Keep Your Word or Lose the Deal

By
Real Estate Broker/Owner with J. Philip Faranda (J. Philip R.E. LLC) Westchester County NY License # 49FA1074963

Sold by J Philip Real EstateBidding wars are relatively rare in Westchester County except in those cases where the house is very special. Multiple offers are not uncommon, but having more than one offer does not mean the price necessarily gets bid up. Sometimes, when  we ask buyers for their best and highest, it can backfire and the competing offer walks, not desiring to go higher in price when there are so many other options out there. Sometimes, a buyer will get caught in the heat of competition and make an offer far higher than they are truly comfortable with. They later get buyer's remorse, and that's when things get messy. 

So here's one of the difficult things some people are pulling in New York real estate transactions, in large part because we don't go under contract right away
 
We recently had an accepted offer on one of my listings and contracts were sent out. Then, in the 11th hour, another offer came in considerably higher. All cash, and it blew us away. I gave the first offer a chance to match, and they couldn't. I have to act in the best interests of my client, the seller's attorney concurred with the seller, and we switched to the higher offer. Inspections were done, and contracts went out to the new buyer. 
 
That was 2 weeks ago. No signed contracts were sent back. No deposit. When I asked our attorney what the delay was, she told me that the buyers were trying to change a term on the contract that I specifically told their agent was not negotiable. Two weeks later our backup offer could have been long gone had I not remained in touch with them. Whether the new folks did this maliciously or not is secondary- good faith is good faith, and if a term has to be changed, it jeopardizes the deal. I have a seller to protect. 
 
So here's the thing to watch out for: In a multiple bid situation, a high bidder gets caught in the competition and "wins" the acceptance of the seller to proceed with contracts. Then, they delay. Inspections take longer. Issues arise. Timelines get pushed back. Eventually, the back up bids go elsewhere, and when the winning bid knows they no longer have competition, they go back on their word on price or terms (sometimes both). Without the leverage of  another offer, the seller sometimes settles for less or worse. I see it too often, and it is not a good thing. 
 
The takeaway for my colleagues is that you keep the lines of communication open with backup offers until contracts are signed (or longer). 
 
For  consumers, they should kow that when you are the winner in a multiple bid situation and then you delay or obstruct longer than normal, you risk losing the deal. 
 
Good faith is good faith. A deal is a deal. We may take longer to put everything in writing in Westchester and the surrounding areas, but if you say one thing and do another, you risk losing the house. 
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Topic:
Home Buying
Location:
New York Westchester County
Groups:
War Stories
Bananatude
40 Somethings
Westchester County
Bartender, Make it a Double
Tags:
bidding wars
multiple offers
good faith

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Rainmaker
289,437
Ellie Penaranda
239.776.5077 Downing-Frye Realty - Naples, FL
Naples Florida Real Estate - Waterfront & Beach Co

Phil, this just happened to a clients of ours who were selling their home in Buffalo NY, they shared with us that they had a contract but waiting for a deposit check - honestly I just thought they didn't understand contracts, and that maybe they had a verbal offer not a contract - excuse after excuse (for 3 weeks) when they realized the buyer was never planning to send that check... in the meantime, they packed their belongings because of a quick close date.  Now back on the market. 

I am glad you provided the link above - and here I thought we had it tough working as transaction brokers instead of representing our clients.

Sep 11, 2011 04:07 AM #47
Rainer
166,285
Marshall Brown
Mid America Inspection Services, LLC - Fargo, ND
BSEE, CHI

I think it's been said that a verbal offer isn't worth the paper it's written on.

Sep 11, 2011 04:31 AM #48
Rainmaker
527,969
Eve Alexander
Buyers Broker of Florida - Orlando, FL
Exclusively Representing ONLY Orlando Home Buyers

Excellent post!

It was smart of you to go back to the first buyer, most agents I know, never go back to the other buyers.

I was recently in a "multiple offer" short sale  situation where the seller just took the other offer which was $2,000 higher (not giving my buyer an opportunity to raise the price) despite the fact that I told the listing agent that my buyers were in it for the long wait since they had a home to live in that they were not selling.

Last week, I noticed that a week after the property went pending, it went back on the market...had the agent called us, we would have jumped on it...I can't even believe that she did not...now it is a stale listing and my buyer is under contract for something else.

Sep 11, 2011 04:34 AM #49
Rainmaker
414,602
Tni LeBlanc, Realtor®, J.D.
Mint Properties, Lic. #01871795 - Santa Maria, CA
Tenacious Tni (805) 878-9879

We go immediately under contract in CA but the dynamics are similar in short sales where there is a wait for bank response and a lot of bidding wars. There is a lot of buyer's remorse after a biddng war.  It is a challenge to make sure that high bidder is serious about the property or if they are just throwing their weight around. 

This also happens to REO agents here all the time.  They have an insane amount of offers, verbally accept the best one, then the high bidder refuses to sign the bank addendum that they later generate.  I do feel sorry for the agents who have to go through 3 or 4 rounds of it.  But not the banks.  With every round the amount they get for the property goes down.  But hey it's their game -- sometimes it works beautifully, other times -- not so much.

Sep 11, 2011 05:53 AM #50
Rainer
299,204
Steven Pahl
Keller Williams Tampa Properties - Tampa, FL
Real Estate Consultant Tampa, FL 813-319-6423

Seems kind of crazy to pay for inspections and such and then negotiate.  We have contract language that allows the seller to walk if the inspections are unsatisfactory.

Sep 11, 2011 06:22 AM #51
Rainmaker
1,527,045
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Real Estate

Never burn bridges & keep the lines of communication open. I wonder what this 'syndrome' is actually called as it happens a lot. Suddenly the winning buyer starts to drag their feet, question everything, tries to negotiate again, etc.  Don't understand it, is it the agent's fault for not explaining the process? Do things move too fast for these 'turtles' in life?

As with Tni's examples above, it's an unseasoned agent that doesn't tell the buyer what to expect & in what order. Of course the bank addendums are going to say they know nothing, saw nothing, won't pay for nothing. 

Sep 11, 2011 06:32 AM #52
Rainmaker
645,297
Bill Reddington
Re/max Southern Realty - Destin, FL
Destin Florida Real Estate

Sorry to hear that. In Florida when the offer is signed and initialled by both buyer and seller it is a contract. This usually happens 24-48 hours of the accepted counter. Have heard about the New York. Must be a lot of attorneys up there. 

Sep 11, 2011 07:04 AM #53
Rainmaker
131,417
Mike Henderson
Your complete source for buying HUD homes - Littleton, CO
HUD Home Hub - 303-949-5848

Keeping in touch with the backup offer is the key.  Great job.

Sep 11, 2011 08:22 AM #54
Rainmaker
809,907
Evelyn Kennedy
Alain Pinel Realtors - Alameda, CA
Alameda, Real Estate, Alameda, CA

J. Philip:

I read your blog which described your contract and what is done with it.  Thank heaven that is not the way we work in California.  As others have said the offer once ratified by all parties becomes the contract.  Lloyd
Binen, #42, gave a very good example of the way some multiple offers are treated, at least in my area.  During last multiple offer I had, there were 35 offers.   Seller with my advice, decided to counter 10 of the highest at a price slightly higher than the highest offer.  Many dropped out and we ended up with 2 offers who countered our counter.  The highest counter offer was accepted.

Sep 11, 2011 06:52 PM #55
Rainer
84,237
Brad Baylor
ERA Coup Agency - Milton, PA

In PA, all offers have to be in writing to be considered an executable contract.  In addition, any changes made after it is submitted have to be initialed by both parties.  Only after all this is done can an offer be considered "accepted" and become binding.  I'm not sure if I'd be able to tolerate all that waiting around and uncertainty that is involved with verbal offers.

Sep 12, 2011 02:42 AM #56
Rainmaker
271,206
Jim McCormack
Nashville Short Sale Specialist - Jim McCormack - Edge Advantage Realty, LLC - 615-784-EDGE (3343) - Murfreesboro, TN
Nashville Short Sale REALTOR - Stop Foreclosure

Losing all the buyers (the high bidder and any other bidder) is a legitimate risk in any multiple bid situation.  I have dealt with multiple offers several times this year on my Nashville Tennessee are short sale listings.  Due to the way that contracts are handled and executed here in Nashville, I am able to guide my short sale seller clients through this situation by only notifying the buyer who lost out on the property after the high bid contract is executed.  After that, I promise to keep all the other agents informed of the progress of the accepted contract in case it gets shaky and contract termination is likely.  That way if the other buyer or buyers are still interested in the property we can quickly move forward with one of the other offers.

