California Real Estate Practice Exam

An owner offered his home to a buyer for $100,000 cash. The buyer paid the owner $100 cash to keep the offer open for two weeks. The owner accepted the $100. Ten days later, the owner notified the buyer that he was withdrawing his home from the sale. The next day the buyer tendered $100,000 cash to the owner. Under these conditions:

1. the offer to sell was binding

2. seller rescinded, voiding the transaction

3. seller violated the agreement to hold open the offer to sell, but did not have to sell to the buyer because the buyer had not promised in his original conversation to buy the property

4. although the seller violated the agreement, he effectively prevented a binding contract from forming by withdrawing his property from the market

The correct answer is: the offer to sell was binding

In this scenario, the offer to sell was indeed binding due to the acceptance of a nominal consideration—the $100 cash paid by the buyer to keep the offer open for two weeks. This payment serves as a form of binding agreement, often referred to as an "option." By taking the $100, the seller has provided consideration in exchange for the buyer's right to purchase the home at the specified price within the agreed timeframe, which creates a legally enforceable obligation on the part of the seller to honor the offer. The seller's notification to withdraw the home from sale does not negate the binding nature of the offer because the buyer had already executed his part by providing consideration for keeping the offer open. Furthermore, the subsequent tender of the full amount, $100,000, by the buyer within the agreed period solidifies the buyer's intent to fulfill the terms of the agreement. Thus, the seller's actions are not permissible, as they contradict the agreement formed when he accepted the cash payment. The buyer's timing in offering the total amount reinforces the binding nature of the offer during that two-week period.