An Offer to purchase real estate is a legally binding contract between two or more parties for the purchase/sale, exchange or otherwise conveying title of property from one party to the other. Most often, the agreement is bilateral in nature and it should conform to contract law in general and in addition, should be set down in writing to be considered as enforceable by law.
In the United States, a contract has to be set in writing to become enforceable, according to the Statue of Frauds. Typically, an Offer shall have the following contents:
Identity of the parties to the contract
Identity of the real estate
Purchase price of the real estate
Signatures of the parties
Should be for a legal purpose and not for any unlawful activity
Parties to the contract should be legally competent to enact the contract
There should not be any conflict in the minds of the parties to the contract
The contract should be enacted for a consideration
Though it may not always be required, notarization of the contract may be necessary in some cases. In any case, the Offer requires that one party make an offer and the other party accepts the offer. To make the contract enforceable by law both the offer and acceptance should be in writing and be signed by all the parties concerned.
All alterations to the contract should be initialed by all the parties concerned. The type of deed that is used to convey title of the property should be specified. It may either be a warranty deed or a quitclaim deed.
In case the type of deed is unspecified then it may be assumed to be a “marketable deed” which implies that it is a warranty deed. All liens or other encumbrances on the real estate should be spelt out at the beginning to avoid the contract being voided either at the time of closing or before closure of the offer.
Furthermore, there may be present certain contingencies that must be complied with for the offer to be accepted and the contract be performed. These are:
Contingency regarding mortgage
Contingency regarding inspection
Contingency regarding another sale
Contingency regarding appraisal
In addition, the Offer to purchase real estate shall include the date of closing the contract and taking possession of the property. The condition of the property should have been ascertained at the time the real estate ownership passes to the buyer. Their may or may not be separate riders to the contract and their may be some amount of money to be deposited as earnest money along with the Offer.
Since this document is exhaustive, care should be taken in drafting it and most buyers/sellers of real estate would be well-advised to purchase pre-drafted offer documents to obviate the necessity of having to draft one for themselves. Since these documents have already been drafted, they form the ideal platform for prospective buyers and sellers to launch their Offers to purchase real estate.