Offer Document

Introductory Guidance Note

So you are a prospective property buyer, and you have been browsing and exploring the real estate market for a while. After days, weeks or even maybe months of searching, you finally found a property that you really like and see yourself in. In that case, it’s time to make an offer!

Bureaucratically, the first step to any property purchase, be it a commercial property or a residential unit, is making an offer to the property owner. What you may not know is that there is legally a difference making an offer through a signed Offer Document, and expressing verbal or written interest through informal means. While an offer document does not legally bind the property owner or the buyer into completing the purchase, it is the first official step in the purchasing process and facilitates communication and negotiation between the buyer and seller.

For this reason, we have provided here a template for an offer document for the purchase of a property, supplemented by additional guidance and explicative notes, to better inform you of the specificities of offer documents generally, as well as the constraints and freedoms such a document allows both the buyer and the seller.

It’s also important to note that an offer document is either provided directly by the prospective buyer to the property owner, or it can provided to an estate agent (if the property owner has hired an agent for the purpose of supporting the purchase and negotiation process). If it is provided to an agent, the agent is obligated to inform the seller of the offer and share the document with them as soon as they are able. An agent is not allowed to withhold this information.

Offer to purchase property

THIS OFFER TO PURCHASE PROPERTY (THE “AGREEMENT”) IS EFFECTIVE FROM [INSERT DATE]

MADE BETWEEN:

[FIRST PARTY NAME] (the “Buyer”)

[YOUR FULL ADDRESS]

AND

[SECOND PARTY NAME] (the “Seller”)

[YOUR FULL ADDRESS]

The terms of the Agreement are not comprehensive and are subject to change or removal. The purpose of the Agreement is to establish the basic terms to be used in a future contract for the sale of the Property between the Seller and the Buyer (collectively known as the “Parties”).

1. OFFER TO PURCHASE:

I, the Buyer, hereby offer to purchase from you, the Seller, upon and subject to the terms and conditions stated herein, the following property:

[LEGAL DESCRIPTION OF THE PROPERTY]

Located at:

[FULL ADDRESS]

Referred to as the “Property”.

The terms of the Agreement are not comprehensive and are subject to change or removal. The purpose of the Agreement is to establish the basic terms to be used in a future contract for the sale of the Property between the Seller and the Buyer (collectively known as the “Parties”).

You may have noticed that at the end of the above two introductory sections include at their ends a small paragraph that specifies that ‘terms of the Agreement are not comprehensive and are subject to change or removal’. This is because elements of the offer may change over time, such as the expected price to be paid for the property, the conditions of the offer or purchase down the line, or even the closing date for the purchase. The purpose of this document is to provide the seller with an official expression of intent that, if accepted, would be the basis for further communication and negotiation between the seller and the buyer.

This communication could be directly between the seller and buyer, or it could be mediated by an agent representing the buyer or seller, or even two agents representing both parties.

One additional element worth noting is the ‘legal description of the property’ included in the ‘Offer to Purchase’ section. The legal description must include all the spaces of the unit being purchased so as to avoid any ambiguities and misrepresentations of the property. For example, if a buyer is making an offer for a dwelling that includes a back garden, the garden must be included in the legal description. If it is also a two-bedroom household, then the fact that it is a ‘two-bedroom’ unit must be included as well.

2. SALES PRICE

The total purchase price for the Property is £[INSERT PURCHASE PRICE] (the “Purchase Price”), payable as follows:

a. The Buyer will pay a deposit of £[INSERT DEPOSIT PRICE] (the “Deposit”) to [NAME OF DEPOSIT RECIPIENT] (the “Deposit Recipient”) in a payment method agreed between the Parties, to be held in escrow, on or before [INSERT ESCROW START DATE]. On the closing date of [INSERT CLOSING DATE] the Deposit Recipient will credit the Deposit to the Seller.

b. The Buyer will pay the balance of the Purchase Price, subject to adjustments, in a single payment or financing method agreed between the Parties at closing date, unless another date is stated in this Agreement.

