Reading offers and negotiating your own sale

An offer is not a number. It is a short contract, and the number is only its first line. Owners who fixate on price alone accept deals that fall apart and reject ones that would have closed clean. Learn to read the whole thing.

What an offer actually contains

Every standard offer covers the same six things: the price and any concessions, the earnest money deposit, the financing, the contingencies, the closing date and possession terms, and what conveys with the home. Read each part before you react to the price.

• The price, and any concessions the buyer asks you to pay, such as money toward their closing costs
• Earnest money, the deposit that shows the buyer is serious
• The financing: cash, or a loan, and what type
• The contingencies, the conditions that let the buyer walk and keep their deposit
• The closing date and possession terms
• What conveys with the home, like appliances or fixtures

Before you sign anything

Before you sign, have someone whose job is contracts read the offer: a real estate attorney or the title or escrow officer who will run the closing. In several states an attorney must conduct the closing anyway, and even where one is optional, a flat-fee contract review usually costs a few hundred dollars against a six-figure transaction. They check that contingency deadlines, earnest money terms, and title and possession language match what you think you agreed to. This guide shows you how to evaluate an offer; it is not a substitute for that review.

Judge how strong the buyer is

Two offers at the same price are not equal. A cash buyer with proof of funds carries no financing or appraisal risk and can usually close fast. A financed buyer is fine, but the quality of their financing matters.

A pre-approval letter is worth far more than a pre-qualification, because the lender has actually looked at their numbers. A larger down payment is steadier than a thin one. And the earnest money tells you something too: it is the deposit a buyer puts down to show good faith, held by a neutral third party, and a buyer who puts up more has more to lose by walking away.

Verify the letter. Call the lender using a phone number you look up independently rather than the one printed on the letter, and confirm the pre-approval is current, covers the offer amount, and was based on reviewed income and asset documents.

The contingencies, and what they mean for you

Each contingency is an exit the buyer can take. None are unusual, but more of them, and longer windows, mean more ways the deal can end before closing.

The inspection contingency lets the buyer cancel or ask for repairs after inspecting. The appraisal contingency lets a financed buyer renegotiate if the appraisal comes in low, since their lender will only finance the appraised value. The financing contingency lets them out if their loan falls through. A sale-of-home contingency, where the buyer must sell their current place first, is the one to be most wary of, because it ties your sale to a home you cannot see.

Most signed deals do hold. In NAR’s December 2025 agent survey, about five percent of contracts were terminated in the prior three months, and fourteen percent saw a delayed settlement, with appraisal issues behind part of the delay. The typical contract takes around thirty days to close, and most lenders work in a thirty to sixty day window. None of that should scare you. It is the reason terms that lower risk are worth weighing against a slightly higher number.

The appraisal gap, and the clause that closes it

An appraisal gap coverage clause is the concrete fix for a low appraisal: the buyer agrees in writing to bring up to a set amount of extra cash if the lender’s appraisal comes in below the agreed price.

The fear it answers is worth naming. Your home has been under contract for weeks, the buyer is financed, and then the appraisal lands below the agreed price. A lender will only lend against the appraised value, so the gap has to come from somewhere or the deal stalls and your sale reopens on price.

Here is how the clause works in practice. Say a buyer offers 450,000 dollars with gap coverage up to 20,000 dollars. If the home appraises at 435,000 dollars, the buyer covers the 15,000 dollar difference in cash, while the lender still bases the loan on 435,000 dollars. This is stronger for you than a fully waived appraisal contingency, because it is capped and explicit, and a weaker offer may carry no gap protection at all.

Low appraisals are real but not constant. In a representative Fannie Mae dataset, about eight percent of appraisals came in two percent or more below contract. When that happened, the probability the buyer renegotiated a lower price jumped from eight percent to fifty-one percent, and the chance the sale was delayed or canceled rose from twenty-five percent to thirty-two percent. Knowing the gap clause before you sign tells you which outcome is even on the table.

Earnest money: how much, who holds it, and how disputes resolve

Earnest money is the deposit a buyer puts up to show they mean it. One to three percent of the price is common, deposits range from one to ten percent depending on the market, and some areas use a fixed figure such as 5,000 to 10,000 dollars. A larger deposit signals commitment, because it is what the buyer stands to lose if they walk for a reason the contract does not allow.

