Contracts and Contract Formation in Real Estate Transactions
Formation elements
Offer, acceptance, consideration, capacity, lawful purpose, and - for land - a writing. The statute of frauds requires a signed writing identifying the parties, the property, and the price or terms; electronic signatures satisfy it where e-signature law applies.
Offer, counteroffer, acceptance
- A counteroffer terminates the original offer; the offeree cannot later "accept" the dead offer.
- Acceptance must be unequivocal and communicated by an authorized method; under the mailbox rule it is effective on dispatch, except for option contracts, which require receipt.
- An option requires separate consideration; without it, the "option" is only a revocable offer.
Contingencies and remedies
- Financing, inspection, appraisal, and home-sale contingencies must be removed in writing within stated deadlines; where "time is of the essence," dates are enforceable.
- Earnest money is credited at closing; when forfeited it must reflect a reasonable liquidated-damages estimate, not a penalty.
- Because land is unique, specific performance is available to a ready, willing, and able buyer.
- Assignability is presumed unless the contract prohibits it or the duties are personal in nature.
Worked example
A buyer signs the offer, writes "subject to my attorney's approval" above the signature, and returns it. That is a counteroffer, not an acceptance, so the seller's original offer is dead. When the seller initials the added condition, a contract forms on the modified terms - and the attorney-approval language now governs whether either party can walk away.
Traps that cost marks
- Treating an email saying "we have a deal" as satisfying the required writing.
- Letting a contingency deadline pass while assuming the deposit is still refundable.
- Overlooking that a minor may disaffirm a contract.