In the context of real estate transactions, what is a binder?

A binder in real estate is a written document that serves as a preliminary agreement between a buyer and seller, indicating that the buyer intends to purchase a property. This document usually outlines the essential terms of the transaction, such as the purchase price, property details, and any contingencies that may apply. It acts as a form of protection for both parties and helps facilitate the drafting of a formal purchase agreement in the future.

By having a binder, the parties demonstrate their serious intent to proceed with the transaction, which can help secure the property for the buyer while the details of the formal contract are negotiated. This makes it a crucial step in the real estate process, as it helps to establish mutual understanding and sets the groundwork for the subsequent legal documentation required to complete the sale.

In contrast, a verbal agreement lacks enforceability and clarity, a temporary reservation of property may not capture the full commitment needed, and a formal listing agreement relates specifically to the representation of sellers, not to the transactional intent between buyers and sellers.