It does not go into your pocket. The deposit sits with a neutral third party, usually a title or escrow company or a real estate attorney, and some states have specific rules about who may hold it. That neutrality matters most when a deal collapses.

A common assumption is that if the buyer walks, you simply keep the deposit. The real mechanics are slower. If the buyer cancels for a reason the contract allows, an inspection, appraisal, or financing contingency that is not met, the deposit is refunded to them. If the buyer breaches the contract or backs out after their contingencies expire, it can be forfeited to you. But if both sides claim it, the escrow holder cannot just hand it over. It stays frozen until both parties sign a release or a court or arbitrator rules. That is why many sellers choose to release a modest deposit and re-list rather than tie up the money in a fight.

Compare offers on net proceeds, not the headline price

Compare offers on what actually reaches you: reduce each one to its net by subtracting requested concessions, repair credits, and any costs the buyer asks you to pay. A 300,000 dollar offer asking for 9,000 dollars in concessions nets the same as a 291,000 dollar clean offer. The headline price is the part that tells you the least.

Concessions are routine, not a red flag. In the first quarter of 2025, Redfin found that 44.4 percent of sales included a seller concession, up from 39.3 percent a year earlier and just shy of the 45.1 percent record set at the start of 2023. Most are money toward the buyer’s closing costs or a rate buydown. To run the net comparison on a live offer, you can evaluate what an offer actually nets you, terms included, in a couple of minutes.

One constraint to know before you agree to a credit: the buyer’s loan caps how much you can contribute. Conventional loans allow three to nine percent depending on the loan-to-value ratio, FHA allows up to six percent, VA up to four percent, and USDA up to six percent. If you agree to more than the cap, the buyer’s lender will not allow it.

If the buyer brings an agent

If your buyer comes with an agent, expect a request that you pay that agent’s fee, commonly 2 to 3 percent of the price. Since the NAR settlement rule change took effect in August 2024, buyer-agent compensation is no longer assumed or set by the listing side: it is an openly negotiated line item. Treat it exactly like a concession in your net-proceeds math: a full-price offer asking 3 percent for the buyer’s agent nets less than an offer 2 percent below asking with no compensation request. You can accept, counter the percentage, or decline, and the buyer can pay their own agent. For the background on what changed and how sellers handle it now, see the commission shift.

Counter on terms, not just the number

When you counter, you do not have to move the price. You can tighten a timeline, ask for a larger deposit, change the closing date to suit you, or trade a small price concession for a faster, cleaner close. Respond quickly, keep everything in writing on your state’s standard form, and do not tell the buyer your lowest acceptable number. Negotiation is information, and you control yours.

How you actually respond

Most offers carry an expiration, often 24 to 72 hours. You respond in writing in one of three ways: sign as-is to accept, reject, or sign a counteroffer that changes specific terms, which voids the original. Unrepresented sellers usually get the forms from the attorney or title company handling the closing or from a state-specific forms service; many Realtor association forms are restricted to members, so do not plan on those.

When you accept

Once you and the buyer agree and sign, you are under contract and you open escrow. If you had strong backup interest, ask those buyers if they want to be a written backup, so you are not starting over if the first deal falls through. From here, the closing process takes over.

Sources used on this page

Every legal, tax, and process claim on this page traces to one of these. We re-check them on a schedule and date the page when anything changes.

1. Mortgages key terms (earnest money, contingencies)Consumer Financial Protection Bureau · consumerfinance.gov
2. My appraisal is less than the sale price. What does that mean for me?Consumer Financial Protection Bureau · consumerfinance.gov
3. Seller Concessions (definition, typical range, loan-type caps)National Association of REALTORS · nar.realtor
4. Home Seller Concessions hit 44.4% of sales in Q1 2025Redfin News · redfin.com
5. Housing Market Effects of Appraising Below Contract (low-appraisal frequency and outcomes)Fannie Mae · fanniemae.com
6. Earnest Money in Real Estate: Refunds, Returns and RegulationsNational Association of REALTORS · nar.realtor
7. REALTORS Confidence Index, December 2025 (contract termination, delay, closing-time figures)National Association of REALTORS · cms.nar.realtor
8. Topic No. 701, Sale of Your Home (capital gains exclusion)Internal Revenue Service · irs.gov

Common questions

How much earnest money is normal?

