What is an Offer to Purchase and why is this Important?

Among the many elements that combine to form any property sale, there is one that causes more consternation than almost any other: the Offer to Purchase. Despite the general lack of understanding as to the importance of this critical document, it continues to be one of the most important aspects of any real estate transaction. During any prospective property purchase, you would do well to examine any Offer to Purchase with a critical eye, and sign only when you are sure that you have done your homework properly.

What is it exactly?

An Offer to Purchase is, quite simply, an effective deed. When it is signed, it helps to establish the parameters of all of the legal proceedings that follow. Within the Offer are every single one of the purchase terms, so once the document has been signed it is legally binding for both parties in the sale. It must contain each element of agreement between the two parties, which means that such an Offer should only be signed after you have completed any necessary negotiations with the other party.

What does it consist of?

Though there are many elements which can be contained within an Offer to Purchase, there are some that definitely shouldn’t be neglected. Such basics as the date the offer is made, details about the identities of the parties, and information about the property itself all need to be included within the document. In addition, the offered price, as well as any commissions and fees, must also be listed.

Of course, the information of any sale will of necessity encompass a far wider scope than those simple details. Most Offers also include dates at which the offer will expire should the seller fail to agree to the terms, as well as any dates regarding the effective occupation of the property by the purchaser. Any provisions for good faith deposits by the buyer should be outlined in detail, as should any information regarding defects or needed repairs. Also, don’t forget to document how various fixtures are handled – if curtains or other amenities are remain with the property, that fact should be stated in clear language within the Offer.

Other provisions

To avoid legal ramifications in the event that your financing process fails to yield success, be sure to have language in the offer detailing the basic conditions that are necessary for the Offer to be binding and finalized. These should include such basic notions that your offer is only valid in the event that you are able to obtain financing, and that the stated value of the property must be documented by an independent assessment of the building and land. Dates should be attached to each of these conditions to ensure that the Offer has some urgency attached to it.

Finally, many Offers also include language that permits the property’s owner to continue to market the real estate until the final details of the Offer to Purchase are met – namely, attaining of appropriate financing. Be sure that you are familiar with the language of such clauses within any document you sign so that you are not surprised later in the process.