2013 Jul 20th

Hoboken Bidding Wars – Raising the Goal Post

There was a great article in today’s New York Times about what’s happening with multiple bids on Manhattan properties.  This situation is exacerbated in Hoboken thanks to the “attorney review” process that is required by law in New Jersey.  goalpost

Since contracts are legally not binding for a minimum of 3 business days after a buyer and seller come to an agreement, Hoboken buyers find themselves getting outbid when they thought they had a deal as sellers continue to ‘shop’ the property in hopes of getting an even higher price.

 

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  1. Craig

    I have no problems with multiple offer situations, as that’s the free market at work. But when there’s a deal in place in principle and the seller pulls the deal because someone else came in late with a better offer, that’s not cool. And NJ gives sellers a whole 72 hours after signing the contract to pull that crap.

    My solution would be to enact rules whereby both sides must put earnest money in escrow upon agreeing to the deal in principle. Buyers have always had to do it to protect sellers. It should work both ways. If the deal goes through, the seller’s earnest money gets applied to their closing costs. But if the seller bails, the buyer gets to keep it. I bet that would go a long way to preventing this nonsense, or at least give buyers something to walk away with for their trouble.

  2. Lori Turoff

    Unfortunately, Craig, that is simply not the law in New Jersey. Contracts are not binding on either party for 3 business days. The seller can always walk away and accept another offer just as the buyer can walk away and buy a different property. It’s a two edged sword. Earnest money is pretty meaningless in practice, unless you are the lawyer getting paid by the hour to bring a suit. I’ve never seen anyone lose a deposit in 10 years of doing deals.

  3. Susana

    This is one of many consumer protection laws enacted by our legislature. Yes, it’s unfortunate when applied in the real estate setting because we all get emotionally attached to the deal (both as buyers and sellers), but we are lucky to live in a state that is dedicated to consumer protection.

  4. Gilby

    best rule of thumb, it ain’t until it is…buyers should just put in multiple bids and bid any seller that pulls such a thing, ‘good luck and have a nice life.’ At the end of the 3 days, the buyer just pulls out on all but the property that they most prefer.

  5. Lori Turoff

    Many buyers are afraid to do that because they don’t understand that BY LAW the contract cannot become binding. Some won’t even sign it without their lawyer first reviewing it – even though that is the purpose of the attorney review period.

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