Offer To Purchase

The differences are as follows:

Offer To Purchase

• This is an official document addressed to the seller expressing the buyer's profound interest in the property.
• The buyer's agent often issues it and includes a check for the Option to Purchase, usually for 1% of the purchase price as a deposit. This is also known as the option fee.
• The seller may provide the buyer with the option to purchase after receiving and signing the offer.

Option To Purchase

• The Option to Purchase is the actual, legally enforceable agreement used to purchase a property. Obtaining the Option to Purchase usually costs around 1% of the purchase price.
• The seller is not permitted to make another offer to other prospective purchasers while the Option to Purchase is still in effect.
• Buyers must execute their Option to Purchase within its active period, or it will expire, and the 1% deposit will be forfeited.

Letter Of Intent

• A letter of intent is a non-binding agreement that describes the conditions of an expected transaction, including the buying price, terms of payment, and the date of closing.
• The objective of a letter of intent is to create a structure for the negotiating process and to ensure that all parties understand the basic terms of the agreement.
• Until a purchase agreement is signed, it is not a legally binding contract, and either party may back out at any time.

An Offer To Purchase is a representation of interest in a property subject to specific terms and conditions. A buyer offers a seller a specific asset value in exchange for the property. The buyer makes an offer to the seller in which they specify their preferred terms in addition to other significant information like the price, obligations, and terms and conditions.

The seller has two choices after receiving an offer, which are either accepting it or rejecting it. The offer is the first of several official documents that must be issued and signed in order to purchase an asset. Once the seller accepts an offer, the two parties sign an agreement to sell to establish their decision legally. Finally, a sale deed is created and executed within the time frame specified in the contract to conclude the transaction.

Rights And Obligations Of The Seller

The seller has the right to obtain and evaluate any purchase bids made for the property. They can respond to anything in any sequence they choose and may choose not to answer them at all. The seller has the following options while an offer is still valid:

• Agree to the conditions of an offer made by a prospective buyer
• Reject the offer in case the suggested price is less than what was initially agreed upon
• Write a formal counter-offer or a fresh offer that negates the previous one
• The potential buyer is immediately involved in the transaction if the seller accepts the terms of the offer

Rights And Obligations Of The Buyer

If the seller fails to follow up on the offer to purchase agreement, even though they had unconditionally approved it, the buyer may request that they honor the contract and sign the deed of sale. Failure to do so will result in a verdict transferring the seller's title to them. On the other hand, if the seller rejects the offer or makes a counteroffer, the buyer has the right to back out. In this scenario, the buyer gets released from any obligation, and the initial purchase offer is considered null and void. 

Some of the things that are to be checked in the offer to purchase agreement include the following:

• Is the buyer's and seller's information accurate?
• Does the property description adhere to the title deed, and is it accurate?
• Is the price stated correctly?
• Are the occupational rent costs and occupation dates correct?
• Do any specific requirements need to be met, such as obtaining a bond or selling another property?
• Does it clearly state which fixtures and fittings are going to remain or be removed?
• Is there a list of defects included?

Let us study the following examples to understand this agreement:

Example #1

Let us assume that Sam owns a property that he wants to sell. He posted an advertisement in the local newspaper, and Jane contacted him, expressing her interest in buying the property. Jane’s agent, on behalf of her, created and sent a contract to Sam. The contract comprised the price of the property and the terms and conditions that Jane wanted to extend for the purchase. This agreement showed that Jane was formally interested in purchasing the property from Sam. This is an offer to purchase example.

Example #2

According to local media, on May 28, 2024, the construction company Vulcan Materials declared that it had turned down the Mexican government's offer to buy its quarrying site in the Caribbean state of Quintana Roo. The organization stated that it would not sacrifice years of effort and investment for an insignificant amount that the Mexican government imposed unilaterally, which is far from reality. Vulcan Materials is an organization established in the United States that produces construction materials. This is another offer to purchase example.