Seller backs out of an accepted offer

nred180 it's unfortunate what you went through but I really don't think there is anything you can do about it. As I understand it, a seller can change their mind all the way up until the contract is signed. I don't think it's fair but there aren't any binders for offers in NYC, only a contract signed by both parties binds them. I would sit tight though b/c after the Labor Day holiday, this seller may have a come to Jesus moment once she sees prices drop.

Exactly the same thing happened to me 2 weeks ago.
I think that the media end-of-recession campaign, which might have a positive function, and money pumping is just delaying price discovery. People will not buy this places for more. We didn't already, and the market is not going up. But explain this to a seller that was riding on a bubble...

It's the cost of doing business. Both sides can walk away until the contract is signed by both parties. I don't believe there is any recourse for now, but as the poster above pointed out, she might have a change of mind if the market further deteriorates.

nred: How long did you have the contract? Sorry, that's got to be a really disappointing situation. A seller recently backed out of an accepted offer with me, too -- my relatives in other states couldn't believe people in NY routinely did business that way, but I think it happens a lot. (Needless to say, when I found another place I liked, I turned the contract around the second the diligence was done, and I was on my lawyer every day -- there had been multiple bids and I didn't trust the seller to stick with my offer for a second if something better came along.)

Buyers have the same option to walk away . . . what would have protected the seller if you would have gotten cold feet?

Is there a common way to make an offer that will incure financial penalties, for the seller, if they walks away, or sells to someone else? A reverse deposit, or a pre-contract maybe?

nred - unfortunately that is part of the game. The deal is not done until the contract is signed, and even when there is an offer accepted, most sellers advise their brokers to fully market the property and accept bids until the deal is signed, sealed, and delivered.

I wonder if they received a higher offer. Its a risky thing to play games at that stage, so if the seller is playing tough or has another offer in, they risk losing your deal. I have been down that road many times with clients. Not much you can do. Nobody can force a seller to sign the contract.

It works both ways. I bought a property in 2004. Aftr signing the contract it took over 5 months to close because the owner needd to resolve a pipe that burst after we signed the contract. it was her obligation to fix it

During those 5 months the property appreciated something like 60%. She wanted to back out, and couldnt, and still had to pay for the repairs. That was such a sweet deal.

This also happened to me....my lawyer was reviewing contracts and then 1 hour before sending them back we find out they sold the apt to someone else....they obviously accepted multiple offers and the first to return the contracts got the apt...there should be some clause that if this happens the seller pays the buyers legal fees.

What happens when buyer gets cold feet? Does buyer pay seller legal fees?

>Does buyer pay seller legal fees?
That doesnt make sense, since the buyer is reviewing the terms that are not available at the time of the offer. However the seller is always getting hard cash - cash does not have terms & conditions.

New York, New York, If you can make it here you can make it anywhere.

There's no reason to be livid. A deal isn't a deal until it's a deal. Anyone who does sales for a living, or is a broker or principal knows that.

In the UK if the seller walks away from an offer, he still owes the broker his commission. That a big disinsentive for a flighty seller, but this would not work in NYC as there are still co-op boards to go thru.

I had the same thing happen to me and maybe even worse. Found a place, had an offer accepted, got it inspected, even rushed through an appraisal (perhaps a mistake in retrospect) before signing. When we're all ready to sign the seller falls off the face of the earth for a week, and the we get a call that he got a higher offer and the deal's off. Our broker talks/yells at him and finds out he had the higher offer in from another buyer within a day of accepting our offer and was just waiting for him to get financing lined up. So, he basically let us spend lawyer fees, inspection fees and appraisal fees for a deal he more or less knew wouldn't go through.

But it's true that that is just the risk of buying real estate in NYC. The seller may have been an a**hole, but, legally he didn't do anything wrong. So, you move on...

BA_DA_BOOM - I lived in London, and own an apartment there. "Gazumping" - seller walking before sigining - is standard bull-market practice there, even more so than in NY. Owing commission is not an issue, since the seller just sells to someone else at a higher price, and broker earns higher commission. In a bear market, by the way, the practice of buyer threatening to walk in order to get concessions is called "gazundering" . . .

It really does work both ways. Last year, we were buyers and negotiating a contract (offer was accepted) when Lehman was bust and we pulled our offer. We actually incurred legal costs because our lawyer was almost done with the due diligence. I don't think our lawyer was going to charge us but I brought it up.

This year, we are sellers, had an accepted offer, then the buyers reconsidered and told us they wanted to go lower and we accepted again. Then they jerked us around on the mortgage contingency (there wasn't supposed to be one), stalled, found out they couldn't beg, borrow or steal the money and basically let things fizzle out before renting a place up the block. The best part is we knew them well! In this case, we did not yet incur legal fees as we had just paid on the failed purchase and our lawyer agreed to just hold on until we do sell.

As and aside (because this is pretty funny) enough we just got a really low ball offer on our place. We figured these guys were probably bottom fishers but even then couldn't figure out how they arrived at such a low number so we asked their broker to explain it to us. To cut a long story short, they basically told us that they didn't like our upstairs (it's a duplex) so they priced it on the basis of the first floor square footage only! I guess I could put in a separate interest and sell them half the place...

