Simone Lawson
The process of buying real estate can be daunting, and there are many steps involved in a real estate transaction that must be done as quickly as possible. One of the most critical steps is the acceptance of an offer, which marks the point at which the deal becomes legally binding. Acceptance occurs when both parties agree to the terms and conditions outlined in the contract. In most cases, acceptance must be in writing to comply with the Statute of Frauds, which requires all real estate contracts to be in writing and signed by the seller. This ensures that there is a clear record of the agreement and helps to prevent disputes. However, it is important to note that acceptance must exactly match the terms of the offer, and any changes to the terms of the contract must be made in writing and signed by both parties.
| Characteristics | Values |
|---|---|
| Offer | A proposal to enter into an agreement |
| Acceptance | Conveys willingness and intention to be bound by the offer |
| Types of acceptance | Express, implied, and conditional |
| Offer vs counter-offer | An acceptance is not an acceptance if it changes the terms of the offer |
| Binding contract | Requires written agreement with signatures |
| Timeline | Deadlines and time limits set out in the contract must be met |
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What You'll Learn
Acceptance must be in writing and signed by the seller
In the context of real estate, acceptance is a critical component of any transaction as it marks the point at which both parties agree to the terms of the transaction and the deal becomes legally binding. An acceptance must be communicated to the offeror, and it must match the terms of the offer exactly. This is known as the mirror image rule or consensus ad idem.
In the case of real estate, the offeror is the buyer, and the offeree is the seller. For an offer to be accepted, the seller must sign the contract, thereby accepting the offer made by the buyer. This is true in Texas, for example, which follows the Statute of Frauds for real estate contracts. This means that all contracts for real estate should be in writing and signed by the seller. The Statute of Frauds also requires the written agreement to be complete in "every material detail" and to contain all essential elements. This makes it easier to resolve disputes about the contract since the parties do not need to resort to what was said during negotiations. For instance, there needs to be a description of the property that can be determined with reasonable certainty. In one case, Texas courts held that the description of a piece of property as "101 Windmill" was not reasonably certain and did not meet the Statute of Frauds standards, so the contract was not enforceable.
If there is a defined method of acceptance, the accepting party must follow that method. For example, if the offer states that acceptance must be given in writing within 14 days, then the acceptance should be given in this way. This is because, without a signed contract, the offer made by the buyer is simply a proposal and is not enforceable by law. Once the seller has accepted the offer and signed the contract, the contract becomes binding, and both parties are legally obligated to fulfill the terms of the agreement.
It is important to note that acceptance does not only refer to the seller's acceptance of the buyer's offer, but also to the buyer's acceptance of the seller's offer or counteroffer. For example, a buyer may accept an offer to purchase a property, but this acceptance may be subject to the buyer obtaining financing. If the buyer fails to obtain financing, the acceptance becomes void, and the deal falls through.
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Acceptance must exactly match the terms of the offer
In the case of Texas, the Statute of Frauds requires that all real estate contracts are in writing and signed by the seller. The written agreement must be complete in "every material detail" and contain all essential elements. This is to ensure that, in the case of a dispute, both parties do not resort to what was said during negotiations. For example, the Texas courts held that a description of a piece of property as "101 Windmill" was not reasonably certain, and therefore did not meet the Statute of Frauds standards. As a result, the contract was not enforceable.
If there is a defined method of acceptance, the accepting party must follow that method. For instance, if the offer states that acceptance must be given in writing within 14 days, then the acceptance should be given in this way.
It is important to note that an offeror is allowed to withdraw the offer prior to acceptance, as long as they did not make a promise to keep the offer open for a certain period.
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Counter-offers and rejections
A counter-offer is not a rejection but rather a new offer that cancels out the original offer. A counter-offer is made when one party wants to change something in the original offer. For instance, if a buyer is happy with the price but wishes to change the completion date, or vice versa, they would need to make a counter-offer. This shifts the power of acceptance to the original offeror, who is now the offeree of the new terms.
