When is a California Purchase Offer Legally Binding?

A purchase offer is legally binding when legal delivery has been confirmed.

My seller asked when is a California purchase offer legally binding? He had accepted a buyer’s counter offer, signed all of the documents. We sent the package back to the buyer’s agent and asked for confirmation. Tick, tick, tick. No confirmation came. Next morning, tick, tick, tick. No confirmation. Then the buyer’s agent sent an email to say the buyer was over the top with excitement. Only little problem? We are not in contact.

Why isn’t the purchase offer legally binding? The seller accepted the buyer’s counter to the seller’s counter, so we have completed agreement, right? Not so fast. We don’t have a ratified contract. The reason is the buyer’s agent did not name herself as the recipient of the counter offer. The agent left that spot blank. Which means it defaults to the buyer to initial and confirm receipt.

We had no confirmed receipt in writing from the buyer. We did not have a done deal. And wouldn’t you know it? Another buyer wrote an offer and submitted it quickly for about 5% over the list price. The amount was significant. This new buyer really wanted the house. As a listing agent with a fiduciary to the seller, this is a situation that required immediate attention.

First, I notified the seller to see if he wanted to take the new 11th-hour offer. It was a lot more money. It was also subject to an appraisal, but same situation as the offer he accepted. Would it appraise at that inflated value? I gave it a 50 / 50 chance, which is pretty good. If it didn’t appraise at list price, the seller can still sell at the appraised value. Plus the odds are good it might fly at that price.

I let him know we could withdraw the accepted Buyer Counter Offer and take the other offer, if he so chose. Not my decision. My responsibility is to relay the pros and cons of the situation and let the seller choose. But the seller decided he likes the first buyer who is buying his home and will stay with the existing offer. See, you never know.

The point is to give the seller enough information so the seller can make an intelligent and informed decision. It is not to make the decision for the seller nor to sway the seller’s thought process.

Second, I notified the first agent again that we had not received the buyer’s confirmation and let the agent know there is another offer that is much higher.

Even so, we did not receive the buyer’s confirmation until around noon the following day. My seller is a sweet, kind, caring person and money holds a lower priority to him.  If this seller was some other guy, I can wager dollars to doughnuts, he would have taken the higher offer in a heartbeat. This particular buyer could have lost her dream home because the agent left blank the spot for delivery.

Still, this is an excellent case study to answer the question of when is a purchase offer legally binding. As a Sacramento Realtor, when I find myself saying, “well, technically,” that means it is not binding until one more action happens. In this crazy Sacramento real estate market, buyers can get squeezed out on such technicalities.