotiated with the seller, including the deposit amount, closing date, repairs, chattels to include, and so forth. 

Learn how to make a preemptive bully offer

Do You Need A Home Deposit When You Make An Offer On A House? 

Yes, a home deposit is an amount provided upfront to the seller at the time the house offer is made. After a house offer is accepted, you’ll need to pay the home deposit amount promised in your offer. 

It’s an act of good faith and gives the seller some reassurance that you are serious about following through with the deal. If you walk away from the deal, you risk forfeiting your deposit. 

The deposit amount goes towards the down payment at closing. The money is held in an account with the listing brokerage until the funds are released when the transaction goes through. 

How Much Is A Home Deposit? 

Generally, at least 5% of the house price is offered as a deposit.  However, depending on the temperature of the market and where you’re buying the home, you may want to offer a larger deposit. This can help you stand out from other buyers. This is particularly true if you’re in the midst of a bidding war. 

Legalities to Keep in Mind 

When both buyer and seller sign off on the purchase agreement, both parties are legally bound to the contract. That means you’ll be legally required to follow through with your obligations as set forth in the agreement. 

That’s why it’s so important that you read through the agreement carefully and enlist the services of a professional and experienced real estate agent to ensure that you’re not signing anything that you are unable to adhere to. As a buyer, you also have the opportunity to have a lawyer review the contract before the deal is sealed. 

Can You Walk Away After Making an Offer on a House?

As long as you have conditions on your offer, you have the option to back out of the deal without consequence. As mentioned, inserting conditions in your offer makes it “conditional,” which means you can walk away from the deal if you are unable or unwilling to fulfill the conditions. In this case, you can take your deposit money and walk away.

That said, you may also back out of the deal even after the sale goes firm, but you’ll likely risk losing your deposit money. You may also risk potential litigation from the seller. 

Learn what happens when you walk away from your offer on a house. 

Home Offer FAQs

When is home insurance due?

Your lender will require that you purchase a home insurance policy when you apply for a mortgage. Not only will this protect the lender, but it will also provide you with coverage before you move into your new home.

Do you need title insurance?

Title insurance is not mandatory, but many lenders require it. This type of insurance will protect you against any risks associated with the title of the property, such as liens that may exist or the unlawful sale of the home by someone who is not actually the owner.

Are there any government programs to help me purchase a house? 

Yes, there are a number of programs offered by the government to help Canadians buy a house. This includes the Home Accessibility Tax Credit (HATC), the First-Time Homebuyer Tax Credit (HBTC), and the GST/HST New Housing Rebate. 

Bottom Line

Making an offer on a home is a big decision, so you’ll want to make sure that you’ve covered everything and considered all aspects before submitting one. Be sure to team up with a seasoned real estate agent to help you draft up a solid offer that will make you stand out against other buyers while protecting you at the same time.

Lisa Rennie avatar on Loans Canada
Lisa Rennie

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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