What is "under agreement"? (sales, real estate, mortgage)

[LoveAlbuquerque]

I wanted to sell my house so I hired a realtor. He got a willing buyer who made an offer and I accepted that offer (sales price of my house).

Then my realtor changed the online status of my house as "Under Agreement".

After waiting for several weekes, it turned out that the buyer backed out right before signing the purchase and sales agreement.

I wonder why this has happened, so I talked to several knowledgeable people about real estate. They told me that since the buyer never signed "Purchase and Sales Agreement", there was never an agreement. It was wrong for my realtor o change the status of my house as "Under Agreement".

Do you agree that my house was never "Under Agreement" because the P&S was never signed?

[wmass]

If the buyer had an accepted offer, I would say that is some type of "agreement". BUT, your realtor jumped the gun on the sign; you should still be accepting backup offers until the P & S is signed.

[CaseyB]

Why did it take several weeks for the realtor to tell you this?

[LoveAlbuquerque]

Originally Posted by CaseyB

Why did it take several weeks for the realtor to tell you this?

After I accepted the offer, my realtor asked the buyer to get an inspector to do the inspection within 10 days.

The buyer said that his father was in the hospital and he needed to take care of his father. Therefore it was delayed for another week.

The realtor said we needed to sign the purchase & sales agreement within the next week. He asked me to hire an attorney to go over the P&S.

I got an attorney who said he would let me know when I could sign. I waited for over a week but never heard from anyone about P&S.

I called my attorney. He told me that the buyer's attorney recommended several changes that were problematic. I had to stop by my attorney's office to go over them. They were odd changes and I got completely lost because they didn't make sense.

At this time, my realtor called me to let me know that the buyer wanted to back out. We needed to confirm the buyer's position with his attorney so my attorney called his attorney and left a message. But the message was not returned until this week. So much time was wasted in the proess.

In order to prevent this from happening again, I want to propose the following to my realtor to apply stricter rules/schedule so that no more time is wasted:

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1) Keep the status as “Active” (Do not change the status to "Under Agreement") until a Purchase & Sales Agreement (P&S) is signed by both the buyer and the seller.

2) Before P&S is signed, continue to show the house to potential buyers. The goal is to have five backup buyers in line.

3) The seller (or I) will need to see a bank statement showing that the buyer has cash that would cover the down payment (5%, 10%, 15%, or 20%) that he/she claims that he/she is able to put down.

4) After the seller (or I) have accepted an offer, give 10 days for the buyer to complete inspection and another day to sign P&S.

If P&S is not signed by the 11th day, the offer from the buyer is automatically voided, and a backup buyer will take over.

5) The seller (or I) will keep any deposit from the buyer, when the buyer backs out at any stage for any reason other than the ability to obtain financing. This needs to be signed by the buyer when he/she puts down a deposit.
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Please comment! I'd appreciate any input!

[CaseyB]

RE: #5, do you mean after the P & S is signed?

My feeling is that your broker should have continued to show the house to potential buyers until the process was further along.

[shiver]

5) The seller (or I) will keep any deposit from the buyer, when the buyer backs out at any stage for any reason other than the ability to obtain financing. This needs to be signed by the buyer when he/she puts down a deposit.

Once the P&S is signed, this typically IS the general rule. Unless of course you as the seller are the one who can't close (title problems, etc.). After offer, but before P&S, the buyer usually puts down $1,000 as the initial good faith deposit. The rest of the deposit is given at P&S signing. Very unlikely that any buyer will give you the rest of the usual 5% deposit prior to this. The buyer can use inspection issues to back out prior to P&S and get back their $1,000.

Some buyers may also balk at showing you their bank statement. You can certainly demand a quality mortgage preapproval though.

While I can understand your frustration and the desire to protect your interests and not waste your time, you don't want to make it so difficult that you turn buyers off. It's a tough market out there so you have to balance. But I would certainly tell any agent to be aggressive about taking back up offers until a P&S is signed.

[LoveAlbuquerque]

Originally Posted by shiver

Once the P&S is signed, this typically IS the general rule. Unless of course you as the seller are the one who can't close (title problems, etc.). After offer, but before P&S, the buyer usually puts down $1,000 as the initial good faith deposit. The rest of the deposit is given at P&S signing. Very unlikely that any buyer will give you the rest of the usual 5% deposit prior to this. The buyer can use inspection issues to back out prior to P&S and get back their $1,000.

Some buyers may also balk at showing you their bank statement. You can certainly demand a quality mortgage preapproval though.

While I can understand your frustration and the desire to protect your interests and not waste your time, you don't want to make it so difficult that you turn buyers off. It's a tough market out there so you have to balance. But I would certainly tell any agent to be aggressive about taking back up offers until a P&S is signed.

For the last buyer, the good faith deposit is $500. The deposit upon signing purchase & sales agreement is $4500 (which he never deposited because he never signed P&S). If the next buyer signs P&S but backs out, I would want to keep both deposits that total $5000. Is that fair?

Last time, my realtor told everyone that my house was sold as soon as I accepted that offer. How stupid.

[LoveAlbuquerque]

Originally Posted by CaseyB

RE: #5, do you mean after the P & S is signed?

My feeling is that your broker should have continued to show the house to potential buyers until the process was further along.

My broker is an optimistic idiot. Once I accpeted the offer from that buyer last time, he announced that my house was sold (put a sign at my lawn).

[wmass]

I'd look for another realtor.

[shiver]

If the next buyer signs P&S but backs out, I would want to keep both deposits that total $5000. Is that fair?

Last time, my realtor told everyone that my house was sold as soon as I accepted that offer. How stupid.

Definitely get a new realtor.

Regarding the P&S, in general, once the P&S is signed, the seller can keep the deposit as liquidated damages if the buyer backs out without relying on a contract contingency. Usually the only contingency at that point is the mortgage one. And as mentioned, of course, they can back out if you don't meet all your responsibilities - not fixing something you agreed to fix in the P&S, not being able to provide clear title, discovery that something was misrepresented etc.