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I don't believe there is any place in the United States, that a contract is binding, until it is signed by both parties. Then if there are contingencies such as inspection, appraisal, etc., it is binding up till the contingency is completed within an allotted time. If buyer wants changes after the inspection, etc., and the owner will not agree it becomes null and void using the legal term, and is no longer a contract.
But after it is accepted, it is a solid contract and enforceable unless a contingency kills it. If the seller wants to play the game of taking another higher offer, yours still is in effect. As they taught me in real estate law classes, if this happens to you, take your contract down to the county registry office, and record your contract. This will stop the seller from selling it to someone else, as mortgage holders and lenders will not allow it to be sold. You then have a period of time such as 1 year to force the seller to go through with your contract. Once the property title is tied up this way, the seller will usually honor your contract and close without you taking legal action.
In NY generally, the realtor sends a binder with an offer-then the 2 realtors (with client input) negotiate. Once a deal is made, the buyer has an inspection. A lot of times buyers use the inspection to negotiate price-at least thats what seems to be going on the market here. Then you have the sellers attorney send the contract over. You c
an also sent contract contigent on the inspection-most do the inspection first without starting with the lawyers-
I know before contract is signed you legally have nothing but no one generally spends the $500-800 on inspection unless you have a verbal through the realtors-its more of a moral question than legal-thanks
This is sort of how it goes in NY.
Once your offer is accepted, you're asked to put down a “binder” (a deposit of, say, one percent) until the contract is signed. The seller’s lawyer will then send the contract to your lawyer for review. The contract is not the final sale: it says “if all goes well” you agree to buy the sellers house at the closing. The “all goes well” conditions are the contingencies. The contract will also set the closing date, which is also negotiable. If it all checks out, you sign the contract and hand over a big check for the down payment to your lawyer which goes into escrow – neither you nor the seller own it until the deal closes. If something goes wrong, you may or may not get it back. If the sale is canceled because one of your contingencies weren't met, you should get it back. If not, be prepared to lose all or part of your down payment – even if you don’t buy the house.
So you don't do inspections until after a contract has been through the lawyers; the inspection is a contingency that may allow you to get out of the contract but you wouldn't be able to conduct one until you actually have contract terms.
Wows who puts money in a inspection of a house without a contract? In California nobody does anything until the bid offer is accepted and house goes under contract. I wouldn't pay for a inspection unless my bid offer was accepted. To me its just pissing 4-700 bucks away.
The original post was two years old, but the "custom" hasn't changed.
The OP lives on Long Island (NY), and here, this is the customary procedure:
1. buyers make an offer
2. buyers and sellers come to an agreement = accepted offer
3. within 24-48 hrs an inspection takes place
4a. if problems show up as a result of the inspection, additional negotiations may take place
4b. if no problems show up or additional negotiations conclude satisfactorily, sellers' attorney draws up the contract and sends it to buyers' attorney
5. buyers' attorney reviews contract with buyers
6. if all goes well (or after changes are made with sellers' attorney's approval), buyers write check for downpayment deposit (usually not the entire deposit) and signed contract plus check are sent to sellers' attorney
7. sellers' attorney reviews changes with sellers (if any) and upon agreement, sellers sign and check is deposited in seller's attorney's escrow account till closing
8. once sellers have signed, fully executed contract (2 copies) is sent to buyers' attorney
9. buyers send copy of executed contract to their lender
10. Appraisal is ordered by lender
etc.
With regard to the original question, legally, in New York there is no obligation on the sellers part until contracts are fully executed (or the buyers for that matter).
I had a case where my sellers accepted an offer because they were motivated, even though they were uncomfortable with the financing (FHA). Inspection was done and another offer came in (long holiday weekend, no attorneys working on the contract)--conventional, full 20% down but same price. It's my job to present all offers. Sellers insisted on following through with the second offer because of the type of financing. They were willing to reimburse the first buyers for the inspection.
