How to structure an offer

How do I structure an offer on a house?

Every offer has the same core components. How you balance them determines whether you win—and on what terms.

Price: What you're offering to pay. This should be based on comparable sales, current competition, and days on market—not the Zestimate or what you "feel" the home is worth.

Earnest money deposit: A good-faith deposit that shows you're serious. Typically 1-3% of the purchase price in West Chester, Garnet Valley, Kennett Square, Downingtown, Media, Newtown Square, and Chadds Ford.

Contingencies: Conditions that must be met for the deal to proceed—inspection, financing, appraisal. These protect you, but too many (or too broad) can weaken your offer.

Closing timeline: When you're proposing to close. Flexibility here can matter as much as price to some sellers.

Additional terms: Everything else—rent-back arrangements, included items, who pays what costs. These details can make or break an offer.

How much earnest money should I put down?

In our area, earnest money typically ranges from 1-3% of the purchase price. On a $500,000 home, that's $5,000 to $15,000.

Why it matters: Earnest money signals commitment. A larger deposit tells the seller you're serious and have skin in the game. In competitive situations, a strong deposit can tip the scales.

What happens to it: Your earnest money is held in escrow and credited toward your down payment and closing costs at settlement. It's not "extra" money—it's part of what you're already paying.

Risk: If you back out for reasons not covered by your contingencies, you may forfeit your earnest money. This is why contingencies exist—they define the conditions under which you can exit and get your deposit back.

In a normal market, 1-2% is standard. In competitive situations, 2-3% (or more) can strengthen your position.

What contingencies should I include?

Contingencies protect you—but each one also gives the seller a reason to worry that the deal might fall through. Here are the standard ones:

Inspection contingency: Allows you to have the home professionally inspected and negotiate repairs, credits, or exit the deal based on what's found. This is your main protection against hidden problems.

Financing contingency: Protects you if your mortgage falls through. If the lender doesn't approve your loan, you can exit without losing your deposit.

Appraisal contingency: Protects you if the home appraises below your offer price. If the appraisal comes in low, you can renegotiate or exit. Some buyers strengthen their offer by pairing or replacing the standard appraisal contingency with appraisal gap coverage—a pre-commitment to cover some or all of a shortfall in cash. See the dedicated section below for how that works.

Home sale contingency: Makes your purchase dependent on selling your current home first. This protects you but significantly weakens your offer—sellers prefer buyers who can close without this uncertainty.

In competitive situations, buyers sometimes waive or limit contingencies. This is a risk/reward calculation: removing contingencies strengthens your offer but increases your exposure. Only waive what you can afford to lose.

Should I offer asking price?

It depends. Asking price is a starting point, not a rule.

When to offer at or above asking: When the home is priced competitively, you expect multiple offers, or comparable sales support the price. In hot markets, asking price may be the minimum to compete.

When to offer below asking: When the home has been on market 30+ days without offers, comparable sales suggest overpricing, or there are condition issues that justify a discount.

How to know: Look at the data. How does the list price compare to recent sales of similar homes? How long has it been on market? Have there been price reductions? What's happening with competing listings?

Your agent should be able to show you this analysis. If you're guessing, you're either overpaying or losing to better-informed buyers.

How do I make my offer stand out to sellers?

Price gets attention, but terms win deals. Here's what sellers value beyond the number:

Strong financing (or cash): A pre-approved buyer with solid financials is less risky than one who "should" get approved. Cash offers eliminate financing risk entirely.

Larger earnest money: Shows commitment and gives the seller confidence you won't walk away easily.

Flexible closing timeline: If the seller needs time to find their next home, offering a later close date (or rent-back arrangement) can be worth more than extra dollars.

Fewer contingencies: Every contingency is a potential exit point. Removing or limiting them signals confidence and reduces seller anxiety.

Clean, simple terms: Offers with lots of special requests, complicated conditions, or unusual terms create friction. Simple deals close.

The key is finding out what the seller actually prioritizes. Some need speed. Some need flexibility. Some just want the highest number. Your agent should be asking the listing agent what matters most.

The sections below go deeper on the financial structure behind a strong offer—what the seller actually walks with, how transfer tax and buyer agency compensation move between the two sides, and how appraisal gap coverage removes the biggest source of deal risk.

How does an offer's structure affect what the seller actually walks with?

When a listing agent receives an offer, the first calculation they run isn't whether the price matches the list price. It's a back-of-the-envelope estimate of what the seller will actually walk away with. That number is called gross proceeds, and for the seller, it often matters more than the headline price.

Gross proceeds is the price paid by the buyer, minus the costs that show up on the seller's side of the settlement sheet that the offer controls—specifically:

• The seller's share of state and local transfer tax
• Any amount the seller has agreed to pay toward the buyer's agent compensation
• Any concessions the seller has agreed to give (closing cost credits, repair allowances, home warranty)

Gross proceeds does not subtract the seller's own expenses—specifically, the compensation the seller pays to their own listing agent, which is negotiated privately between the seller and their listing broker before the house ever goes on the market. Those numbers aren't part of what the buyer offers. They're already settled.

