An Accepted Offer Is Not a Contract

Buyers from other states are often surprised by how a home purchase works here. In much of the country, the offer you sign with your broker is the contract. In New York City and on Long Island, it is not.

The offer is only the beginning

When a seller accepts your offer, the two of you have agreed on a price and little else. In this part of New York, the contract of sale is prepared and negotiated by the parties' attorneys after the offer is accepted. Nothing is binding until that contract is signed by both sides.

Until then, either party can walk away. A seller can accept a higher offer. A buyer can change their mind. That is uncomfortable, and it is a reason to move through the contract stage without delay.

What the contract decides

The contract sets the terms that matter most:

• The down payment, and how it is held in escrow until closing
• The mortgage contingency, meaning whether and when you can cancel and recover your deposit if your loan is not approved
• Title and condition, meaning what happens if the title report or the property turns up a problem
• The closing date, and what follows if one side is not ready

Each of these is negotiable. A form contract with the blanks filled in protects whoever wrote the form.

When a down payment is at risk

The contract controls. A buyer who cancels within the mortgage contingency, following the notice requirements exactly, generally gets the deposit back, provided the buyer applied for the loan in good faith and the denial was not the buyer's own doing. A buyer who misses the contingency deadline, or who cannot close after one has been properly set as "time of the essence," may lose it.

Most deposit disputes we see come down to a date or a notice that someone did not pay attention to. The time to understand those terms is before signing.

Between contract and closing

Once the contract is signed, your attorney orders and reviews the title report and survey, resolves objections with the seller's attorney, coordinates with your lender, and prepares for the closing.

New York also requires most sellers of residential property to give the buyer a Property Condition Disclosure Statement. Buyers should read it carefully, and sellers should understand what they are being asked to disclose before they complete it.

Do you need a lawyer if you have a broker?

Yes. The broker brings the parties together and is usually paid when the deal closes. The contract that defines your rights is the attorneys' work, and each side should have its own.

For most people, a home is the largest purchase they will ever make. It is worth having someone read the contract whose only job is to protect you.

If you are buying or selling in New York City or on Long Island, call the office before you sign anything. For more, see Real Estate.