When making an offer to buy land, there is more to consider than just the price you will pay. One of the things to consider is earnest money, which can also be called the down payment. The second thing is to know when you have a legally binding contract. Let’s examine both below.
It’s called earnest money for a reason – it’s your “skin in the game”, and it’s an indication of how much you are willing to risk should you fail to close on the contract. Also, the more you are willing to pay as a down payment with your offer, the more likely a seller will negotiate with you on other issues (such as offer contingencies). Remember, the down payment is a credit towards the purchase price. So, assuming you intend to close (and you have well written contingencies) you are not really taking much risk. A large amount can (and usually will) get the seller’s attention and moving your way.
When An Offer Becomes Binding
It’s critical that you get your offer to purchase in writing. We have seen situations where a prospective buyer believed that by verbally accepting the price offered by a seller, the seller was legally obligated to close with them. Not so! Even if a seller verbally accepts your offer, they are free to accept a higher offer until your offer is binding legally. Alabama real estate law stipulates that a contract is binding on the parties only after, 1) it is signed in writing by all parties (including initialing any changes made during counter offers), and 2) both parties have received copies that are fully signed and initialed. Also, remember that Alabama’s Statute Of Fraud requires all contracts to 1) be in writing, and 2) have ‘consideration’ (payment of money).