Why this matters: Two offers at identical prices can produce meaningfully different gross proceeds depending on structure. An offer at $500,000 that absorbs the seller's transfer tax and asks for no compensation contribution can deliver more to the seller than an offer at $505,000 with standard splits and a full compensation ask. A listing agent comparing two close offers will run this math before they recommend anything to their seller.

The three levers below are what let a buyer change the gross proceeds number without raising the headline price.

Can I offer to pay the seller's transfer tax?

Yes. Pennsylvania and Delaware both charge transfer tax on real estate sales, and the contract can assign the burden however the parties agree—not just the longstanding 50/50 split.

Pennsylvania (Chester, Delaware, Montgomery counties): 1% state realty transfer tax plus (in most municipalities) 1% local transfer tax, for a combined 2% of the sale price. Longstanding practice is a 50/50 split—1% buyer, 1% seller. On a $500,000 home, that's $5,000 on each side. The local rate varies by township or borough, so confirm the exact rate with your closing attorney before drafting.

Delaware (New Castle County): 2.5% state plus 1.5% county, for a combined 4%—also typically 50/50 by practice, so 2% each side on a $500,000 home.

How a buyer uses this as a lever: A buyer can propose to absorb some or all of the seller's share of transfer tax as a term of the offer. Every dollar the buyer absorbs is a dollar that doesn't come out of the seller's pocket—it's a direct increase to gross proceeds. Unlike a price increase, a transfer tax absorption doesn't raise the appraisal hurdle, doesn't increase the loan amount, and doesn't change the seller's capital gains basis. It's a clean transfer of cash that lands entirely in the seller's pocket.

The tradeoff: Transfer tax isn't financeable. Whatever the buyer absorbs has to be paid in cash at closing, on top of the down payment and closing costs. For a buyer with strong liquidity, that's not a problem. For a buyer stretched on the down payment, it may not be a realistic lever to pull.

How does buyer agency compensation work in an offer today?

This is the part of offer structure that changed most recently—and the part most buyers misunderstand.

What changed: On August 17, 2024, the National Association of Realtors settlement took effect. Two things changed nationally, including in Pennsylvania and Delaware:

• Compensation offers are no longer published in the MLS. That field is gone.
• Buyers must have a written agreement with their agent before touring a home. The agreement sets what the buyer owes their agent.

The practical consequence: compensation is now handled in two separate, private agreements—one between the seller and the listing agent (settled before listing), one between the buyer and the buyer's agent (settled before touring). Neither is advertised publicly. Neither depends on the other. There is no market rate, no customary rate, and no industry rate for buyer agency compensation—every buyer's agreement is separately negotiated with their own agent.

Where offer structure comes in: Once a buyer has a signed agreement with their agent, they have a decision to make when writing an offer. They can ask the seller to pay some, all, or none of that compensation as a term of the offer. Whatever the seller does not agree to pay, the buyer pays themselves in cash at closing.

Three configurations:

Buyer asks seller to pay the full agreement amount. If the seller agrees, compensation comes from the seller's proceeds. The buyer pays nothing out of pocket for their agent—but every dollar the seller agrees to pay reduces gross proceeds by that same dollar. From a listing agent's perspective, this is the weakest configuration for the seller's bottom line.

Buyer asks seller to pay part. The buyer covers the rest in cash at closing. Gross proceeds drop by only the portion the seller agreed to pay. The offer looks stronger than the full-ask scenario.

Buyer asks seller for nothing and covers the full amount themselves. Cash-heavy for the buyer, but gross proceeds are maximally preserved. This is the strongest buyer-side signal of the three, and the most expensive for the buyer at closing.

The gap is not financeable. Whatever portion the buyer covers themselves has to be cash at closing, on top of down payment, closing costs, and any transfer tax absorption. For a buyer tight on reserves, asking the seller to cover more preserves cash but weakens the offer's gross proceeds. For a buyer with strong liquidity, covering more themselves is often what wins tiebreakers against competing offers.

What is appraisal gap coverage?

Every financed offer is contingent on the lender's appraisal. The lender will only lend against the appraised value of the home, not the agreed-upon purchase price. If the appraisal comes in below contract, the buyer has to renegotiate, walk (via the standard appraisal contingency), or bring the difference to closing in cash. The default outcome is usually a renegotiation—and the seller usually absorbs the cut to save the deal.

Appraisal gap coverage (sometimes called appraisal protection) is a provision a buyer can include in their offer committing to bring cash at closing to cover some or all of an appraisal shortfall, up to a stated limit. Three configurations:

No coverage. The standard appraisal contingency stays intact. If appraisal misses, the buyer can renegotiate, walk, or pay. No pre-commitment—and no downside floor for the seller.

