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Is an Offer to Purchase Real Estate Binding?


For the past two years, the residential real estate market in Massachusetts has been setting records. The most recent data released by the Massachusetts Association of Realtors (MAR) indicated the median price for a single family home rose over 12% to $617, 750. The availability of single family homes in MA has been historically low, driving higher prices, bidding wars and making it difficult for parties to find a home. With interest rates rising, the mania of past months has cooled a bit, but if you are considering selling or buying, it is important to protect your interests when it comes to making or accepting an offer to purchase.

With these high prices, many homeowners are seeking to cash in. But what happens if you list your home for sale, accept an offer to purchase from a buyer and then change your mind?

Many sellers are under the misconception that the offer to purchase is merely a formality and is unenforceable and not a binding contract. They further believe that a contract only forms when a purchase and sale agreement is executed by both the buyer and the seller. So, is an offer to purchase real estate a binding contract? The answer in Massachusetts is “Yes.”

An Offer to Purchase: What You Need to Know

In Ritter v. Johnson, Case No. 21-cv-18015-DJC, the Plaintiffs sued the Defendant for backing out of an agreement to sell his home. The Plaintiffs submitted an offer to purchase (“OTP”) the Defendant’s property for a sum certain; agreed to execute a purchase and sale agreement (“P&S”) by a certain date; identified a specific closing date for the transaction and stated that “time was of the essence.” The OTP did include certain contingencies including a satisfactory home inspection, the Plaintiffs obtaining a loan and a mutually acceptable P&S. Importantly, the OTP also stated that the OTP “was a legally binding contract. If not understood, seek competent advice.” Lastly, the OTP stated that if the seller failed to fulfill his obligations under the agreement that it was enforceable both at law and in equity. Both the Plaintiffs and the Defendant signed the OTP. After the OTP was executed, both parties retained counsel to negotiate the terms of the P&S. The Plaintiffs executed the P&S and paid the required deposit. The Defendant did not execute the P&S and requested to terminate the transaction. The Plaintiff sued the Defendant for specific performance. 

The Court ruled the OTP was enforceable as a matter of law citing McCarthy v. Tobin, 429 Mass. 84 (1999). The Court looked at the facts and circumstances surrounding the transaction, the words used by the parties and the agreement itself to determine the intent of the parties. The OTP included all the material terms of the parties ‘agreement which gave rise to an inference that the parties intended for the OTP to bind them. Furthermore, the OTP contained a description of the property to be conveyed, the purchase price, deposit requirements and closing date. If the parties did not intend to be bound by the OTP, then they should have employed language to that effect. In Ritter, no such language was included. In addition, the facts and circumstances clearly demonstrated that it was the parties’ intent to be bound by the OTP (home inspections were performed, the parties retained counsel to draft and negotiate a P&S agreement).


So what does this all mean? Sellers should be careful to read all of the terms and conditions set forth in an OTP. If they want to protect themselves and provide for an exit strategy in case they change their minds upon selling, they should include specific language in the OTP that suggests that they do not intend to be bound by a preliminary agreement until the more formal P&S executed by both parties.

If you need legal assistance whether for litigation related to a real estate matter or to protect your interest in buying or selling real estate, please contact us via web form or contact attorney Michael B. Cosentino directly at 781-235-5500, 781-247-8013 or via email at mcosentino@wcnllp.com

Learn more about our Litigation and Real Estate practices.

This Article is not legal advice and should not be taken as such or relied upon as legal advice. The attorneys at Wilchins Cosentino & Novins LLP are ready, willing and able to assist you with real estate matters including litigation. We have a proven track record of assisting our clients including successfully prosecuting and defending cases involving real estate transactions.

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