How to Review and Respond to Purchase Offers

You Got an Offer — Now What?

Getting your first offer is exciting, but this is where discipline matters most. Don't respond emotionally. Take your time (you typically have 24-72 hours to respond), review every detail, and consult your real estate attorney before signing anything.

The Anatomy of a Purchase Offer

A standard purchase offer includes these key elements:

Purchase price — What the buyer is willing to pay
Earnest money deposit — Good faith deposit (typically 1-3% of purchase price). Held in escrow. Higher = more serious buyer.
Financing terms — Cash, conventional, FHA, VA, or other. Includes pre-approval letter.
Contingencies — Conditions that must be met for the sale to proceed (inspection, appraisal, financing, sale of buyer's home)
Closing date — When the sale will be finalized (typically 30-60 days)
Items included/excluded — Appliances, fixtures, window treatments, etc.
Buyer agent compensation — What the buyer expects the seller to contribute toward their agent's fee
Expiration — When the offer expires (usually 24-72 hours)

Red Flags in Purchase Offers

No pre-approval letter — A pre-qualification letter is NOT the same as pre-approval. Pre-approval means the lender verified the buyer's income, assets, and credit. Require it.
Extremely low earnest money — Less than 1% signals a buyer who isn't fully committed
Excessive contingencies — Sale of buyer's home contingency is the riskiest. It means your deal depends on their deal closing first.
Unreasonable closing timeline — Less than 21 days is aggressive. More than 90 days may indicate the buyer isn't ready.
Escalation clauses without caps — Some offers include "I'll beat any other offer by $X up to $Y." Make sure there's a cap.

Your Four Options

Accept — Sign the offer as-is. You're now under contract.
Counter — Change one or more terms and send it back. Most common response.
Reject — Decline the offer outright. Appropriate for insultingly low offers or offers with unacceptable terms.
Let it expire — Do nothing and let the deadline pass. Same effect as rejecting but less direct.

How to Write an Effective Counter-Offer

Change only what matters — don't counter on every single term or you'll overwhelm the buyer
Prioritize: price is usually #1, but closing date, contingency timelines, and included items also have negotiating value
Be reasonable — a counter that's only slightly below your asking price keeps the buyer engaged
Set a short expiration (24-48 hours) to maintain momentum
Have your attorney draft or review the counter-offer

After Accepting: What Happens Next

Earnest money deposited — Buyer deposits earnest money into escrow within the agreed timeframe (usually 3 business days)
Inspection period — Buyer conducts inspection (usually 7-14 days). This often leads to a second round of negotiation.
Appraisal — If buyer is financing, the lender orders an appraisal. If it comes in low, expect renegotiation.
Loan processing — Buyer's lender processes the mortgage (2-4 weeks)
Title search — Title company verifies clear title to the property
Final walkthrough — Buyer inspects the property 1-2 days before closing
Closing — Sign documents, transfer keys, receive funds

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Frequently Asked Questions

How long do I have to respond to an offer?

The offer itself specifies an expiration date, typically 24-72 hours. You should respond within this timeframe. If you need more time, ask the buyer's agent for an extension — most will grant 24 additional hours.

Should I accept the first offer?

It depends on the terms. If the offer is at or above asking with clean terms (strong financing, few contingencies, reasonable timeline), accepting quickly can be smart. But you can almost always improve terms with a counter-offer.

What if the appraisal comes in low?

You have options: reduce the price to the appraised value, split the difference with the buyer, ask the buyer to make up the gap in cash, or cancel the deal if you can't agree. Your attorney can advise on the best approach.

Can I accept another offer while under contract?

No. Once you accept an offer and are under contract, you cannot accept another offer. However, you can accept 'backup offers' — these automatically become the primary contract if the first deal falls through.

What is earnest money and can I keep it?

Earnest money is a good faith deposit (1-3% of purchase price) held in escrow. If the buyer backs out without a valid contingency reason, you may be entitled to keep it. If the buyer exercises a contingency (inspection, financing), they typically get it back. Your attorney can advise on your specific situation.