Sep 12, 2011 03:36 AM #57
Rainmaker
271,206
Jim McCormack
Nashville Short Sale Specialist - Jim McCormack - Edge Advantage Realty, LLC - 615-784-EDGE (3343) - Murfreesboro, TN
Nashville Short Sale REALTOR - Stop Foreclosure

Hi Brad. I believe that the issue is NY is that real estate contracts are always subject to attorney review and approval.  Therefore, even after an agreement is reached with a buyer it is not binding until that attorney review is complete.  As a former top producing broker in Pennsylvania I am glad that PA did not operate that way.

Sep 12, 2011 03:38 AM #58
Rainmaker
1,431,210
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

Good post and good points.  Never write off a buyer and until you have it locked up.

Sep 12, 2011 05:16 AM #59
Rainer
116,418
Ric Mills
Keller Williams Southern Az - Tucson, AZ
Integrity, Honesty, and Vast Real Estate Knowledge

Here, that is a good way to lose earnest money.  There is no re-negotiating after all parties have signed and it has cleared inspections.  i have buyers try this all time and the result is always the same, you walk away from your EM and open yourself to litigation.

Sep 13, 2011 05:35 AM #60
Rainer
18,149
Caryn Baker
Realty Pros & Assoc. - Ormond Beach, FL

great job for your sellers.  Shame on the buyers & their agent if the agent knew what was going on and perpetuated it.

Sep 13, 2011 06:35 AM #61
Rainmaker
768,312
Kasey & John Boles
Jon Gosche Real Estate, LLC - BoiseMeridianRealEstate.com - Boise, ID
Boise & Meridian, ID Ada/Canyon/Gem/Boise Counties

This is very interesting.  I was going to ask how things work in your parts but it looks like you already wrote a post about it.  I'll head over that way. -Kasey

Sep 13, 2011 12:06 PM #62
Rainmaker
272,833
Carrie Sampron
Home Smart Realty Group - Highlands Ranch, CO
ABR SFR & Kathy Sampron (303) 931-3629 Highlands R

J. Philip: Yikes!! I do like your advice of staying in touch. It's fantastic to be in a position where you have a back up offer so don't do anything to jeopardize it, including ignoring the buyers. Carrie

Sep 14, 2011 06:04 AM #63
Ambassador
2,738,698
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

My first exposure to real estate practice in NY was in about 1993 when I was working with a relocating couple from NY.  The hubby was a Marine and stationed here.  Wife was a real estate agent in NY and gave me an education. 

She was very impressed that when the contracts were signed and the EM deposited I ordered the home inspection, termite and title work.  Thought that it was risky.

She was impressed that everything went according to schedule from the day of ratification and we settled in about 3 weeks.

Me?  I was just doing my job.

Sep 14, 2011 09:18 AM #64
Rainmaker
224,121
Laurie Mindnich
Centennial, CO

Phil, what's interesting is that the real estate community in New York continues to support the process- lawyers are not required in New York, yet, many real estate agents are so used to it that they don't effect change by questioning the "WHY CAN'T WE WRITE THE CONTRACT" (as done in most places).  It is most definitely NOT that NY Realtors are stupid (it's just the lawyers that seem to believe this)...just non-proactive in changing a system that is $upporting the legal contingent.

Sep 15, 2011 12:54 AM #65
Rainmaker
535,205
Gay E. Rosen
Julia B. Fee Sotheby's International Realty - Larchmont, NY
As Real as Real Estate Gets!

Phil -  perfectly said... We recently switched to an all cash offer..In our case it worked out as the first bidders were nickle diming us everywhere as they felt 'in charge..'  It felt nice to say good by and close just 20 days later with the second buyers...  but just as you say, when they start dragging their feet.... it is time to look at the best, solid deal.. and I love to hear that the buyers 'love the house..''' makes it that much easier..

 

Oct 03, 2011 12:58 PM #66
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