While the price of the property may be up for change or (re)negotiation down the line, the offer document is expected to reflect truthfully what the buyer is intending to pay for the property. If the offer is accepted, the buyer is also expected to set funds aside for a deposit, which typically represents a fraction of the purchase price (though there is no legal minimum or maximum purcentage), and which will be protected until the purchase is either completed or falls through. The deposit should be provided to a neutral third party recipient, typically the seller’s solicitor.

The deposit condition is surprisingly not a legal requirement that has to be included in the offer document but it is considered essential because it guarantees three things: firstly, that the buyer is committed to the purchase and has set money aside as a deposit for that purpose; secondly, that the buyer does have access to funds that enable them to continue with the purchase (at least initially); and, thirdly, the deposit will be protected by a reliable third party who will ensure that the seller does not claim the deposit as their own.

Do property purchases always expect payment in a single payment? Or can the compensation be incremental?

3. RETURN OF DEPOSIT

The Deposit Recipient will return the deposit to the Buyer if the Agreement is rejected or expires before is it accepted.

4. AGREEMENT SUBJECT TO CONTRACT

This Agreement represents a preliminary agreement and is not a legally binding sales contract. The sale of the Property will be contingent on the exchange of a legally binging sales contract.

As discussed above, the offer document does not legally bind either party into completing the purchase under the terms of the initial offer being made. As the property in question is inspected and surveyed, things could be revealed to the buyer and seller that change the circumstances of the purchase. Additionally, as the offer price and even process duration could change because of a multitude of reasons, it is best to treat the offer document as an official expression of commitment to the purchase and to frerquent communication.

That said, there are additional conditions that you, as the buyer, could include in this section to protect your interest in the property. For example, it is commonly thought that once an offer has been accepted, then the agent/seller will be mandated to remove the property from the market, that no additional viewings will be organised, or expressions of interest (including rival offers) will be accepted. In actuality, that is not legally the case. While it is considered bad etiquette, and even unethical, to do so, the seller and/or the agent is under no legal obligation to take the property off the market if an offer has been accepted. This is why it is encouraged that prospective buyers either press the agent/seller to delist the property until the pruchase either fails or is completed. One way to add that pressure is to make the offer document (the ‘Agreement’) conditional on the removal of the property from the market and any platforms being used to advertise its sale.

5. CLOSING AND POSSESSION

The closing date will be on or prior to [INSERT CLOSING DATE] (the “Closing Date”) or at another time agreed by the Parties. The Buyer will take possession of the Property on this Closing Date.

This is very straightforward; it simply described the date on which the buyer is expected to take possession of the property in question. Sometimes, the purchasing process can take much longer than one expects, especially when there’s a ‘chain’ involved.

A ‘chain’ is when an one of the parties is connected to another buyer/seller. For example, a property seller could be simultaneously a prospective buyer for another property (so they are selling their current property in order to move into/buy another property) . A prospective buyer could also, similarly, be a seller of another property that they already own but intend to sale in order to fund the purchase of a new property. The issue with chains is that they do not always involve a single degree of separation (one individual connected to a singular buyer/seller). Sometimes, chains can be very long, connecting multiple buyers and seller, which can increase the expected duration of a purchase process.

This is why it is important to think of this closing date as a tentative one and the buyer and seller involved in this agreement must if necessary renegotiate the Closing Date.

6. ENERGY PERFORMANCE CERTIFICATE (EPC)

The Seller must provide the Buyer with a valid energy performance certificate, free of charge, on or before [INSERT DATE BY WHICH EPC MUST BE PROVIDED].

An Energy Performance Certificate (EPC) is a document issued by an energy assessor, which could be a professional in a company or an independent trader, that represents the energy efficiency of a given property. The rating varies from A (most energy efficient) to G (least efficient). An EPC is conducted to show the actual rating of a property in its current condition and a higher, potential rating representing the efficiency grade that the property could achieve if improvements were made to it. EPCs can also vbe very detailed as they include entries on the conditions of every part of a household, including but not limited to: wall insulation (or lack thereof), if the windows seal correctly, choice of glazing for the windows (if single, double or triple glazed), and signs of damp or water leakage.

