Offers and Counter Offers
Offers and Counter Offers are Binding . All too often people sign offers on the spur of the moment. There is a common misconception that the terms of a real estate purchase agreement can be changed once escrow is opened. This is not true! A written offer is a legally binding document once it is accepted by the seller. Similarly, a counter-offer is binding once it is accepted by the buyer.
How do you protect yourself and still have the flexibility to make or accept an offer on a moment’s notice? Ask your broker or agent for their particular standard offer form and have them fill it in with everything except the price and the location of the property. We can then review the form for you. If you are a buyer, it should not take more than an hour’s time to review and, if necessary revise a standard California Association of Realtor’s form which is the form used by most members of the California Association of Realtors. If you are a seller, make sure that the listing agent knows you would like your counter-offer reviewed by your attorney. If it is the weekend, have your agent include in the counter-offer language that says “This transaction is subject to review by Seller’s attorney by no later than [insert date and time].”
Contingency Terms in a Sale Agreement. There is a natural friction between the goals of a buyer and a seller in a real estate transaction. Optimally a buyer wants to leave ways to get out of the transaction while the seller wants the buyer to be committed. The battle ground for this friction can be found in the “contingency provisions” of the agreement. There are three types of contingencies that appear in every real estate sale: (1) title contingencies; (2) physical inspection contingencies; and (3) loan contingencies. If a sale involves rental property there will also be a contingency related to review and verification of the rental agreements. If you are a seller you will want to make sure your title company has a preliminary title report (along with the underlying documents listed in the report) ready for a buyer’s review to speed up the title contingency process. Sellers will also want to make sure the physical inspection is completed as quickly as possible so that this contingency can be waived as well. Finally, a seller can help speed up the loan contingency process by (1) making sure that the buyer is pre-qualified for their loan (although this is still not a guarantee the loan will be approved); and (2) that the appraisal is performed as soon as possible.