An Accepted Offer: Not a Done Deal
A prospective buyer should understand that having a seller accepts your offer does not mean the end of the process. It is a common misconception that the house is yours. However, in New York City, that is not the case.
Therefore, buyers need to understand that the listing remains active, and sellers are likely to continue showing the property. This can unsettle buyers, but the process protects you, too.
Don’t celebrate
Once you agree to mutually acceptable terms, it is not the time to pop the champagne cork. The deal moves into the due diligence phase, and it is in the attorneys’ hands. A lot goes on during the attorney review, including an inspection and back-and-forth negotiations between the lawyers.
Since there is not a signed contract between the parties, sellers are free to continue the active search for buyers. Meanwhile, the buyers are not bound by the offer.
Risks to the seller
Should the seller stop the process based merely on the acceptance of an offer, he or she is putting him/her at risk that the buyer could renegotiate or pull out altogether. If the buyer should do so, there is no recourse.
Should this happen, the seller has lost valuable time. Other interested prospects may very well have moved on to other properties. Furthermore, the listing has remained on the market, and buyers may consider it “stale.”
However, the seller alleviates this risk by continuing the process until both parties sign the contract and the buyer makes an earnest deposit.
Risks to the buyer
Prior to having a signed contract, the property remains on the market and the seller is free to accept other bids. This means another buyer can swoop in with a better offer. He or she could offer more money or make it compelling in another way (e.g. fewer contingencies, more amenable closing date, etc.). Then, this places you in the position of having to amend your offer or walk away.
The buyer can continue searching different listings in case the preliminary deal falls through.
Penalty phase
Once the seller and buyer sign the contract, it is a different story. Typically, there are certain contingencies in the contract. For instance, it is typical that you have to qualify for a mortgage within a certain period of time. If the lender denies the mortgage, the buyer can pull out of the deal without penalty. As a buyer, you may find legitimate issues during this process. For instance, you may wish to renegotiate the price following the inspection.
However, if the buyer wants to walk away after signing the contract for reasons other than the contingencies stated in the contract, there is a financial penalty. Typically, he or she forfeits the earnest money.
From the seller’s perspective, he or she can accept backup offers, but cannot proceed unless your deal falls through.
The Upshot
Neither party is bound by an accepted offer. Since this is the case, you should expect the listing to remain active until both parties sign on the dotted line. You may not like it, but in New York City, it is the prudent way to conduct real estate business.
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