As households in the UK have become more concerned with domestic energy consumption, for financial and environmental reasons, the EPC rating of a property could impact a prospective buyer’s opinion of a property, their offer price, and the conditions of purchase. For properties in England and Wales, you can check if a property already has an EPC by checking the following register. Please make sure to check the ‘date of assessment’ and ‘date of certificate’ of the EPC to see if the assessment is recent.

7. ADDITIONAL TERMS

The following documents are also attached and form part of the Agreement:

[LIST AND ATTACH ANY ADDITIONAL DOCUMENTS]

8. NOTICES

All notices pursuant to the Agreement must be written and signed by the respective party or its agent, and mailed with return receipt requested or hand delivered to the following:

BUYER

NAME:

ADDRESS:

PHONE:

EMAIL:

SELLER

NAME:

ADDRESS:

PHONE:

EMAIL:

9. SEVERABILITY

If any term or provision of the Agreement is determined to be invalid or unenforcable by a court, the remainder of the Agreement will not be affected and any unaffected term wil remain valid and be enforceable by law.

BUYER’S OFFER

This is an offer to purchase the Property on the above terms and conditions. The Seller may continue to list the Property for sale and accept any other offer at any time prior to the acceptance of the Agreement by the Seller, subject to the above terms and conditions.

The Agreement will lapse if not accepted by the Seller by [INSERT DEADLINE DATE].

SIGNATURE:

BUYER’S NAME:

ADDRESS:

DATE:

PHONE:

Above, we discussed how a buyer could include in the offer document a condition that mandates the removal of the property from the market if the offer is accepted. The first sentence of this section, the ‘Buyer’s Offer’, explains that, until the offer is accepted, then the seller can still advertise their property and accept offers for it. This is why a deadline date is included for making a decision on the offer, so as not to waste the buyer’s time waiting for an answer on the offer. That being said, this agreement is not legally binding and, as a buyer waits for a response, they can always inspect other properties and make other offers on other properties. While it may be regarded as bad etiquette to do so, there is no legal constraint on the buyer to prohibit them from doing so.

SELLER’S ACCEPTANCE / REJECTION / COUNTER-OFFER

[ ] ACCEPTANCE: The Seller accepts the Agreement along the terms and conditions specified above and agrees to convey the Property to the Buyer.

SELLER’S SIGNATURE:

DATE:

[ ] REJECTION: The Seller rejects the Agreement put forward by the Buyer.

SELLER’S SIGNATURE:

DATE:

[ ] COUNTER-OFFER: The Seller presents an offer to the Buyer subject to modifications specified in 7. ADDITIONAL TERMS.

SELLER’S SIGNATURE:

DATE:

This section of the Offer Document is filled out and signed by the seller and represents their response to the buyer’s offer. As discussed earlier on, the document does not set everything in stone and the conditions for moving forward with the purchase could change once surveys have been conducted, assessments and certificates have been examined, and mortgage applications are submitted. For these reasons it’s important to know what happens next depending on the seller’s response.

If the offer has been accepted, then initial contact between the buyer and seller is established and greater communication is expected to take place between both parties. It is best at this point for the seller to provide any documents, surveys or other paperwork relating to the premises to the buyer so as to better inform them of the condition of the property and whether the seller is in a chain or not. The buyer should contact a property lawyer to assist them with legal paperwork and stamp duties, a surveyor to inspect the property (and maybe the building, if it’s a flat), and to complete their mortgage application if they need one. The offer can always be renegotiated and additional conditions can be added if need be in the future as more information is revealed and exchanged between both parties.

If the offer has been rejected, this does not stop the buyer, if they are very interested, in providing the seller with a new offer at a different price and/or with different conditions.

If the seller provides a counter-offer (the conditions of which would be set in section 7, ‘Additional Terms’) then it is up to the buyer to see if they accept these new conditions. The buyer can also provide another counter-offer. It is important to note that counter-offers are not acceptances. Therefore, even though it can be argued that both parties have entered some form of negotiation, the seller is not mandated to delist the property or stop the agent from organising new viewings or considering new offers, if such a condition was added in the document.

SIGNED

SELLER’S NAME:

ADDRESS:

DATE:

PHONE: