What Is an Offer?
Details of an Offer Letter
Someone who has listed a home for sale will accept offers from prospective buyers. Alternatively, an online advertisement, such as an ad for a two-bedroom rental apartment for $1,000 a month, could be considered an offer, too. Making an offer is the first step toward forming a contract. (You should always include the six basic elements of any offer.)
Let’s say Tom has an interest in purchasing a condo in his local city. Tom searches online and finds an ad for a newly built condo at a purchase price he’s comfortable paying. The ad itself is an offer by the seller to sell their home to a potential buyer. However, Tom may make a counteroffer that is below the asking price, creating a new offer that would have to be accepted by the seller.
An offer is the first of six factors that create a contract:
- Acceptance, which can be verbal, physical, or written
- Consideration, also known as the established price
- Mutuality, where both sides agree to terms
- Capacity, which ensures that both parties understand the terms
- Legally acceptable terms — or the final, signed contract.
For Tom’s condo sale, the offer is forthright: The seller placed an ad with a realtor which offered the condo for sale with a particular price. Tom either accepts the value listed or counteroffers with a lower price, which the owner can accept or decline.
Accepting An Offer
Once the offer is accepted, both parties are in a legally enforceable agreement. However, an offer is very different from a solicitation — referencing that you might sell something isn’t considered an offer. But saying that you would sell an item for a set price on a particular date is.
Ending an Offer
- Death of either party
- Insanity of either party
- Death or destruction of the person or the thing required to perform the contract terms.
What Is a Real Estate Offer?
Investors writing home offers can follow these six effective strategies to ensure their offer is accepted.
A real estate offer is signed by the potential buyer so that, if accepted by the seller, it becomes a legally binding sales contract. Thus, an offer should include all conditions and issues you hope to address. Make sure to include the address, target closing date, contingencies, time limit, and payment method — such as a cash offer or one using a conventional mortgage. A real estate offer will generally come with earnest money deposit, which shows good faith.
Common contingencies are might include a home inspection contingencies or financing contingencies. For example, if financing falls through or if there's an unacceptable home inspector's report, then the offer would be void.
In the buying process, the seller can accept or reject the offer or make a counteroffer. If a counteroffer is made, the buyer could then accept the counteroffer, reject it, or make their own counteroffer. An offer to purchase a home can generally be rescinded right up to the point of acceptance by the seller.