Q. I represent a seller who has signed and delivered an accepted offer, but we still haven’t received a check from the buyer. Is this a binding contract?
The Answer: It depends on what form you use.
In order for a binding contract for the purchase of real estate to exist, there must be a written offer, acceptance, and consideration. Typically, theexchanging of a “good faith deposit” with an offer is thought to be the requisite consideration to bind the offer. However, that is not necessarily the case. Where the buyer has promised to purchase the property for a set price and the seller has accepted this offer by promising to sell, this mutual exchange of promises is sufficient to form a binding contract. The check typically serves to demonstrate good faith and add a layer of protection for the seller in the event of the buyer’s default.
However, this depends entirely on what form you are using. Different forms require different things in order to qualify the offer as a binding contract. For example, if the Contract to Purchase (such as MAR’s Form 501), specifically calls for the remittance of a check in order to bind the offer, failure to deliver a check could constitute a breach of the contract by the buyer. If the form used does not require the remittance of a check, then the accepted offer is considered a binding contract.
The Takeaway: Know & Explain Your Forms
It is important for agents to know what is in the forms they present to their clients in order to avoid confusion that can wreck an offer, or worse. Agents should clearly explain to their clients what they are signing, and what their signature means to the transaction process. If an agent is unsure about a question, check with an expert or legal counsel before providing a client an answer.
The information and services provided though the Massachusetts Association of REALTORS® is intended for informational purposes and does not constitute legal advice, nor does it establish an attorney-client relationship. The Massachusetts Association of REALTORS®, by providing this service, assumes no actual or implied responsibility for any improper use of responses to questions through this service. The Massachusetts Association of REALTORS® will not be legally responsible for any potential misrepresentations or errors made by providing this service. For more information regarding these topics authorized callers should contact the MAR legal hotline at 800-370-5342 or e-mail at email@example.com.