Last Updated December 21, 2023
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What is an Offer to Purchase Real Estate?
An Offer to Purchase Real Estate is a legal document that outlines the terms and conditions under which a buyer is willing to purchase a property from a seller. It serves as a formal proposal and initiates the process of a real estate transaction.
An Offer to Purchase Real Estate is also known as a:
- Real estate offer form
- Home purchase offer letter
- Real estate offer letter
- Offer letter to purchase property
Our template is suitable for both private sales, also known as “for sale by owner,” and when a real estate agent is involved. It works for both residential and commercial sales.
How does an Offer to Purchase Real Estate work?
An Offer to Purchase Real Estate works as follows:
1. Preparation and submission
The buyer prepares and signs the Offer to Purchase.
Once the Offer to Purchase is completed, the buyer’s solicitor submits it to the seller or the seller's representative.
2. Review and negotiation
Upon receiving the offer, the seller reviews its terms and conditions. The seller may:
- Accept the offer
- Issue a counteroffer
- Reject the offer
Counteroffers may involve modifications to the purchase price, deposit amount, closing date, or other terms. Negotiating and issuing counteroffers may continue until both parties reach a mutually acceptable agreement.
In Scotland, counteroffers are called "missives," and, together with the offer, will form the Sales Contract.
3. Acceptance
When the seller agrees to the offer terms, they accept it by signing the Offer to Purchase. Their acceptance creates a binding contract between the buyer and the seller.
4. Fulfilment of conditions
If the offer includes conditions, such as a home inspection or appraisal, the responsible party must satisfy these conditions within the specified timeframe.
Failure to satisfy the conditions may allow either party to withdraw from the contract without any penalties.
5. Closing
Once all the conditions are met, the buyer and seller can complete the closing process. During closing, they sign the necessary legal and financial documents to transfer the property from the seller to the buyer.
Generally, a Sales Contract needs to be signed, except in the case of Scotland, where the offer, along with the negotiations and counteroffers (i.e., missives) will form the Sales Contract.
Conditions on an Offer to Purchase Real Estate
A condition makes a buyer’s offer contingent on the fulfilment or completion of a certain task. The following are some examples of common conditions:
- Satisfactory home inspection: The buyer must obtain a satisfactory survey on the condition of the property, allowing them to renegotiate if a problem comes up.
- Proof of marketable title: The seller will provide evidence to the buyer that the title to the property is not subject to any encumbrances by other parties.
- Market value appraisal: The sale is contingent upon an appraisal of the property, ensuring that the buyer doesn't pay more for the property than it is actually worth.
- Disclosure statement: The seller completes a disclosure form, informing the buyer of any property problems of which the seller is aware.
- Loan approval: The buyer must obtain a loan to cover the non-deposit portion of the purchase price (e.g., a mortgage).
- Local byelaw documents: The seller must obtain all documents relating to relevant local byelaws (i.e., laws enacted by local government).
- Specific property repairs: The seller must complete certain repairs to complete the sale.
- Property is properly zoned: The property must be properly zoned for the buyer’s intended purposes (e.g., the seller must obtain proof that the zoning allows business use).
- Buyer selling their property: The purchase of the seller's property is contingent on the buyer being able to sell their property and close the deal.
If a party is unable to meet a contract condition, you can cancel the Offer to Purchase the seller's property.
How to write an Offer to Purchase Real Estate
Use LawDepot’s Offer to Purchase Real Estate template to draft a quick and comprehensive letter.
1. Provide buyer and seller details
Include full names, addresses, phone numbers, and emails for both the buyer and the seller.
2. Describe the property
Include the legal land description of the property. You should be able to obtain the description from HM Land Registry. It may also be found on the title deeds, in tax assessments, and in the mortgage agreement.
Also include descriptions of any fittings (i.e., fixtures) that are included in the sale. Fittings are personal property items that are moveable, such as appliances.
3. Outline offer and deposit details
Specify the purchase price and when the offer will be made. Then, provide the following deposit details:
- Amount
- Payment method (i.e., cash, cheque, bank draft, etc.)
- Due date
- Escrow agent
An escrow agent is a neutral third party who holds the deposit until you finalise the transaction.
4. Pick a closing and possession date
In your Offer to Purchase, specify a closing date. Also, state when the buyer gains possession, which is generally upon closing and funding.
Real estate transactions typically allow some time between the offer and closing dates. This gives you and the seller the opportunity to address conditions, such as securing financing or conducting house inspections.
5. Outline conditions
If your offer is subject to any conditions, outline them and the date on which they must be completed. Refer to the above section for examples of conditions.
For example, buyers can make their offer conditional on the property being taken off the market. Asking the seller to take the house off the market and not conduct any more viewings reduces the chances of the buyer being gazumped.
6. Set an acceptance deadline
Specify the deadline for the seller to accept the offer. The acceptance deadline date must be set prior to the proposed closing date. There should be enough time for the seller to view the offer, respond to it, and organise the sale logistics.
Do you need a mortgage before making an Offer to Purchase?
No, in most cases, a buyer obtains a mortgage after making an offer on a piece of real estate. For instance, the buyer might want to negotiate the property's sale price or ensure certain repairs are made before they proceed with financing.
The Offer to Purchase provides a timeline for the buyer to obtain a mortgage or otherwise secure financing before the offer is binding and the sale is closed.
However, a buyer may seek pre-approval for a mortgage so that they don’t make an offer that they cannot afford. In this case, mortgage lenders can identify the maximum amount that you qualify for.
Is a signed Offer to Purchase legally binding?
Yes. When the seller agrees to and signs an Offer to Purchase Real Estate, their acceptance creates a binding contract with the buyer. This means that, after accepting, sellers can't back out just because they received a better offer.
However, if the Offer to Purchase includes conditions that aren’t satisfied, then the parties may be able to break the contract without issue. Similarly, the parties may be able to terminate the Offer to Purchase if it includes provisions that allow either party to terminate the sale.
