One of the most useful items (in my humble opinion) I have ever posted, and one of the most read, is a blog post I wrote in 2011 about what a real estate binder is and why, despite its name, it is not always binding. I am not going to repeat the article here, but you should read it before continuing, as it will put everything below into context.
For most of 2020 and continuing now in 2021, the real estate market has been especially difficult to navigate as demand is far exceeding supply. It has led to most new listings having multiple bids, accepted offers being discarded by Seller's receiving higher offers after a deal is struck, and Buyer's waiving contingencies like mortgage approval and even inspections to secure a desired house. As someone who has been representing Buyers and Sellers for a long, long, time, it reminds me very much of the last boom time of the early 2000s.
As a result of the craziness, I am also seeing more and more offers being made on full-blown contract (again, read this if you haven't) instead of binder forms. This has significant implications for both Buyers and Sellers. The big ones:
On the buy side:
1. You may not get standard Seller representations. Seller representations could be a separate blog post, but, basically, it is a series of statements from a Seller as to facts which may not be evident from a building inspection.
2. You may have limited rights if a title search shows facts you do not like. Again, separate post, but most form contracts require a Seller to give marketable title where most attorney contracts give a Buyer some discretion if there are easements or other restrictions on the property a Buyer is unwilling to live with.
3. You may be bound under the document you sign if you do not meet time deadlines in the document or give timely notice of any rights to cancel you may have.
On the sell side:
1. Upon signing, you are bound to the Buyer and obligated to sell your property. Since most of these contracts contain some contingencies for inspections, you are essentially giving the Buyer a free option to purchase the property during the inspection contingency period.
Bottom line, both Buyers and Sellers should be aware of the implications of any documents they sign, prior to signing, which is not always the case given the speed of the market.
If you have any questions, about making or accepting an offer, do not hesitate to contact us at 203-762-0751, or through the contact form at the bottom of the page.