Homeowners who decide to sell their home without the help of a professional real estate broker or agent, a For Sale by Owner (FSBO), are naturally not as well versed in real estate transaction fundamentals, including the topic of contracts. When listing and selling a home without a broker, a FSBO needs to know what constitutes the termination of an offer to purchase.
Can I Cancel My Offer to Purchase?
The first thing to keep in mind as a FSBO is that an offer to purchase is continuous, meaning that when a buyer makes an offer to buy, the offer to purchase is good until one of the following occurs:
- Rejection – an offer to purchase is good until the seller (or offeree) rejects the buyer’s (or offeror’s) offer.
- Making a Counteroffer – an offer to purchase is good until the seller rejects the buyer’s offer by making a counteroffer (for instance, the seller counters at a higher price point).
- Revocation – an offer to purchase is good until the buyer revokes their offer, so long as it is prior to the seller accepting the offer to purchase.
- Time Expires – an offer to purchase is good until the seller fails to accept the offer within a stated time period of time (for instance, offers to purchase are often on the table until a certain day and time, after which, the offer expires).
- Incompetence or Death – an offer to purchase is good until the death or insanity of either the seller or the buyer prior to acceptance of the offer to purchase by the seller. What constitutes incompetence?
- Minors (those under 18)
- Persons declared legally insane
- those convicted of treason (they can’t own real property)
- Possibly someone who is under the influence of drugs and/or intoxicants at the time of signing a contract
- Illegality – an offer to purchase is good until there is a subsequent illegality by either party at any time.
A real estate contract that is legal in the eye of the courts needs a valid offer and an acceptance of said offer, a legal object (versus one that is illegal), competent parties to the agreement, and consideration (value) exchanged between both parties.
Because of the Statute of Frauds that governs real estate transactions, real estate contracts must be in writing, except for leases that are less than 12 months.
Real estate transactions often come together quite quickly, and there may even be multiple offers on the table, a For Sale by Owner (FSBO) seller must understand and follow governing law, especially the ins and outs of what constitutes termination of an offer to purchase.