You find a great New York City apartment online. Your agent reaches out to the listing agent to show it to you, and – YES, IT’S AVAILABLE! So you see it and immediately fall in love. You spend an hour inside looking at every corner, imagining where your furniture is going to go, all while the listing agent spurs you on and tells you how perfect the property is for you.
After talking it over with your banker and your lawyer, you decide to make an offer – except now that you’ve decided to move forward, you learn that the property has a contract out to another buyer. Furthermore, this contract was out before you even showed up to the property. So why did the listing agent even show you the property in the first place if they knew it wasn’t going to be yours?
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It’s all about fiduciary responsibility
When an owner hires an agent to sell a home, they enter into a fiduciary agreement. This states that the agent works solely for the seller. While we could delve into the language behind this, what it means is that the agent has to do everything they can to get the best terms for their seller and make the deal come to fruition.
Buyers often show up to properties and start asking the agent lots of questions. As they get to know the agent, they sometimes forget that this person was hired by someone else for one sole purpose; and that purpose isn’t negotiating for a buyer. This agent works for the seller.
Does that mean a seller’s agent can lie to me if I’m a buyer?
They shouldn’t lie to you, but they don’t necessarily need to tell you the whole truth. In New York City, we have a saying that nothing counts until the contract is signed and the check is in the bank. While a property may have an accepted offer on it, accepted offers don’t always translate into signed contracts. Sometimes buyers decide it’s not the right time to purchase or have second thoughts. Other times, they might find something they like better. Therefore, while a deal is in the stages of “contract out,” a good seller’s agent will still be showing the property, ensuring that if the current deal goes south, there is a backup in line.
How can I guard against this?
Unfortunately, this can lead you, the purchaser, to feel misguided. The simplest way to get around this is for you or your agent to inquire into properties by asking, “Is this home still available, and can you confirm if there are any contracts out?” If you only ask if the home is available, all that means is that there is not a signed contract for this piece of property. You need to ask if an offer has been explicitly accepted; the purchase contract has been sent to attornies to know if you have competition.
You should keep in mind that just because a contract is out on a property doesn’t necessarily mean you shouldn’t see it. If you’re beginning your search, trying to get a sense of the market, seeing a home with a contract could be a waste of your time. However, you can submit an offer while a contract is out and for you to be the one who walks away with the apartment. If your terms or price are more favorable to the seller, they may back away from their pending deal to take yours. If you feel ready to jump on a home, you can see a home with a deal in play; so long as prepared to move quickly.
Finally, think about how you would feel if it was your home on the market. You would want your agent to keep showing until you were holding a check. So remember, if this does happen to you, you have come in contact with a stellar agent.