LOI Addendum

When is an Offer to Purchase binding? Is it the time when the seller signs it? Is the payment of Earnest Money a requirement for the seller to be bound by the offer?

What if the seller signs the offer but the Buyer delayed the payment of earnest money because he made multiple offers for various properties and he wanted to choose the best deal?

Or, what if the seller signs the offer but had to wait for the buyer (Buyer 1) to get back from out of town for the earnest money check? What if another buyer (Buyer 2) came along and put up a higher offer? Could the seller accept the higher offer even if he has signed Buyer 1's offer but hasn't received the earnest money?

Let's try to complicate it further. What if the seller didn't sign the offer but accepted the earnest money check–which he didn't deposit because he was expecting a higher offer? Is the seller obliged to go with Buyer 1's offer?

These are actual scenarios I've come across. To avoid this situation, I've decided to add the following clause to my Offer to Purchase/Letter of Intent template:

"This Offer shall be considered binding upon the SELLER and the BUYER upon:

1. The signing of the SELLER in the space provided below; and

2. The SELLER’s receipt of the earnest money check paid by the BUYER.

Should the SELLER receive the earnest money check but fail to deposit it, this offer shall still be considered ACCEPTED, and both the SELLER and the BUYER shall be bound by the provisions stated in this letter."

Lawyers might say the clause merely states the obvious. However, I believe adding this clause would discourage the seller and the buyer from exaggerating their interpretation of the offer. Anyway, it wouldn't hurt to have this.

What do you think?