2008 May 9th

When “Final and Best” is Neither

Beware When Buying a Condo in Hoboken – Final Doesn’t Always Mean Final

The Hoboken condo and real estate market is still reasonably strong and a surprising number of Hoboken condos and brownstones elicit multiple offers. When this happens, the listing agent can handle them in two basic ways:

Competing Bids Can Cause Chaos or Worse

With competing bids, the buyers bid against each other until the seller accepts one offer and says “stop – no more showings, no more offers”. Very often the seller will play one buyer against the other to keep outbidding each other to get the highest price. This strategy backfires when both buyers get frustrated and walk away. Occasionally a seller will accept one buyer’s offer, sign contracts and begin attorney review with that buyer. Then an even higher offer comes in, possibly even after the the end of attorney review when the sales contract is supposedly binding, and the seller will dump the first buyer or try to get the first buyer to top the bid again. This results in hard feelings, a disgruntled first buyer and may even end in a law suit.

The idea behind “Final and Best” is for the seller to be as fair as possible to everyone. The listing agent tells the buyers’ agents that each buyer should present their “Final and Best” by a certain deadline. The seller will then select which offer is most attractive and move forward with that buyer. “Final and Best” is supposed to avoid tangled mess of multiple bidders trying to out bid each other. It is often presented to the buyers as a way to “level the playing field”.

As They Say in Latin, Caveat Emptor – Buyer Beware!

Even when the seller’s agent says they are doing “Final and Best” in the end, it’s often entirely meaningless. Well how can that be, you may wonder? Here is a comon scenario:

So much for “Final and Best”. Now, of course, there are some sellers with a sense of fairness that actually superceeds their greed. Upon having committed to a buyer, they will not entertain any further offers, even if higher than the accepted one. Buyers should remember, though, that just because the seller represents that they are doing Final and Best, it may be neither.

When is a Deal a Deal?

So when can a buyer relax and know that they’ve bought the property? At closing, of course. Prior to closing buyers should keep in mind that anything can and does happen. During attorney review, the contract is not even binding. The risk to the buyer is greater before buyer has put any money on the table. Once buyer has paid the initial deposit, done the inspection, obtained and delivered a mortgage commitment, the risk lessens. Chances are, the property is no longer being shown. In fact, a smart buyer will make a term of the offer be that upon acceptance of the offer the property is taken off the market. The more time that goes by, the fewer other buyers there are likely to still be floating around. But regardless of what the contract says, a seller can still change his or her mind and the buyer’s only recourse is an expensive lawsuit. We all know that when that happens, it’s the lawyers who win.

Posted by Lori Turoff | Currently 9 Comments »

2008 Feb 10th

5 Familiar Problems Encountered When Buying Hoboken Real Estate – Or How to Avoid “Oh No!”

1. The Seller Got A Better Offer

You’ve been looking at properties for a year and finally found “the one”. It has everything – it’s big, has deeded parking, top floor of an elevator building, great layout, nice kitchen, good condo association. So you make your offer and, after some negotiation, it’s accepted. What happens next? You hire an attorney to begin attorney review.

Oh No!

– You get the call from your real estate agent that the seller got a better offer. What should you have done?

You should have written into the ‘additional provisions sections of your offer (which shoud be in contract form) the following: “Seller agrees that all further showings will be only for backup offers.” With this, you have a better argument that if the seller accepts the higher offer he or she will be in breach of the agreement.

2. One of the Attorneys Is Sleeping On The Job

The sales contract has been executed and distributed to all parties. Attorney review has begun. It’s been over a week and nothing is happening. The seller’s attorney has left numerous voice mail messages sent emails to your lawyer to no avail.

Oh No!

– Your realtor calls to tell you your deal is about to fall apart because the sellers are getting nervous and jerky that attorney review is not concluded yet. What should you have done?

Hire a local lawyer. Or at least one who has experience doing real estate deals in Hoboken. Real estate is local and real estate transactions and procedures tend to vary enormously from place to place. Now is not the time to hire your wife’s second cousin the New York litigator to handle your closing just to save a few hundred bucks. You need a lawyer who knows the quirks of doing a deal in Hoboken (and, believe me, they exist – things like flood zones and Fannie Mae condo requirements for example). Hoboken is a very small town so it helps the flow of communication when your lawyer sees the seller’s lawyer at lunch at Frankie & Johnny’s every week.

3. The Condo Association Has No Money

Your lawyer has been asking the seller for the condo docs for days. The seller is having a hard time getting them from the condo association. The managment company doesn’t respond to seller’s calls. Finally, the documents are delivered by seller’s agent, who has a relationship with the management company from past deals. These documents should include the condo’s Certificate of Incorporation (sometimes called the Master Deed), By-laws, rules & regs, floor plans, financial statements for the past year and copies of the condo board meeting minutes for the past several month. Often times, they don’t include the last few items. Often times, your attorney does not perform adequate due diligence and never looks at these documents. But you have a good lawyer.

Oh no!

She calls to tell you the condo is in the red. The association has used up it’s reserve fund repairing the roof last year and the current budget is underfunded. A special assessment, increased maintenance or both are surely on the way. What should you have done?

Have your agent ask for all these documents as a condition to your offer. There may be boiler plate language about it in the standard form NJAR sales contract but – have your realtor ask the sellers’ realtor for the documents when the offer is made. If they are not delivered promptly, be sure your lawyer is aware and extends the time for attorney review until they are received and reviews. Ask to see them for yourself – you might learn something interesting.

4. The Home Inspector Find Some Major Problem

Studies show that the typical buyer spends 12.5 minutes looking at each property when house hunting. You spent all of about 30 minutes total looking at the property over two visits before deciding to make an offer. It never occurred to you to try the a/c or heating system or run the water in the shower while you were there. After all, that’s what your home inspection is for. You hire a great inspector who does a very thorough job. The inspector’s report is emailed to you the next day.Oh no! There is a significant problem with the HVAC and to repair it parts would have to be ordered and installed. The cost estimate is in the thousands.What should you have done?

Well, in this case it’s not too late – ask the seller to put an amount into escrow to cover the cost of the estimated repairs while you figure out who will fix it, what it will really cost and who will pay for it. Even if the seller agrees to fix it most times it’s better for you to do the repair so you know it’s done properly. The seller can give you a credit at closing to pay for remedying the problem.

5. The Sellers Aren’t Ready to Move

The closing is scheduled for next Tuesday. You’ve given your landlord notice months ago that you’re giving up your rental. You’ve packed up millions of boxes with your possessions and the movers are coming next Thursday.

Oh no!

The seller’s new house isn’t finished being renovated and they’re not ready to move out.What should you have done?

If you’re in a time sensitive situation and there is some doubt about the seller vacating in a timely manner have your attorney write a clause into the contract that basically says if the seller isn’t out by such and such a date, they have to pay you a per diem, reimburse you for storage costs and pay for your hotel and meals until they leave. At least it will make the wait and resulting inconvenience a lot less painful.

Posted by Lori Turoff | Currently 6 Comments »

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