It’s completely legal for a home seller in NYC to simultaneously accept more than one offer and send out multiple contracts. It’s also legal for a seller in NYC who has already agreed to terms with a buyer to accept a different offer and send out a second contract while the contract with the original accepted offer is still being negotiated. In fact, a seller in NYC has no obligation to countersign a contract if a buyer has already signed.
Moreover, sellers in NYC have no legal obligation to disclose the fact that multiple contracts are being sent out.
If all of this sounds unfair, keep in mind that buyers in NYC are also allowed to accept multiple offers. Both buyers and sellers in NYC are free to back out of a potential transaction at any point prior to signing the contract without incurring any obligation to the other party.
This also means that a seller has zero obligation to reimburse expenses (such as legal & inspection fees) on behalf of a buyer whose offer was originally accepted by the seller prior to the seller going with another offer.
No real estate transaction in NYC is legally binding until the purchase contract has been fully executed (i.e. signed by both parties) and the seller’s attorney has received the contract deposit (also known as the earnest money deposit) from the purchaser.
The requirement for New York real estate contracts to be in writing is memorialized in New York Consolidated Laws, General Obligations Law – GOB § 5-703, Conveyances and contracts concerning real property required to be in writing:
Once a contract is fully executed, the seller is obligated to proceed with the purchaser stipulated in the contract even if a more competitive offer emerges from another party. A seller in NYC may not accept another offer while under contract.
Sellers only send out multiple contracts when they have leverage to do so. This commonly occurs in the case of a hot listing which ends up conducting a best and final offer process. If multiple competitive (and similar) offers are received, the seller may instruct her or his attorney to send out multiple contracts with the understanding that the buyer who signs first will secure the property.
Even if a seller doesn’t have loads of offers, she or may still opt to send out multiple contracts if one of the buyers seems difficult, attempts to renegotiate or is simply taking too long to sign the contract.
A seller may also be inclined to send out multiple offers if she or he is under time pressure to sell quickly. Sending out more than one contract increases the odds that at least one counterparty will complete buyer due diligence and actually sign the contract in a timely manner.
The reality is that it’s quite common for buyers to back out after the accepted offer stage and prior to contract signing. Reasons a NYC home buyer might back out after an accepted offer include the following:
Buyer finds another property
Buyer feels she or he is overpaying
Buyer is unable to renegotiate the deal terms
Buyer encounters financing issues
Buyer doesn’t like the due diligence findings
Structural issues are uncovered during an inspection
Buyer loses her or his job or decides to leave NYC
The typical timeline from accepted offer to signed contract in NYC is five to 10 business days. In the case of a hot listing, buyers are expected to sign much more quickly (i.e. within a few days of the accepted offer).
From a buyer’s standpoint, the only way to mitigate the risk of being outbid after an accepted offer is to sign a contract as quickly as possible. This means hiring a nimble and responsive NYC real estate attorney as opposed to someone who is slow or simply unfamiliar with the pace of a NYC real estate transaction (such as a generalist lawyer who doesn’t specialize in NYC real estate).
Any experienced buyer’s agent will inform her or his clients of the non-binding nature of an accepted offer and associated risks of hiring an unresponsive attorney or taking too long to sign the contract. Moreover, a seasoned listing agent in NYC will typically remind any prospective purchaser whose offer has been accepted that it’s standard practice in NYC real estate to continue showing a property to interested parties until a contract is fully executed.
Another way for a buyer to mitigate risk is by wiring the contract deposit instead of mailing a check. Remember that a contract is not considered fully executed until the contract deposit is received by the seller’s lawyer, so any delay in payment will create an opportunity for another buyer to submit an offer.
Although it’s legal for a seller to accept multiple offers, the Real Estate Board of New York recommends that listing agents disclose the receipt of multiple offers to fellow agents (provided the seller agrees to this).
REBNY also recommends that listing agents encourage owners to allow the original accepted offer to submit a new offer prior to accepting a higher offer from another party.
For example, let’s say a seller accepts an offer of $1,100,000. Prior to the contract being signed, another bidder submits an offer of $1,200,000. REBNY recommends that the $1,100,000 buyer be given an opportunity to submit a more competitive offer before the seller accepts the other buyer’s offer of $1,200,000.
Recommended REBNY protocolos for multiple offer scenarios are outlined in the RLS Universal Co-Brokerage Agreement Rules and Regulations, Article II, Section 11. Disclosure Procedures Among Participants when there are Multiple Bids:
In conclusion, sending out multiple contracts is completely legal in NYC real estate. A seller may also accept multiple offers at the same time. While a buyer cannot completely eliminate the risk of being outbid after an offer is accepted, the risk can be mitigated by completing buyer due diligence and contract negotiation as quickly as possible so the contract can be signed in a timely manner.
Disclosure: Hauseit® and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. No representation, guarantee or warranty of any kind is made regarding the completeness or accuracy of information provided. Hauseit LLC is a Licensed Real Estate Broker, licensed to do business in New York under license number 10991232340. Principal Office: 244 Fifth Avenue, Suite 2950, New York, NY 10001.