Turns out the second buyers used the same inspector and paid the first buyers for the report. Uncomfortable? Yes. Legal? Yes.
Last edited by Elke Mariotti; 04-13-2014 at 10:20 PM..
In Long Island it is common you do a handshake agreement on purchase price or do a RE binder with a small amount down. Then you do inspection and do formal contract with usually the 10% downpayment.
Every house I bought or sold was that way.
After inspection is when buyer tries to back peddle for money off. Also during this period other interested parties still can throw hat in the ring.
One house I sold in a "as-is" sale buyer wanted to do an inspection anyhow for structural issues such as cracked foundation etc. While we were in this period a second buyer came forward and offered 5k more as is with no inspection. But we said we made a handshake deal already.
Then first buyer comes back with with nonsense the chimney needs cleaning etc. and wanted some money off. Our lawyer said as soon as he counters the deal legally is dead and we sold to next guy for 5k more.
So this is my 5th house purchase in 4 states and 2nd in NY. Apparently although we have an accepted offer, that means nothing here. Because NY is not like other states where there is an actual contract submitted with the offer (that the buyers either sign or don't) so the sellers can back out whenever they want as long as it is before closing with no penalty.
We have earnest money at stake but if the sellers get an offer that is $1000 more with similar terms 3 weeks after they have agreed to your price, they can just back out and take the other offer with no penalty.
My realtor says do you want to make a higher offer? I say it's not the money (I might have gone higher, but they accepted the offer!) but why would I want to deal with people who do business in bad faith? If someone asks you to the prom and you say yes, honorable people do not say to you later "sorry, I got a better offer" - they either say no to you and take their chances or man up and say "sorry, I already have a date" to the second asker.
This was a cash, no contingencies, no inspection offer and it is not a "hot market" area but it was a good deal. What's to stop the listing realtor from shopping your price around? Leaves a bad taste in my mouth.
For those in other states who use a contract to make the offer, consider yourselves lucky. In NY, all contracts are done by lawyers after the initial "binder" agreement. I just wonder who gets to pay for the time our lawyer spent on this before the sellers backed out.
In CA real estate, a contract is not a contract unless it is in writing and signed by both parties. We normally wouldn't spend a penny on inspections until the contract is signed.
This^^^
I wouldn't even think about doing a inspection unless I have a actual accepted signed purchase offer from the seller. But I understand its done differently in other states.
I am in NY-I am talking about if the inspection is done but the contract has not been signed yet-thats how it is mostly done here-inspection first, then contract-
Universal contract law, no contract is valid or binding until it has been signed by all parties.
That is why, there is a meeting of the minds as they say and contracts are signed, prior to an knowledgeable buyer spending money to have inspections done, or spending for any other reason.
As long as contracts have not been signed, seller can sell it to anyone else they desire to sell it to. In the real estate world all over the nation, never spend money for inspection, etc., till you have a solid contract signed by all parties involved. A verbal agreement to buy or sell a home, is just a lot of hot air being expelled, and not worth anything. The first contract signed by both parties always takes preference over all verbal agreements.
I am in NY-I am talking about if the inspection is done but the contract has not been signed yet-thats how it is mostly done here-inspection first, then contract-
It sounds to me like that is your problem. The contract should be signed with contingencies for inspection before you pay for any inspection to be done.
You say the other way is common where you are, Well it shouldn't be. There is a right way to do these things, and the way you are doing it is NOT it.
Wows who puts money in a inspection of a house without a contract? In California nobody does anything until the bid offer is accepted and house goes under contract. I wouldn't pay for a inspection unless my bid offer was accepted. To me its just pissing 4-700 bucks away.
Depends on the market. Here buyers often pay for a pre inspection prior to writing an offer, then submit an offer that waives the inspection contingency. I understand this is somewhat unique to the seattle area however. Unfortunately buyers sometimes end up paying for inspections on several homes before getting an offer accepted. This is what happens when there aren't many houses for sale.
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New York is crazy - accepted offer means nothing
