Estimated study time: 45 minutes
Content:
The Offer to Purchase is the first written step in a Massachusetts residential real estate transaction. It is a binding contract — once accepted by the seller, it creates a legally enforceable obligation for both parties to proceed to the Purchase and Sale Agreement stage. In Massachusetts, verbal offers and acceptances are not binding on real estate matters under the Statute of Frauds; all offers must be in writing. The Greater Boston Real Estate Board (GBREB) and local real estate boards publish standardized Offer to Purchase forms widely used across Massachusetts. The offer specifies the proposed purchase price, the earnest money deposit to be paid at offer acceptance, the date by which the P&S must be signed, the proposed closing date, and any initial contingencies.
The earnest money deposit paid with the offer (sometimes called a binder deposit) is typically a smaller amount than the P&S deposit — often $1,000–$5,000. It is held in the real estate broker's escrow account pending acceptance. If the seller does not accept, the deposit is returned to the buyer. Once accepted, the buyer and seller have a specified period (typically 5–10 business days) to negotiate and execute the Purchase and Sale Agreement. During this negotiation period, the buyer's attorney and seller's attorney review and modify standard P&S language to address specific terms. The Offer to Purchase itself is generally superseded by the P&S once signed.
An offer must be communicated to the offeree (seller) to be effective; an offer in the broker's desk drawer does not bind the seller. All offers must be presented to the seller promptly — a Massachusetts license law requirement. A seller receiving multiple offers simultaneously is not required to accept any of them and may counter any or all offers or request "best and final" offers. An accepted offer creates contractual rights: the buyer cannot unilaterally withdraw without risking the deposit (if the offer specifies the deposit is at risk upon acceptance). A counteroffer by the seller constitutes a rejection of the original offer and creates a new offer; roles reverse — the buyer becomes the offeree and the original seller becomes the offeror.
Offers may be terminated without acceptance in several ways: by the passage of the stated time limit (an offer may specify "this offer expires at 5 PM on Friday"), by the death of either party before acceptance, by destruction of the property that is the subject of the offer, by a counteroffer, or by withdrawal before acceptance is communicated to the offeror. Once an offer is accepted and communicated to the buyer, the contract is formed and it cannot be revoked without the other party's consent (or operation of a valid contingency). In Massachusetts practice, time is generally not "of the essence" in the Offer to Purchase unless explicitly stated — however, if the offer expires, it lapses and the seller's subsequent acceptance would not create a binding contract.
Key Terms:
Quiz Questions:
Q1. A buyer submits a written Offer to Purchase to the listing agent on Monday morning. The seller verbally accepts on Monday afternoon. Is there a binding contract?
A) Yes — verbal acceptance of a written offer creates a binding contract B) No — the seller's acceptance must be in writing and communicated to the buyer to be binding C) Yes — the listing agent's receipt of the offer on behalf of the seller constitutes acceptance D) No — Massachusetts requires notarization of all real estate contracts
Answer: B — Under the Statute of Frauds and general contract principles, the seller's acceptance of a real estate offer must be in writing and communicated to the buyer (or buyer's agent) to form a binding contract. Verbal acceptance is insufficient.
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Q2. A seller receives three simultaneous offers. The seller is interested in only one. What must the seller do with the other two offers?
A) Return them to the respective buyers' agents immediately without review B) Accept the best offer and automatically reject the others — counter-offering multiple buyers is not permitted C) Review all three; is not required to accept any; may counter any, all, or none; must not conceal offers from the client D) Hold all offers for 48 hours to give all buyers equal opportunity to revise
Answer: C — The seller has no obligation to accept any offer. The seller may counter any, all, or none. The listing agent must present all offers and advise the seller of all options. The seller decides how to proceed.
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Q3. A buyer submits an Offer to Purchase at 3 PM on Thursday with a deadline of "5 PM Friday." The seller counters at 4 PM Friday with a higher price. At 4:30 PM Friday, the buyer accepts the counter. Did the original offer expire?
A) No — the counter keeps the original offer alive B) Yes — the original offer expired at 5 PM Friday; however, the buyer's acceptance of the counter at 4:30 PM created a new binding contract based on the counter C) No — the seller's counter extended the original offer's deadline automatically D) Yes — and the buyer's acceptance of the counter is too late because the original offer lapsed
Answer: B — The seller's counteroffer at 4 PM Friday constituted a rejection of the original offer. The original $X offer no longer exists. The counter creates a new offer at the seller's revised price. The buyer's acceptance at 4:30 PM (before the 5 PM original deadline and while the counter is still open) creates a new binding contract at the counter price.
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Q4. A listing agent receives an offer that the agent considers too low to bother the seller with. The agent holds the offer for two days before presenting it. Has the agent violated Massachusetts law?
A) No — agents are permitted to filter offers to protect sellers from wasting time on frivolous offers B) Yes — Massachusetts license law requires all offers to be presented to the seller promptly C) No — the agent's fiduciary duty to the seller permits judgment about which offers to present D) Yes — but only if the buyer complains to the Board
Answer: B — Massachusetts license law and professional ethics require all written offers to be presented to the seller promptly. An agent who filters or delays presenting offers — regardless of the offer amount — violates license law and may face disciplinary action.
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Q5. A buyer submits an Offer to Purchase at 10 AM. At 11 AM, the buyer's agent calls the listing agent and verbally withdraws the offer. At noon, the seller signs and returns the acceptance. Is there a binding contract?
A) Yes — the seller's signed acceptance created a binding contract despite the verbal withdrawal B) No — the buyer validly withdrew the offer before acceptance was communicated; no contract formed C) Yes — written offers cannot be withdrawn verbally D) No — the one-hour gap between offer and withdrawal makes the offer voidable by the buyer
Answer: B — An offer may be revoked by the offeror at any time before acceptance is communicated to the offeror. The buyer withdrew at 11 AM; the seller's acceptance was communicated at noon (after the withdrawal). No contract was formed because the offer no longer existed when the seller accepted. (Note: If the parties had made the offer irrevocable, this analysis might differ.)
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