From 1996 through 2000, I sold real estate in Rochester, New York. I learned the business in a way very similar to the way real estate deals are put together in most other parts of the country. Here’s the typical chronology:
- The buyer makes an offer in writing on a boiler plate form jointly approved by the local Bar Association and the Association of REALTORS. When countersigned by the seller, that offer then becomes the purchase and sale contract.
- The contract is contingent on attorney approval, home inspection, and mortgage within specified time frames.
- Once the attorneys approve the contract and inspection issues are settled, the remaining contingency is the buyer’s mortgage.
- Buyer makes an offer that, when accepted, is simply deemed an accepted offer. Nothing other than the terms of the offer are in writing.
- A memorandum of agreement (often called a “deal sheet” in NYC) is sent out to all parties, typically by the listing broker, with the terms spelled out.
The status at this point is often “accepted offer, continue to show for backup.”
- The buyer must complete their home inspection prior to the seller’s attorney sending out contracts to the buyers attorney. This is where we play the theme to Jeopardy while the attorney for buyer and seller trade pet riders and jabber about discuss language. There is no universal contract. Riders can be 5 pages and have all kinds of clauses and revisions echoing that attorney’s past trauma. It gets really fun when the attorneys don’t pick up the phone to work things out and opt to fax marked up contracts back and forth for weeks.
While this occurs, the official status is “accepted offer, contracts are out.” The seller can elect to continue to show for backup or not. I have seen contracts be “out” for a month.
- Assuming all inspection issues are settled and the lawyers agree to verbiage (this can take a week or more), the buyers meet with their attorney to go over the contract and make their signatures and down payment.
- Once the buyer’s downpayment and signed contract are sent back to the seller’s attorney, the seller counter signs and their attorney deposits the down payment into their escrow account. Until this is completed, anything can happen. Another buyer can appear, the buyer can propose changes to the contract before signing, you name it.
- Only after 1-5 occur is the home considered under contract, and the only remaining cointingency is the buyer’s mortgage. Some attorneys will stop the process and insist that the septic, submerged oil tank, or other variable be tested before contracts are delivered. They want the contract to have no contingencies or “clean.”