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Offers to Purchase
Here’s a very common situation:
Seller lists real estate for sale with a broker. A prospective Buyer signs an offer to purchase, at Seller’s asking price, and gives it to the broker, along with a check of $1,000. The offer, drafted by the broker, says it has to be signed by the Seller on the same day. Broker brings the offer to the Seller, and encourages the Seller to sign it right away, without consulting a lawyer.
Should the Seller sign without legal advice? Absolutely not!
Many people believe that an offer to purchase is a preliminary document, and that neither party is actually bound until a purchase and sale agreement is signed. But that’s not the law. The Greater Boston Real Estate Board form, which is the form most commonly used, says “This is a legal document that creates certain binding obligations. If not understood, consult an attorney.” The Massachusetts Real Estate Bar Association form is even more direct: “This is a legal document. Consult an attorney. Upon acceptance by the Seller, it constitutes a binding agreement on both parties.”
In a 1999 case, McCarthy v. Tobin, the Massachusetts Supreme Court ruled that an offer to purchase, explicitly made subject to later execution of a purchase and sale agreement, was binding on the Seller even though no purchase and sale agreement was ever signed. The Court noted that the offer form said it was a “legal document that creates binding obligations” and that the key terms — description of the property, price, deposit amount, and closing date — had all been agreed to.
I have represented Buyers seeking to enforce offers to purchase against Sellers who were refusing to sign purchase and sale agreements or complete the transactions. In each case, I was able to obtain court orders forcing the Sellers to go through with the sales.
There is another reason both Buyer and Seller should seek legal assistance before signing an offer to purchase. A good real estate lawyer will make sure his client is not locked into unfavorable terms and conditions. He can provide legal and practical advice on key issues, such as the price, amount of the deposit, inspection, mortgage and permitting contingencies, and the timing of the closing.
February 16, 2008