In the US, counter-offers and rejections are governed by the Statute of Frauds, which requires that all real estate contracts be in writing and signed by the seller. This statute also requires that the written agreement be complete in "every material detail" and contain all essential elements. This ensures that, in the event of a dispute, the parties involved do not resort to what was said during negotiations.
An offer can be revoked at any time before acceptance, provided that the offeror did not make a promise to keep the offer open for a certain period. In Texas, for example, a contract is not enforceable unless it meets the Statute of Frauds standards. Therefore, if an offer is made orally, it cannot be considered binding.
It is important to note that acceptance must exactly match the terms of the offer, according to the mirror image rule or consensus ad idem. Any changes to the terms of the contract must be made in writing and signed by both parties. This is critical, as acceptance marks the point at which the deal becomes legally binding, and sets a timeline for the transaction to be completed.
Buyers and sellers should work closely with their real estate agents, attorneys, and lenders to ensure that all necessary documents are in order and that the deal is legally binding.
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Timeframes and deadlines
In some cases, a defined method of acceptance may be specified in the offer. For example, an offer may stipulate that acceptance must be given in writing within 14 days. In such cases, the accepting party must follow this method, or the contract will not be binding.
It is important to note that any changes to the terms of the contract, including deadlines, must be made in writing and signed by both parties. Meeting all the deadlines and time limits set out in the contract is crucial, as any delay in acceptance or performance can lead to the termination of the deal.
Additionally, there are certain actions that buyers and sellers should take after an offer has been accepted. For instance, buyers may need to schedule a professional home inspection, which is recommended even if it is not mandatory. During this due diligence period, which can range from 14 to 30 days, the buyer can also request repairs based on the inspection's findings. Furthermore, buyers should work closely with their lenders and real estate agents to ensure a smooth home-buying journey.
Overall, timeframes and deadlines play a crucial role in real estate transactions, and both parties must be diligent in meeting these obligations to ensure a successful and timely completion of the deal.
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Inspection and insurance
The home inspection period is a critical time in the real estate transaction process. It is a buyer's protection, alerting them to minor problems before they become major ones, and major problems before they become the buyer's responsibility.
In Oregon, for example, the inspection period is typically 10 business days, starting the first business day after all parties or their agents receive the signed sale agreement. During this time, buyers may conduct inspections, get specialised contractor opinions and bids, research the history of the home, look up permits, and ask the seller questions.
A buyer may waive the inspection contingency, meaning they still want the information but won't hold the seller responsible for making or paying for repairs. This can make an offer more appealing in a competitive market. However, even if the inspection contingency is waived, a serious defect in the home, such as toxic mould, could give the buyer legal cause to back out of the deal.
It is recommended that a buyer always gets a home inspection, regardless of whether there is a contingency in the contract. If the home doesn't pass the inspection, the buyer can usually back out of the deal if there is an inspection contingency in the contract.
In terms of insurance, a buyer's lender will likely require them to get a homeowners insurance policy. The buyer should ask their agent for insurance company recommendations and reach out to insurance companies they already work with for quotes before purchasing a policy.
Real estate inspectors must also show proof of insurance. In Texas, for example, an inspector must file a Certificate of Insurance form, signed by the insurance agent, with the Texas Real Estate Commission (TREC) when their license is issued and with each renewal.
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Frequently asked questions
The first step is to communicate your offer to the seller. This can be done through a real estate agent or directly to the seller.
Acceptance occurs when the buyer and seller agree to the terms of a purchase contract. This agreement is made when the seller signs the contract, thereby accepting the offer made by the buyer. Acceptance must be in writing to comply with the Statute of Frauds.
After the offer is accepted, the contract becomes legally binding, and both parties are obligated to fulfill the terms of the agreement. Both parties are expected to fulfill their obligations within a certain timeframe, which is typically outlined in the purchase contract. This may include deadlines for home inspections, financing, and closing.