It varies by market, but one to three percent of the price is common. A larger deposit signals a more committed buyer, since it is the money they stand to lose if they walk for a reason the contract does not allow.

Should I take a lower cash offer over a higher financed one?

Often yes. Cash removes the financing and appraisal risk entirely, so it usually closes faster and is far less likely to fall apart. Whether the certainty is worth the gap is your call, but do not dismiss a strong cash offer just because the headline number is lower.

What is an appraisal contingency?

It lets a buyer back out or renegotiate if the lender's appraisal comes in below the agreed price. Because a lender will only finance the appraised value, a low appraisal can stall a deal unless the buyer covers the difference in cash.

What happens to the earnest money if the buyer backs out?

It depends on why they walk. If the buyer cancels for a reason the contract allows, for example an inspection, appraisal, or financing contingency that is not met, the deposit is returned to them. If the buyer breaches the contract or changes their mind after their contingencies have expired, the deposit can be forfeited to you. In practice, a disputed deposit is not paid out automatically: the escrow holder will not release it until both sides agree in writing or a court or arbitrator decides, so a fight over earnest money can tie the money up for a while. Source: NAR, Earnest Money in Real Estate, https://www.nar.realtor/magazine/real-estate-news/sales-marketing/earnest-money-in-real-estate-refunds-returns-and-regulations

How likely is my deal to fall through after we sign?

Most signed contracts do close. In NAR's December 2025 agent survey, about five percent of contracts were terminated in the prior three months, and fourteen percent saw a delayed settlement, with appraisal issues behind a portion of the delays. That is why the terms that reduce risk, a strong deposit, clean financing, and shorter contingency windows, are worth weighing against a slightly higher price. Source: NAR REALTORS Confidence Index, December 2025, https://cms.nar.realtor/sites/default/files/2026-01/2025-12-realtors-confidence-index-01-21-2026.pdf

The buyer's lender will only fund the appraised value. What can I do if the appraisal comes in low?

You have a few moves and none of them require panic. You can hold firm and ask the buyer to cover the gap in cash, lower the price to the appraised value, split the difference, or, if the comparable sales used look wrong, support the buyer in requesting a reconsideration of value from the lender. Low appraisals are uncommon but consequential: in a Fannie Mae study about eight percent of appraisals came in two percent or more below contract, and when that happens the odds of a renegotiated price jump from eight percent to fifty-one percent. Knowing the gap clause in the offer ahead of time tells you which of these is even on the table. Sources: CFPB, https://www.consumerfinance.gov/ask-cfpb/my-appraisal-is-less-than-the-sale-price-what-does-that-mean-for-me-en-2007/ ; Fannie Mae, https://www.fanniemae.com/media/18751/display

The buyer is asking me to pay some of their closing costs. Is that normal?

Yes, it is one of the most common things buyers request, and it does not mean the buyer is weak. In Q1 2025, Redfin found 44.4 percent of sales included a seller concession, often money toward closing costs or a rate buydown. What matters to you is the net: a 300,000 dollar offer that asks for 9,000 dollars in concessions nets the same as a 291,000 dollar clean offer, so compare offers on what lands in your pocket, not the headline price. Note that the buyer's loan caps how much you can credit, for example up to six percent on FHA and up to four percent on VA. Sources: Redfin, https://www.redfin.com/news/home-seller-concessions-march-2025/ ; NAR, https://www.nar.realtor/closing/seller-concession

Should someone review the offer before I sign it?

Yes. Before you sign, have someone whose job is contracts read the offer: a real estate attorney or the title or escrow officer who will run the closing. In several states an attorney must conduct the closing anyway, and even where one is optional, a flat-fee contract review usually costs a few hundred dollars against a six-figure transaction. They check that contingency deadlines, earnest money terms, and title and possession language match what you think you agreed to.

The buyer has an agent who wants me to pay their fee. Do I have to?

No, but expect the request, commonly 2 to 3 percent of the price. Since the NAR settlement rule change took effect in August 2024, buyer-agent compensation is no longer assumed or set by the listing side: it is an openly negotiated line item. Treat it exactly like a concession in your net-proceeds math, because a full-price offer asking 3 percent for the buyer's agent nets less than an offer 2 percent below asking with no compensation request. You can accept, counter the percentage, or decline, and the buyer can pay their own agent.