What happens to an “Expiration of Offer” provision when the offer is rejected?

QUESTION: I received an Offer to Purchase and Contract on one of my listings from a buyer agent last Monday afternoon at 3 PM.  The Additional Provisions Addendum was attached to the Offer with the “Expiration of Offer” provision selected.  The time and date inserted in the blanks were 9 AM the next day, Tuesday.

I called the buyer’s agent at 9:30 PM Monday evening and said that while the sellers appreciated the offer, it was unacceptable as written.  I told the agent that the sellers would seriously consider another offer with a   larger Due Diligence Fee and a shorter Due Diligence Period.

The buyer agent said she would pass that along to her client but insisted that a contract had to be negotiated and signed by Tuesday morning at 9 AM in order to be valid.  I said that the Expiration of Offer provision was no longer valid since the sellers had rejected the buyer’s offer.  Who was right?

ANSWER: You were.  When you told the buyer’s agent that the offer was unacceptable to the sellers, that constituted a rejection of the buyer’s offer.  None of the terms of that offer remained on the table at that point, including the Expiration of Offer provision.  Of course, if the buyers chose to make another offer they could include another Expiration of Offer provision as a part of that offer if they wanted to.

Another thing an agent who uses the Expiration of Offer provision needs to understand very clearly is that, as written, the provision requires acceptance of the offer, not just a response to it, by the date and time inserted in the blanks.  Let’s vary the facts of your situation just a bit to illustrate the importance of this fact.  Say you’d contacted the buyer’s agent Monday evening and told her that your sellers were very interested in the offer and that they were going to sleep on it.  Then let’s say the sellers called you Tuesday morning at 10 AM to tell you they’d signed the offer and you’d then communicated that right away to the buyer’s agent.  Is there a contract?  No.  Since the Expiration of Offer provision provided that the offer would expire unless unconditional acceptance was delivered to the buyer by 9 AM that morning, the buyer’s offer actually expired shortly before notice of it acceptance had been communicated.  And an offer that’s expired can’t be accepted.

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