Capped coverage. The buyer commits to cover any appraisal shortfall up to a specific dollar amount. For example: "buyer agrees to cover up to $15,000 in the event the appraisal comes in below contract." If the shortfall is $10,000, the buyer covers it and the deal closes at the original price. If the shortfall is $20,000, the buyer covers $15,000 and the remaining $5,000 has to be renegotiated.

Uncapped coverage. The buyer commits to cover any shortfall, no matter how large. The strongest possible signal of deal certainty, and the most exposed position for the buyer. Rare outside highly competitive multi-offer situations.

Why this matters more in 2025 and 2026: Appraisal shortfalls became more common during the 2020–2022 rapid-appreciation period, when sale prices moved faster than the comparable-sales data appraisers rely on. That trend has cooled in much of the Philadelphia suburbs, but appraisers remain measurably more conservative than they were pre-pandemic. Properties with unusual characteristics—stucco-clad homes, large acreage, recent renovations, or neighborhoods with limited recent sales—still produce appraisal variance. A buyer with even a modest cap (often in the $10,000–$25,000 range, though every situation is different) is offering the seller a real reduction in deal risk.

The seller's floor: With no coverage, the seller's downside is undefined—deal might fall apart, or they might cut $20,000 off the price. With capped coverage, the floor is bounded—worst case, the seller absorbs only the portion of a shortfall that exceeds the cap. With uncapped, the seller's floor equals the baseline gross proceeds regardless of appraisal outcome. When a listing agent presents competing offers, they increasingly frame the analysis as: which offer has the most certain landing spot?

What is an escalation clause?

An escalation clause automatically increases your offer to beat competing bids, up to a maximum cap you set.

Example: "Buyer offers $500,000, escalating in $5,000 increments above any competing offer, up to a maximum of $525,000."

If another buyer offers $505,000, your offer automatically becomes $510,000. If someone offers $530,000, you're out—your cap was $525,000.

Pros: Keeps you competitive without guessing what others might offer. You don't overpay if there's no competition.

Cons: Reveals your maximum to the seller. Not all sellers accept escalation clauses—some prefer "highest and best" offers. In some cases, the seller may simply counter at your cap.

Escalation clauses work best in situations with clear competition where you want to stay in the running without blindly overbidding.

Should I write a personal letter to the seller?

Personal letters used to be a common way to connect with sellers emotionally—especially in competitive situations. Today, they're more complicated.

The case for: Some sellers genuinely care about who buys their home. A thoughtful letter explaining why you love the property can create a connection that tips the scales in a close competition.

The case against: Letters can inadvertently reveal protected characteristics (family status, religion, national origin) that could expose the seller to fair housing concerns. Some listing agents advise their sellers not to read letters at all.

The reality: In most transactions, the terms of your offer matter more than a letter. If your offer is strong, you don't need a letter. If your offer is weak, a letter won't save it.

If you write one, keep it focused on the home and neighborhood—what you love about the property—rather than personal details about your family.

How long should I give the seller to respond?

Offer deadlines (also called expiration dates) create urgency but also signal your expectations.

Standard practice: 24-48 hours is typical for most offers. This gives the seller time to consider without leaving you hanging indefinitely.

Competitive situations: If there's an offer deadline set by the seller (e.g., "all offers due by 5pm Sunday"), you'll follow their timeline, not yours.

Short deadlines: A very short deadline (same day, 12 hours) can pressure the seller but may backfire if they feel rushed or have other offers to consider.

No deadline: Leaving an offer open-ended gives the seller time to shop it around. Not recommended.

Work with your agent to set a deadline that's reasonable for the situation while protecting your ability to move on if needed.

Should I include a home sale contingency?

A home sale contingency makes your purchase dependent on selling your current home first. It protects you from owning two homes—but it significantly weakens your offer.

Why sellers don't like it: They're accepting uncertainty. Your home might not sell, or might not sell in time, and they're back to square one. In competitive markets, they'll often choose a buyer without this contingency.

If you must include one: Consider a "kick-out clause" (also called a "bump clause"). This lets the seller continue marketing the home. If they get another offer, you have a set period (usually 48-72 hours) to either remove your contingency and commit, or step aside.

Alternatives: Some buyers sell their home first and rent temporarily. Others use bridge financing to buy before selling. These approaches let you make a stronger offer, though each has trade-offs.

Your agent can help you think through the options based on your specific situation and local market conditions.

What happens after I submit my offer?

Once your offer is submitted, the seller has three options:

Accept: They sign your offer as-is. You have a deal. The contract is binding, and you move to the next steps (inspections, financing, etc.).

Counter: They come back with changes—different price, different terms, different contingencies. You can accept their counter, counter back, or walk away.

Reject: They decline your offer without a counter. This could mean they have a better offer, or your offer was too far from what they'd accept to negotiate.

Your agent should be in communication with the listing agent throughout this process, getting feedback and understanding where you stand. If there are multiple offers, they should be advocating for your position and gathering intel on how to improve if needed.