Real estate contracts tend to differ from state to state. When buying an apartment in NYC, it’s important to understand how they differ and the basic steps involved. This is especially so if you’ve bought an apartment or home somewhere else before. One of the most common questions brokers receive from clients is when exactly do NYC real estate offers become binding?
As you’ll see, the process involves a bit of back and forth before anything becomes legit, with the seller holding most of the cards.
When does an offer in NYC become binding?
Unlike many other states, when an offer is made to purchase a home in NYC, nothing legally prevents either side from walking away without reason until both parties have signed the purchase contract. Verbal agreements are not valid nor even written ones unless they are signed by both buyer and seller.
It doesn’t matter what kind of paper the agreement is written on. It could be written on a napkin. Though a napkin would not be very efficient for writing the meticulous details of an agreement. However, to be legally enforceable it must be signed and sealed by both parties.
Another important difference is that upon signing, the buyer must make a down payment, usually 10% of the purchase price. This should not be confused with the downpayment a buyer must also make to their mortgage lender at closing. Which is typically another 10% of the purchase price.
Offers and counteroffers
When someone makes an offer on a New York home it is typically done by filling out a one-page offer form or letter provided by the listing broker. A buyer is not required to sign the document when making the offer or make what’s called an “earnest money deposit” (A deposit typically made to show good fate and their solid intentions to close the deal).
The seller can then either decline, accept the offer or make a counteroffer. However, if the buyer does not accept the counteroffer the contract is still not legally binding. Both parties must reach a full agreement regarding all the terms and sign before the contact becomes legit. Because the seller has the ability to sign last, they have enormous negotiating power. They can use this to test other buyers and choose the best offer. All while holding the current buyer completely captive.
Once an offer is accepted it is vital that the buyer and their attorney move as fast as possible to finalize and sign the contract of sale. The completed contract will lay out all the terms of the deal, such as price, contingencies and closing date.
Delivering the downpayment upon signing
Once the buyer’s attorney has performed due diligence and the buyer signs the purchase contract they will be expected to produce a check for 10% of the purchase price, made out to the sellers’ attorney or firm. This down payment will be deducted from the purchase price and the balance due at closing. Buyers should ensure they have sufficient funds to cover this downpayment. Many contracts allow sellers to cancel the contract if the downpayment check is dishonored.
The check, along with your signature pages, will then be delivered to the sellers’ attorney. Once they have signed and sent copies back to the buyers’ attorney they will officially be “in contract.” Neither side can now walk away without being in breach of the contract and subject to litigation.
The deal is now binding and in the escrow period however not yet complete. If the buyers’ mortgage financing goes through and no outstanding liens are found against the property, the title will be transferred and money exchanged.