Featuring real estate articles and information to help real estate buyers and sellers. The Nest features writings from Georges Benoliel and other real estate professionals. Georges is the Co-Founder of NestApple and has been working as an active real estate investor for over a decade.
Accepting two offers and negotiating contracts in parallel: is it legal? It is not about being legal or illegal: it is just meaningless. An apartment seller cannot accept another offer if the listing is “in-contract.” A home is “in-contract” after the buyer and the seller have signed the contract. The buyer needs to pay the downpayment at the time of signing. The buyer cannot cancel the contract and sell to a new buyer if the home is “in-contract.” Accepted offers alone have no legal value. Only fully completed contracts have legal significance.
Can the seller accept another offer while negotiating a contract with a first buyer?
Absolutely. We have seen cases where the seller has accepted another offer after the buyer has signed the contract and sent the deposit. A seller can do that before they sign themselves. Either party can do whatever they want until there is a fully executed contract. This behavior sometimes frustrating in a deal since the buyer has already incurred various expenses (due diligence, inspection)
Are accepted offers binding in New York?
No. In New York accepted offers are not-binding. It is common to see buyers put offers on multiple properties simultaneously. An accepted offer is nothing more than an agreement on terms and pricing. Only fully signed contract matters, and until then, both buyers and sellers can back out, change their mind, or renegotiate the price or terms. At NestApple, we have seen sellers deciding not to sell just before signing a contract. Remember, an accepted offer is only a preliminary handshake based on general terms submitted over email by the buyer’s agent.
When does an accepted offer become legally enforceable?
An accepted offer becomes enforceable once both the buyer and the seller have signed the contract, and the buyer has paid the good faith deposit. Generally, several copies are signed, and both the buyer’s attorney and the seller’s attorney keep a copy of it. The deposit gets usually sent to the seller’s attorney and deposited into its firm escrow account. At this point, the offer becomes legally binding as the home is “in-contract.”
Can the seller’s attorney send out multiple contracts to different prospective buyers?
Yes. It is tolerated for the seller to send out multiple contracts to various prospective buyers. Either party can change their mind, renegotiate, or walk away. Until the listing is “in-contract,” The seller can do a deal with someone else even if he had an offer accepted. For the records, this is true in New York, but in some other states such as Connecticut, buyers sign an offer form with more restrictions and more commitments when submitting an offer.
Can a buyer make multiple offers and negotiate contracts on various properties simultaneously?
Yes. Buyers can negotiate multiple contracts on multiple accepted offers, and at the very end of the process, they can choose the property they are willing to buy. Some buyers use it as a strategy to have back up contracts in case a deal is not going through.
Is it ethical for the seller to send out multiple contracts?
It is not ethical, but it is legal. Seller’s broker and seller’s attorney have a fiduciary duty to their client (i.e., to the seller), so will act in the seller’s best interests. In theory, the seller’s broker would give whoever has an accepted offer a few days to go over the contract and do its due diligence. But in practice, listing agents sometimes receive several bids, and the seller’s attorney sends several agreements out. In an ideal world, the listing agent would disclose to all prospective buyers that there are several contracts out. If a deal is being negotiated with a potential buyer, and a new buyer comes in at a higher price, the listing agent could give the first buyer the option to match the price. They do not always do it. In reality, we see brokers sent multiple contracts out, negotiate with various buyers. Sometimes brokers even accept multiple offers without notifying each buyer they are competing with other buyers. This way, they have potential back-ups in case one of the buyers has a change of heart or is trying to re-trade right before signing a contract.
Ethically speaking, the listing agent should disclose to prospective buyers that several contracts are being sent out. However, it’s not legally required. Accepting 2 offers and negotiating contracts in parallel can be frustrating. For Buyers, the process takes time and can be costly (due diligence and inspection). It is the right thing to do is to disclose that other contracts are out and that another buyer had a head start and is already working on his due diligence.