Buyer 7: What to do with a contract out?

The most important thing to realize about having our offer accepted by the seller for a New York City home is that there is no ‘binder’ system in New York like there is in the rest of the country. An accepted offer is nothing more than a handshake. Until a contract is fully executed, a seller can negotiate with other buyers, send out additional contracts, relegate you to a back-up offer, tell you they’re doing so… or not tell you they’re doing so! For this reason, it’s in our interest for the due diligence period to go quickly.

Pick the right attorney

If you chose a real estate attorney who does the bulk of their business in Manhattan coop and condo closings, we should be in good shape. The circle of closing attorneys who do most of the business in Manhattan is small, and you want one of them. They know the buildings, and they know each other. We want an attorney who is going to be a bulldog about following up with the managing agent regarding their due diligence questionnaire and reading of the board meeting minutes. The due diligence questionnaire is where we find out about the percentage of renters in the building, any litigation, and other issues that can affect financeability. The board meeting minutes is where we learn of any upcoming expenses that might not be reflected in the annual financial statement, such as leaky roofs, malfunctioning boilers, pest issues, as well as upcoming planned construction, such as façade work or a lobby renovation. While we certainly want to be aware of these issues, a longer-than-necessary due diligence period simply gives the seller time to shop around our offer. Throughout this period, I’ll follow up with your real estate attorney daily to make sure contract negotiation and due diligence are coming along smoothly. If I need to have the listing agent ask the seller to compel the managing agent to act more quickly, I certainly will.

After about ten business days, your attorney will present you with a draft of the purchase contract and due diligence report for your approval. They’ll render their opinion of the financeability and overall strength of the building, and explain to you the terms of the purchase contract. Purchase contracts are fairly boilerplate; they are largely fill-in-the blank, with standard Buyer and Seller Riders each attorney ads that solidify any special terms of our transaction.

Continue to weigh your options

During this time, we will certainly look at other homes! The listing agent will continue to show the home we have a deal on, and we should continue to explore our options as well. You never know when our seller will receive a higher offer, or when we’ll find out something about the building during due diligence that is disqualifying. After all… never be so attached to an opportunity that you wouldn’t accept a better one.