Submitting an Offer and Making It “Binding”

What’s up with that offer? 

One of the most stressful moments of a transaction can be right at the start, in that time between when a buyer submits an offer and when they hear back from the seller about whether it’s been accepted, rejected or countered. Casual words and careless practice can create chaos and confusion over the status of an offer, so here are a few basic tips to keep that to a minimum.    

What’s the law? Offer + Acceptance + Delivery 

Basic contract law says that the steps to a binding real estate agreement include the buyer making an offer (which generally needs to be in writing for a real estate transaction), acceptance of that offer by the seller (again, generally in writing) and then return delivery of the accepted offer to the buyer. If you’re missing one of those steps, then there may not be a valid contract.  

Was that an offer? 

In a fast-moving market, buyer agents might contact a listing agent with … let’s call it “some information about what their buyer might be willing to do to buy the property.” Maybe it’s a phone call that ends with, “My client will be submitting a full-price offer this afternoon.” Or a text that asks, “Would the seller take $345k?” While that’s the sort of information a listing agent should be sharing with their sellers to ensure that the client is aware of what’s happening with their property, these communications don’t meet the legal definition of an “offer,” because they don’t contain all the necessary terms and conditions of the proposed transaction. So even if a listing agent/seller responds with something positive about the communication (see more about that below), it can’t be a contract if there was never a real offer in the first place. If a buyer wants to enter negotiations for a property, the way to do that right is to prepare a full written offer. 

Acceptance: Beware text messages, emails and calls. 

Now assume the buyer submits a full written offer, but now it’s the listing agent responding with, let’s call it, “some information about what their seller might be willing to agree to in order to sell the property.” Maybe there’s a phone call that ends with the listing agent saying, “Just send over the change we discussed and the sellers will sign,” or they text with, “Will sign in PM.” Remember that contract law requires “acceptance” of a contract, and that real estate contracts are required to be in writing.  

Until the seller signs, there’s no contract. The listing agent sort of agreeing via text, email or phone is probably not enough to establish a contract. If buyers really want to try and argue that a promise from the agent (who isn’t even a party to the contract) was a valid contract, they need to talk to an attorney ASAP, but it’s unlikely to be successful unless there’s some way to show some sort of bad faith. 

Delivery 

A fair number of calls involve negotiations where there was a valid, written offer that the seller actually signed – but after signing, the seller changed their mind and decided to tear up/reject the offer (usually to take another one that was received in the meantime). Remember that the third element is delivery of the accepted contract back to the buyer, so if the change of heart comes before delivery, there may not be a contract at all. 

But again, careless messaging could create issues for the parties here. If a listing agent conveys firm information that an offer has been signed, it’s possible that a court might interpret that as constructive delivery – and the clearer the communication, the more risk there is. For example, “seller loved the offer” isn’t delivery. Texting a photo of the seller signing a piece of paper with a message that says, “Will drop it off in an hour,” might be constructive delivery. Or looking at another common scenario, if a document is e-signed and a receipt is automatically sent to the other party, that’s probably going to be sufficient delivery because the proof of signature is delivered, even if the actual document might not yet have been received. 

Remember that return delivery is not the same as the “execution date” of the contract. The execution date is defined by paragraph 5(C) of the PAR Residential Agreement of Sale – but that’s another article, How to Count. 

Bonus #1: Paper Trails  

These questions almost always involve one party or the other wondering how to prove to their client that an offer or counteroffer was actually presented. Standard of Practice 1-7 and 1-8 state that upon a written request, the agent shall provide a written affirmation that the offer or counter offer was presented. PAR has a Broker’s Request for Affirmation (Form BRFA), (Here’s What You Need to Know About Upcoming Standard Forms Changes), which allows brokers to request a written response as to when the offer was submitted satisfying SoP 1-7 and 1-8. Some brokers or agents have adopted a policy of always submitting the BRFA, or you could always use it if there’s a concern just in a specific transaction. Remember that failure to return the form is a potential ethics violations in itself (even if the offer was actually submitted), so if you see the form, be sure to fill it out and return. 

Bonus #2: What (Not) to Say 

The lessons here are pretty simple. First, if it’s not in writing, signed by the relevant party(s), and in your hands, you should start out with the assumption that it’s not a contract. Second, STOP MAKING PROMISES ON BEHALF OF YOUR CLIENTS. The vast majority of the scenarios we see could have been avoided with more careful communications. On the seller side, “This looks good, I’ll present it tonight,” is better than, “I’m sure the seller will take it.” “If they sign tonight, I’ll let you know first thing in the morning,” is better than, “We accept, and I’ll have seller sign tonight.” On the buyer side, telling the buyer client that, “The listing agent says it looks good, I’ll let you know as soon as I hear whether they signed it,” is better than, “You’ve got the house – we just have to wait for the final signatures.” 

Constant and open communication is a huge part of an effective real estate transaction, and there’s absolutely a place for quick texts and casual updates – but contract law is contract law, so be sure to write it all down for real and not rely on shorthand to take the place of a full agreement.