The Offer to Purchase is generally regarded as the first step in the real estate transaction. The Offer to Purchase will include the purchase price, required deposits, a proposed closing date, and any terms which the purchase is contingent upon. Common examples of contingencies include the mortgage, inspection, and appraisal contingencies.

Unfortunately, many home buyers and sellers do not realize that with the acceptance of the Offer to Purchase, Buyer and Seller may very well have entered into a legally binding contract. Where the following three (3) elements are met, Buyer and Seller have entered into an enforceable contract: (i) the Offer to Purchase includes all of the essential terms of the contract; (ii) the Offer to Purchase is in writing and signed by the parties; and (iii) the parties intend to be bound by the Offer to Purchase.

Moreover, the general conception appears to be that any errors or omissions in the Offer to Purchase can be rectified in the more formal Purchase and Sale Agreement (the “P&S”). However, this is somewhat erroneous as it is the Offer to Purchase that sets the outer parameters for the P&S. For example, should the Offer to Purchase fail to include a mortgage contingency, it will be extremely difficult to convince the Seller to agree to such a contingency in the P&S. Why? Because the Seller has based acceptance of the Offer to Purchase on the terms presented in said offer. To change the terms after acceptance is to change the rules of the game. This is not to say that additional terms and contingencies are categorically denied during the negotiation of the P&S. They are not. However, to ensure the inclusion of these contingencies, the Buyer will want to be absolutely sure that they are addressed in the Offer to Purchase.

To best achieve a properly structured Offer to Purchase, the Buyer should consider having their real estate attorney review the offer prior to transmitting it to the Seller. Most real estate attorneys will include this service as part of their flat fee, which has become the industry standard. Likewise, the Seller would be wise to have his attorney review the Offer to Purchase prior to the Seller’s acceptance.

With a properly structured Offer to Purchase and acceptance of that offer, the Buyer and Seller will have identified the terms of the agreement and thereby established the expectations of the parties; a critical first step in what is often one’s single largest investment.

Related Articles:

• Nothing Standard About Standard Purchase and Sale Agreement
• Buyer Advice: No Condo is Perfect
• Special Offer from Local Boston Author Matthew Martinez
• Due Diligence and the Final Walk-Through
• Lofts at 36 A Offer Unique Value