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The two components of a valid contract; a meeting of the minds. An offer is a manifestation of an intention to enter into an agreement. In a real estate contract, the offer must be communicated to the offeree and must be definite and certain, with all terms reduced to writing. The offer creates the power of acceptance in the person to whom it is communicated. Upon acceptance by the offeree of all terms of the offer, a valid contract is created. Unless the offer is in the form of an option, the offeror can revoke the offer at any time before the offeree has communicated acceptance to the offeror, but the revocation usually is not effective until received by the offeree. Immediately upon an effective revocation, the offeree no longer has the power to accept the contract.

An offer may be terminated by lapse of time, communication or notice of revocation, qualified acceptance (as in a counteroffer), rejection, death, or insanity of either the offeror or offeree.

Acceptance of an offer must be definite, unambiguous, and unqualified. If acceptance is in any way qualified or changes the terms of the offer, then such acceptance constitutes a counteroffer, and a contract can be created only when this counteroffer is accepted by the original offeror. In real estate transactions, the acceptance should be in writing and signed by the party to be bound. It is also advisable that the time of acceptance be indicated. There is a presumption in commercial transactions that an offer made in writing normally must be accepted in writing.

Most offers to purchase real property are made in the sales contract. There is no legal requirement that the offer be accompanied by an earnest money deposit, although this is the usual case. It is common for the offeror, normally the prospective buyer, to give the offeree a limited time in which to accept the offer. The offeror could, nevertheless, withdraw the offer at any time during this period, because an offer can be revoked at any time prior to notification of acceptance. An exception is a case where the offeror’s agreement to hold the offer open is supported by independent consideration, such as in an option. If accepted after the deadline, the acceptance would constitute a counteroffer.

A written offer mailed to the offeree is accepted and a contract is created when the offeree places the acceptance in the mail. Therefore the offeror cannot revoke the offer after the offeree has mailed the acceptance but before the acceptance is received by the offeror. The rationale is that the offeror has chosen the mail as the agent, and when the offeree delivers to the agent, that is, puts the acceptance in the mail, it is deemed to be effectively communicated to the offeror, even if the acceptance is lost in the mail.
Dearborn Real Estate Education
This "Word of the day" is excerpted from The Language of Real Estate, 6th Edition by John Reilly (published by Dearborn Real Estate Education, 2006 copyright). To purchase the complete book, with over 2800 key terms and definitions, or to browse through Dearborn's hundreds of other professional real estate titles, including Real Estate Technology Guide by Klein, Barnett, Reilly, click here.