Some well-priced homes are now gone before they officially hit the market. Potential buyers are bidding on properties before actually seeing the home.
Deals are quickly being written and submitted, but when is an offer actually binding?
In residential real estate, not until the purchase and sale agreement is “signed all around” and actually delivered – just ask Fred and Samantha Patrick.
The retired couple, looking forward to “buying down” to a smaller home, lost out on a home they long had coveted when a seller accepted another offer before the Patricks’ was delivered.
The act that binds the agreement is delivery, according to Chris Osborn, real estate attorney. While there is some confusion around this issue, merely signing a deal does not bind it.
Offers are typically made through a purchase and sale agreement, commonly known as an earnest-money form. Usually buyer and seller must sign, including spouses, if any. Verbal acceptance is simply not enough. And, it is also not a good idea to delay a counteroffer or its acceptance, as the Patricks recently discovered.
Here’s what happened: The Patricks had considered the purchase of a house listed for $319,950 for two months, but they did not want to make an offer until they sold their house. The seller of the new house did not want an offer contingent on the sale of another. In fact, the seller already had one contingent offer from another party. The Patricks wanted the new home so much that they significantly reduced the price of their current home. When they got an acceptable offer, they immediately made an offer on the $319,950 house.
It was Saturday morning when they offered $314,000. At 5:45 p.m., the seller considered the offer and countered at $315,000 and gave the Patricks until 10 a.m. the next day to accept it. The Patricks’ broker relayed the message to the Patricks, who were headed out to a neighborhood party. The broker and the Patricks agreed to meet at 9 a.m. Sunday to sign the counteroffer. The broker would then proceed to the seller with a copy of the agreement that had been signed all around.
At 10 p.m. Saturday, the Patricks’ broker got word from the seller’s agent that the seller had rescinded the counteroffer and accepted another offer. The Patricks, who had gone to the party confident they had a deal, were furious, as was their broker.
According to Osborn, either party has the right to withdraw at any time up until the time the offer is delivered. Delivering can mean sent by fax, if both parties agree that faxes are acceptable. The sending of the fax would suffice. The seller would not have to be home at the time the fax was sent.
The Patricks’ example also is a refreshing reminder to agents that time is of the essence in real-estate transactions. Agents could be held liable for damages if the agent did not deliver the buyer’s deal in a timely fashion. And, if more than one offer is submitted simultaneously, it’s up to the seller’s agent to present all of them as soon as possible.
And sellers don’t always have to sell – even if you meet their terms and conditions as a buyer. Most of the time, the only responsibility the seller may have is to pay the agent’s commission. That’s because the agent produced a customer “ready, willing and able to buy” the home. If the seller changes his mind, the agent still performed the service outlined in the listing agreement.
Sometimes a seller might take a home off the market after an offer is received. Often, the reason is “seller’s remorse.” Another example would be when a home is listed for sale because of divorce and one spouse somehow finds the money to buy out the other’s interest and remain in the home.
Those are circumstances beyond a buyer’s control. If you believe you have found the home you want, don’t drag your feet. Sign as soon as you can, especially on a counteroffer. Somebody else might want the house more – while you are at a neighborhood party.