What Is Offer to Purchase?
An offer to purchase is your formal bid to buy a property. It spells out the purchase price, earnest money amount, contingencies (inspection, financing, appraisal), and closing date. The seller can accept, reject, or respond with a counter-offer. Once signed by both parties, it becomes a binding contract. For commercial deals, investors often use a letter-of-intent first, then formalize with a purchase agreement. Your earnest money goes into escrow when the offer is accepted.
An offer to purchase is a formal written proposal you submit to buy a property at specified terms—price, earnest money, contingencies, and closing date.
At a Glance
- What it is: A written proposal to buy property at specified terms.
- Why it matters: It's the first binding step—once accepted, you're under contract.
- Key detail: Must include price, earnest money, contingencies, and closing date.
- Related: Counter-offer, letter of intent for commercial.
- Watch for: Missing contingencies leave you exposed if the deal goes sideways.
How It Works
Structure. A typical offer includes the purchase price, earnest money amount and deadline to deposit it, contingencies (inspection, financing, appraisal), closing date, and any special terms (seller concessions, included appliances, repairs).
Submission. Your agent (or you, if unrepresented) presents the offer to the seller or listing agent. The seller has a set time to respond—often 24–48 hours in residential, longer in commercial.
Acceptance or counter. If the seller accepts as-is, you have a contract. More often, they respond with a counter-offer—a different price, different terms, or both. You can accept the counter, reject it, or counter again. The back-and-forth continues until both parties sign.
Binding effect. Once both sign, the offer becomes a binding purchase agreement. Your earnest money goes to escrow. You're obligated to close unless you invoke a contingency and exit per the contract.
Real-World Example
Phoenix triplex, listed at $385,000.
You submit an offer: $372,000, 3% earnest money ($11,160), 10-day inspection contingency, 21-day financing contingency, close in 45 days. Seller counters: $378,000, 5% earnest money, 7-day inspection, 14-day financing. You accept the counter. You wire $18,900 to escrow within 3 days. Inspection finds $4,200 in HVAC repairs. You request a $3,500 credit. Seller agrees. You close 42 days later. The earnest money applies to your down payment.
Pros & Cons
- Puts your intent in writing—no ambiguity about terms.
- Contingencies protect you if inspection, financing, or appraisal fails.
- Earnest money shows seriousness and strengthens your offer.
- Creates a clear path to closing once accepted.
- Binding once signed—you can't walk without invoking a contingency.
- Weak offers get rejected or countered aggressively.
- In hot markets, sellers may favor offers with fewer contingencies.
Watch Out
- Execution risk: Don't waive contingencies to win unless you can afford the downside. No inspection = you own whatever's wrong.
- Compliance risk: State laws govern offer forms and disclosures. Use a licensed agent or attorney in your state.
- Modeling risk: Your offer price affects your cash-on-cash return. Overpay to win and your numbers suffer.
Ask an Investor
The Takeaway
An offer to purchase is your formal bid. Include price, earnest money, contingencies, and closing date. The seller accepts, rejects, or counters. Once both sign, you're under contract. Use contingencies to protect yourself—don't waive them to win unless you're prepared for the risk.