The contract usually written as an offer with the buyer’s signature. The contract does not become binding unless the seller accepts the offer and signs the contract. If the seller does not agree to the exact terms of the offer, then there is no binding contract. The seller actually has three choices when an offer is made:
- The seller can agree to all the terms of the offer and sign the contract. The offer would now be a binding contract.
- The seller can agree to some of the terms of the offer, but not all of the terms. The seller would then make a counteroffer, stating what terms he or she does not agree with. At this point, there is no binding contract.
Important note: If the buyer does not agree to the terms the seller has put in the counteroffer himself, the seller is free to negotiate with any potential buyer. Many beginner investors assume because they are countering the seller’s counteroffer, the seller is locked into dealing with them. In reality, the contract will become binding only if the buyer accepts the seller’s counteroffer. If the buyer counters, the seller is no longer bound to the contract.
- The seller can reject the offer.