Seller has every right to do this. I had a buyer accept my offer, only to change his mind and walk. I incurred the legal fees too of having the contract prepared. The way this works legally is that when the Seller gave you the contract he was, in effect, soliciting an offer from you to purchase which he then accepts by signing the contract once you return it. You did your DD and held onto the contract. Ok. The seller can market the apt and change his mind at any time up until you return your signed contract and the Seller signs on the dotted line as well.

This is unfortunately how the business works. The key is to get the contract signed and counter-signed as quickly as possible (you mention you never signed yourself--I wonder why you waited).

Of course, if the seller was balky to begin with, he very likely would have simply sat on the contract and not bothered to counter-sign so even expedience on your part may not have helped things.

Either way, there's nothing you can do legally as there's been no breach of contract.

Happened to me, and it happens every day. An accepted offer is not a binding contract. That happens when both parties sign the contract...

i've walked away as a buyer three times, and i've had two sellers walk away, although one later came back.

as a buyer once the financials sucked, once it had been two months and no contract had been produced for consideration (upstate), and once the coop board said they wanted a higher percentage down than we wanted to give (above the usual building requirement, the seller had run our info by the board, wisely as it turns out).

it adds to the stress, and can be a financial burden, but lord knows we shouldn't all be rushing into real estate decisions without some time to consider.

lo888, I can't decide whether to laugh or cry at the "rationale" of their offer. As a potential buyer, I do like to make sure I understand comps, and have a gut feel to top it off. I can't imagine making an offer based on half an apt. Yikes...good luck with your sale!

Petrofizz, I'm glad you sold that property before the market tanked. The poor buyer now has something that's worth no more today than it did in 2004 -- plus the value of the fixed pipe, of course.

And when I sold, we almost went to contract once, tried to go once and ended up selling to our back-up offer. Good thing I have a great broker (yes, they do exist) and lawyer!!!

your lawyer should consider this part of the process and go a bit easy on you, especially if he wants to be sure to handle your ultimate purchase and any additional deals you may bring him--and these guys work heavily based on word of mouth and to be understanding of this buys a good lawyer big loyalty--my lawyer stayed with his flat fee after we got rid of a whinerbuyer and sold to a more reasonable party (for less$$ but waaaay less hassle)--ive bought and sold through him twice since then--great guy

but yes--this is the way it goes
wait til your seller delays the close significantly past the contract specified date--in essence nuttin you can do there also, and you remain obligated to buy--once had to close 75 days after the contract-speced date--friggin nightmare with a crappy wife (now ex) and two great kids and an expired lease etc

alanhart - I was the buyer. I bought a killer duplex for $420K then it took 5 months to close. The place was then worth over $650K when i closed. the seller had to rip out all the walls on one of the floors and rebuild. I was going to do it myself.

Now it was just appraised last month at $990K.....

overall you can summarize these examples are "owners have the power, renters have their dicks in their hand"

Same thing happened to me. Nothing you can do. However, be alert to the cliche of a New York sellers' broker: divorced, false smile, aggressive, very unattractive but heavily made up. I kind of knew from the profile of the broker (which quite resembled the cliche) that she was very likely lying through her teeth. So I wasn't too surprised when she yanked the accepted offer.

What about making it a condition of an offer, that the unit is no longer marketed or shown until the closing date? I there much resistance from sellers for that.

petrfitz - how much is half your duplex worth?!

It depends. The real half is worth $200K, and the imagined half is worth $800K.

I'm now playing the waiting game after signing the contract and giving the deposit and now waiting for the seller to sign the contract.
This thread sure hasn't made it any better.

AptHunter265 - what reason have they given you for the delay?

Haven't been given a reason.
How long should it usually take?

>>your lawyer should consider this part of the process and go a bit easy on you, especially if he wants to be sure to handle your ultimate purchase and any additional deals you may bring him<<

But don't count on this. The attorney should (rightly) expect to be paid for services rendered. Yes, it sucks to 'waste' money on legal and other fees associated with a botched deal, but that is unfortunately a risk any buyer (or seller) assumes when attempting a real estate transaction.

As a buyer, to prevent this in the future, the initial contract to buy should be looked over by your lawyer BEFORE it is presented to the seller. There should be an expiration (no longer than 48 hours) for the seller to make their decision. At no time should you hire appraisers, contractors etc until the signed contract comes back to you. NOTHING should be assumed until the contract is signed by both parties. A verbal agreement is worth only the paper it is written on. I am surprised real estate agents in NY don't require all contracts to be made in writing and signed by both parties before they consider it a deal.

The thing I don't understand is that the seller and seller's lawyer confirmed the changes, had my lawyer put them in, my lawyer sent me a contract to sign, I signed it and now am waiting for them.

generally the seller's attorney offers the first draft of the contract following a standard form. and the buyer is expected to sign first. NY does require all contracts to be in writing and signed before its a deal.

Seller's lawyer does in fact usually supply the contract.

