Legally enter into multiple contracts for sale - Posted by Mike G

import · September 20, 2003, 12:18am

Posted by Frank Chin on September 21, 2003 at 12:54:35:

Mike:

I have made offers to sellers in the past, who made it clear to me that they are awaiting other offers, and evaluating them, before going foreward with the strongest one. It is agreed that the earnest money would be returned should my offer not be accepted.

So far so good, and no stonger language needed on the offer.

But, if my offer was accepted, and it goes to the P&S contract phase, and then I go ahead to:

1- Pay for a home inspection, about $200.00
2- Pay the mortgage application fee, about $350.00
3- Pay for an appraisal, about $400.00

Would I be competing with four other simultaneous contracts that you signed at this point?? Sounds like I am. Would I get any money back from you besides the deposit to make me whole.

What if I was in the process of selling my current home to move in to the one you’re selling, only to find that another one of your buyers beat me to the closing. What if my sale has a TOE clause?? Who’ll be paying my hotel bills??

What would you do if I recorded the P&S contract, and another one of the buyers proceed to closing?

If you made it clear to me that you are signing contracts with fours others, there’s no way I’ll go thru a contract with you.

I deal in rentals. In everyones mind, if I take a deposit, I am going forward with the party I’m taking the deposit from. No way am I going to take deposits from 4 others in case the first one falls thru (wish I could soemtimes), so I get to rent it out sooner. Beleive me, I had to return deposits on one or two occasions when credit didn’t check out, and I had near fist fights, and near lawsuits.

If you’re talking about the offer stage, that’s different.

Frank Chin

import · September 20, 2003, 12:18am

Legally enter into multiple contracts for sale - Posted by Mike G

Posted by Mike G on September 20, 2003 at 24:18:47:

What’s the best way to word a sales contract so I can keep my property on the market and legally enter into more contracts w/ other buyers until I know 100% that someone can close?

Just recently completed my first deal, which I had simultaneously entered into contract for sale w/ FIVE different buyers, all w/ different closing dates. That’s right five! I used the following clause, per the advice of a mentor I am working w/:

“CLOSING DATE & PLACE: Closing shall be on or before X at a location to be selected by Seller. Time is of the essence. The property is subject to prior sale until such time as the Buyer named above shows a written, unconditional, verifiable loan commitment (if applicable) along w/ proof of the funds needed to close and all contingencies have been met.”

Everything ended up working out fine on this one, but I lost a lot of sleep w/ the stress of not knowing whether I had abused this clause or not (esp since both this was my first deal and since I knew that these people were not fully aware of what this clause meant). Luckily I informed the other 4 that I was closing w/ someone else before they all spent moeny on appraisals, etc.

Anyone have any advice on how I could word this clause any better going forward to achieve my objective of not taking my property off the market until I know someone can close?

import · September 20, 2003, 6:57am

Re: Legally enter into multiple contracts for sale - Posted by John Merchant

Posted by John Merchant on September 20, 2003 at 06:57:03:

This is an everyday tactic used in selling houses, to keep things moving while keeping Seller’s options open.

Suggest you talk to a knowledgeable realtor in your area & get a blank copy of one of their MLS P&S Agreements. Usually, on a residential property, their forms are about as good as you’re likely to find, and those forms have been carefully drafted so as to keep the Realtor legal.

In big market areas, MLS or Realtors have offices with RE forms supplies, where anyone can go to shop for & buy most any kind of common form like this.

import · September 20, 2003, 8:16am

Re: Legally enter into multiple contracts for sale - Posted by Frank Chin

Posted by Frank Chin on September 20, 2003 at 08:16:56:

John:

As a buyer, I’ll probably sue if I wound up paying for a home inspection ($200.00??), $350.00 loan application fee, plus appraisal fees that run around $400.00, attorney fees to review contracts, and only afterwards find out I’m one of five buyers, and run myself ragged with a “TOE” clause, which attornies around here would not let me sign either as buyer or seller.

Even as seller, my attoreny explained that its difficult to tell, especially with tougher code enforecement on sales, that a buyer should chance a TOE clause, if certain violations require a “variance” hearings.

I have recorded P&S agreements in the past, but not all, but I might start doing so in the future if this is a common practice among sellers. I don’t think it is around here in NYC. Usually, RE agents explain that the earnest deposit insures that you are the one and only.

Mike didn’t make mention of earnest money in his post, and I wonder if something would be amiss if there is none going into a P&S contract. If there is, I smell fraud with a seller collecting several deposits.

Frank Chin

import · September 21, 2003, 12:02pm

Re: Legally enter into multiple contracts for sale - Posted by Mike G

Posted by Mike G on September 21, 2003 at 12:02:21:

Frank, I did have my buyers put up a small deposit, which of course was refunded to each afterwards. You don’t think the “this transaction is subject to prior sale until…” language provides adequate disclosure for this to not be considered fraud? Because there’s even room to dispute this, that tells me I need to make this language stronger. Any thoughts?