When is a Deal not a Deal in NYC Real Estate?
When is a deal not a deal in NYC real estate? I’ll help you figure it out. Picture this: John and Jane buyer are married with a child on the way. They are both hard-working professionals with advanced degrees from outstanding universities. Together, they earn a very good living by any objective measure and have been diligently saving money over the past few years for a downpayment on their first Manhattan apartment. They finally have enough cash to put 20% down and, after studying the market for the past several months, are ready to get serious and start making offers. An apartment on the Upper East Side comes online that fits most of their criteria (after all, nothing is perfect in Manhattan), and having reviewed their real estate broker’s pricing analysis, they know it is priced well. They offer the asking price, and even though they are financing most of the purchase price, they are outstanding candidates to pass the co-op board’s requirements, and the seller accepts their bid! They are thrilled and let their real estate attorney (Arthur) know. The contract is sent out and Arthur begins negotiating the document and performing due diligence. Arthur sends his mark-up of the document to the seller’s attorney and then silence. Arthur reaches out by phone and email, but hears nothing. John and Jane’s real estate broker reaches out to the seller’s broker and doesn’t hear anything either. Several days later, the seller’s broker finally reaches out and says that, after accepting John and Jane’s offer, the seller received an all cash offer at the same price (or more) and decided to take it instead. John and Jane are heartbroken but determined to get the next one.
This scenario, or something like it, is unfortunately not uncommon in today’s real estate market in New York City, which is still heavily weighted in favor of sellers. In fact, it has recently happened to three of my clients – one in connection with an Upper West Side co-op, one in connection with a Bed Stuy townhouse and the other in connection with a new development Boerum Hill condo. Cash is king, and if a seller is faced with proceeding with a financing offer or a cash offer, and the bids and buyers are otherwise materially comparable, the seller will almost invariably go with the cash offer. There is often a misconception among buyers that an accepted offer is binding to some extent. While it is certainly a step in the right direction toward getting a deal done, an accepted offer is not legally binding. It is simply an agreement on the salient terms of the deal, and since no consideration is exchanged, it is non-binding. Once a contract is entered into and the buyer deposits 10% of the purchase price into escrow, the deal officially becomes binding and the parties can only get out of it pursuant to the terms of the contract. This is the reason it is so important to have a great real estate attorney representing you and working diligently to get the contract signed by both sides as quickly as possible.
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