AptHunter - I would think that in a market such as this the seller would be keen to sign as soon as you have mutually agreed on the terms of the contract. In your case, there may be an extraneous circumstance or they could be stalling because of other interest. In either case, your lawyer should be asking for an update daily if all the terms have been agreed upon.

"What about making it a condition of an offer, that the unit is no longer marketed or shown until the closing date? I there much resistance from sellers for that."

And how would you enforce this with no written contract (to this act)? In THIS market, I would say a seller would have to be an idiot to agree (and comply), considering the percentage of buyers who are backing out before signing. I think you would get 2 types of answers to this: "Yes", but we're still going to "show it for back-up" and "Yes" (and they still show it for backup anyway).

I dont really care if the actually show it or not, I just want redress if they sell to someone-else or decide not to sell at all. It about more than just accepting the offer in "good-faith".

>>"And how would you enforce this with no written contract (to this act)?"
With a written pre-contract. I the seller refuses to accept the terms of the offer and pre-contract then they are not serious and she buyer should move on to the next apartment in the building.

So what should the pre-contract contain:
*) The buyers deposit placed with lawyer (never broker)
*) a definition of financial redress if either side backs out.
*) a definition of financial redress if either side cant close.
*) A list of acceptable reasons for not being able to close (board reject.....)
*) a timeline for exchange and closing
*) redress$ if said time line is not meet

The way to deal with Buyers pulling out is to demand a deposit accompany an accpeted offer.

In other words.... a contract of sale? because it will take just as long for the attorneys to agree on the above.

Sorry to jump in here but at what point does the NYC coop buyer start running up due dilligence expense....lawyer reading minutes etc?

Before or after contract has been signed by both parties?

In my mostly NJ dealings there is no significant expenditure on due dilly (surveys, inspections, title work etc.) until a contract is signed....same in NYC?
Somehow, I have the impression that the Buyer is supposed to have vetted a coop before getting a firm contract...seems like a bad deal if so.....and expensive if Seller changes his/her mind and sells to somebody else.

you are correct...due diligence is advisable before signing contract and placing 10% down payment in escrow. its not that expensive and is basically an attorney checking board minutes and financials...no inspection and no title work as most contracts require clear title to close.

Why is this happening all of a sudden? It just happened to two of my buyer clients, who are lovely people -- this seller jacked around and wasted a month of our time, not to mention some attorney time (attorney reviews financials and reads minutes, reads contract, suggest changes -- all which must be paid for) and some due diligence money (we did an inspection pre-contract, which cost us $550).

Anyone who is a regular on this board knows that I'm a huge bull in relative terms, and *even I* don't think prices are going up six months or a year from now.

These flip-floppy sellers are just putting bad karma out there, and it's going to come back on them when they try to sell and find they've trashed the most eager buyers, and have to take the less-eager next in lines.

ali r.
{downtown broker}

kind of makes sense in a perverse way. particularly given that many, many contracts have been struck at significant discounts to peak; the media continues to present a bullish look at the economy; also wonder to what extent, people who have a deal on their place intending to move up get cold feet when they first start to look for the next step up and discover its out of range based on what they just agreed to sell for?

Unfortunately, until there is a fully executed contract, both parties signed, either the buyer or seller can back away from an offer. I've had this happen to a deal or two and while it is frustrating, do not let it deter you from taking advantage of a buyer's market.
From your post, it seemed that you were delaying the process, this most likely made the seller nervous and therefore they refused to accept the offer.

Interesting thread - thanks for all of the insight. As a buyer, we were not delaying the process at all - we hadn't signed the contract yet because the form provided by the Seller was from the 1970's - so my attorney had to spend significant time addressing all the changes that have occured since then.

cc, i agree. some sellers are now feeling saucy. but when those who have to sell do so, and a number of those sales are below your price (particularly in your own building), you may regret it later.

>> 30yrs_RE_20_in_REO -- In other words.... a contract of sale?
Duh! isnt that the aim? at least for the buyer.

"Why is this happening all of a sudden? "

Because a) when people are taking a huge haircut, they are much more willing to "bigger better deal" someone, b) when buyers hear the price something actually went for and see how much lower it is than they were looking at last year, throwing another $10,000 at the deal still seems like a good deal to them, and (most importantly) c) buyers are flaking on deals much more than they did back in the frenzy of "sign now, due diligence later" of the bubble; the more buyers flake, the more sellers flake because they have reason to believe that the first person to come in with a signed contract is the one they should go with and they are just looking to protect their interest.

As far as karma, I think there's a balance: would you say that all the buyers backing out of deals are also causing bad karma? I think if you look at all the sellers and all the buyers backing out of deals, they may not be the same people, but the totals are probably equal or there are more buyers than sellers. It's just that the buyers reasons are accepted as more "noble" than the sellers.

>>buyers reasons are accepted as more "noble" than the sellers.
because there are no noble reasons for a seller to backout.

Generally buyers will backout for one of two reasons.
a) information is disclosed which makes their bid overpriced (building finances for instance).
b) they are unable/unwilling to forefill the committement to close (mortgage reject; finding another unit).

Sellers will backout only for one reason:
c) they thing they can get more money.

IMO a) should be allowed, and b) & c) should carry a financial penalty.