Navigating the complexities of real estate transactions requires a profound understanding of numerous elements, key among them being the concept of contract expiration. This guide delves into the intricacies of real estate contract expiration, its implications, and strategies for managing such situations. If you are making an offer on real property in California – or if you’re a seller and you’ve received an offer – it is very important to understand the expiration date in California real estate purchase offers.
Before I go any further, I should explain that a real estate purchase offer and contract is a legally binding document, and for that reason, nothing in this article should be considered legal advice. If you have questions about the purchase offer, counter offer, offer expiration, or any other terms in the purchase contract, you are advised to consult with a licensed California real estate attorney.
The California Residential Purchase Agreement
Most resale homes in California are sold using the California Residential Purchase Agreement (aka the RPA). Some areas will have their own purchase agreements – for example, many agents who work on the San Francisco Bay Peninsula will want to use the PRDS Contract , and Realtors in the City of San Francisco will often want to use their own special San Francisco Association of REALTORS purchase agreement.
Even in those areas where other purchase contracts are used, it is not uncommon to use the “gold standard” purchase agreement, the California RPA. While I have used other contracts from time to time, most transactions I’m involved in do use the standard contract forms. If I am working with you on the purchase or sale of a property in the Bay Area, we’ll probably be using this form, which clearly states the offer expiration date (as well as all other terms of the contract).
California RPA Offer Expiration Date
What is a Real Estate Purchase Offer Expiration Date?
A real estate purchase offer (contract for sale) is a legally binding agreement between a seller and a buyer. It outlines the terms and conditions for the sale of a property, including the sale price, closing date, and other relevant terms. However, a purchase offer doesn’t remain valid indefinitely. The validity of a real estate purchase offer is usually bound by a specified timeframe, beyond which the offer is considered expired. This is called “the expiration date” – and is a specific date and time that the contract will expire.
What Happens when a Purchase Offer Expires?
There is great confusion – even among real estate agents – about what happens when a California residential purchase contract expires. When a buyer makes an offer to a seller, there are four things the seller can do:
- Do nothing at all: seller is not required to even acknowledge that the offer has been received.
- Reject the offer: the seller can formally reject the buyer’s offer (although there is no benefit to the seller to do so)
- Make a counter offer: the seller can (and usually does) make a counter offer to the buyer, making changes to the price and/or terms of the buyer’s original offer
- Accept the offer: the seller can accept the buyer’s offer in its entirety, without making any changes whatsover.
When a buyer makes a purchase offer, it will have an expiration date. The standard California residential purchase agreement gives a default expiration date of 5 PM, three days after the offer is made. The buyer may shorten or extend that period by changing the default date/time. Buyers often do change the default expiration date, typically shortening it to be just one day, or two, or even just several hours after the offer is made.
With a shortened timeline, or even with the default three days, a seller may find themselves unable or unwilling to accept an offer before it expires. A lot of sellers worry about an offer expiring, but there is usually no cause for worry. The truth is, only one thing happens when a purchase offer expires: the seller cannot accept the offer. However, the seller is still free to make a counter offer – which is what usually would happen anyway.
Making a Counter Offer
In my practice, I find it is very rare to find a purchase contract that is so great it doesn’t need some kind of fine tuning with a counter offer. Many buyers, sellers, and even real estate agents don’t understand how counter offers work, so I’ll explain some important nuances here.
A counter offer legally constitutes a rejection of the prior offer, and instead is considered to be a whole new offer. When the buyer makes an offer to the seller, and the seller makes a counter offer, the seller’s counter offer is an offer from the seller to the buyer, with its own complete set of terms and conditions.
As it happens though, a seller’s counter offer will incorporate virtually all of the terms of the buyer’s initial offer, subject only to the different terms explicitly detailed in the seller’s counter offer. That’s why the counter offer form (there are actually several types of counter offers) is only 1-2 pages whereas the purchase contract is full of fine print and runs over 10 pages.
When one party makes a counter-offer to the other (e.g., seller counters buyer’s initial offer), the counter offer itself will have an expiration date (which again, by default, is three days after the offer is made), and the other party cannot accept the offer past the expiration date – but they are free to make a counter offer to it at any time.
Once a seller has made a counter offer to the buyer, the seller can no longer accept the buyer’s last offer – because remember, a counter offer legally constitutes a rejection of the prior offer. Therefore it is important to understand that if you really want to accept the buyer’s offer and you’re afraid of losing it, you might want to just accept it before it expires.
Countering an Expired Offer
When you receive a purchase offer, it’s good practice to scan it and find out when the offer expires. In the latest version of the California Residential Purchase Agreement, the expiration date is listed on page one of the purchase offer itself, right near the top, just under the offer price and proposed closing date.
Again, unless the offer is so good that there’s nothing you’d want to change about it, don’t worry about the expiration date, because it is perfectly fine to make a counter offer to an expired offer. But this is a point many people – including many real estate agents – have a hard time understanding.
The reason this is true is because you must remember that legally, a counter offer is a rejection of the prior offer, and all its terms – and one of those terms is the expiration date of the offer. The counter offer replaces the prior offer, and is a whole new offer, with its own set of terms – including a new expiration date.
Requested Response Date to an Offer
Of course, many agents do understand how the expiration date works, which is why they may say, when an offer is presented, “We are requesting a response by tomorrow at 6 PM” – which the seller may, or may not, be able to accommodate.
It should be noted that there is no actual place on the standard RPA purchase offer for a “requested response date.” However, some agents understand that the expiration date has very little teeth, and that in practice, the expiration date more often serves as a way for the buyer to formally notify the seller that they would like a response to their offer by the expiration date and time.
I believe that a seller should make a good faith effort to respond by an offer’s expiration date, if only to acknowledge receipt of the offer through the seller’s agent. However, a seller should in no way feel bound to make a formal, written response to a buyer’s offer by the expiration date, unless the seller feels it is in their best interest to do so (as would be the case if it’s a really great offer, and/or the seller has no other offers on the table).
Withdrawing an Offer Before It Expires
Another thing to understand about an offer is that an offer may be withdrawn at any time before it expires – which means that the expiration date itself is not really a guarantee of anything. While it is unusual to withdraw an offer, it happens often enough that of course there is a REALTOR form for that – the C.A.R. WOO (Withdrawal of an Offer) form.
Once an offer (or counter offer) has been withdrawn, the party receiving the offer cannot accept the offer, or make a counter offer. Withdrawing an offer makes it null and void.
Conclusion
I hope that this article has been helpful to understand the way offer expiration works in the California real estate sale process. One thing that is often lost in the back-and-forth and black-and-white fine print of purchase offers and counter offers is that the essential ingredient is a buyer who is willing to buy, and a seller who is willing to sell to that buyer. If buyer and seller are working and negotiating in good faith and maintain cooperative and constructive communication during the negotiation process, a successful sale may be culminated regardless of the expiration date on any offer or counter offer.
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