As agents, we complete a standard contract form, negotiate the terms, and have both buyer and seller sign. It still, however, is not a binding contract until the buyers/sellers have their respective attorneys review and approve the contract, or the time allotted for an attorney to review has expired.
Therefore, even though buyer and seller have signed, we realize that either party can walk away. Is all they need is a two sentence letter signed by their attorney...no reason needed.
If I represent a seller, I know that the buyer could walk away. I also know that the buyer's attorney could add terms and conditions to the contract that could cause the seller's to walk away. Both attorneys add and amend the prepared standard contract.
Therefore, without a doubt, I recommend a seller continue to show and hold any scheduled open houses.
Where do you stand? Are you the seller with a contract or the buyer with a contract?
There are no "back-up" offers in attorney review. If the house is in attorney review, all offers are sent directly to the sellerâ€™s attorney for discussion with the seller and can be negotiated as any other offer.
In attorney review although you have a meeting of the minds on a price, nothing is agreed upon until you are out of attorney review and the under contract. The sellers Realtor may not even be involved in the discussion of the new contract.
In the current market with the way buyers are acting, the house could definitely sell at an open house with no problem at all.
Get out of attorney review.
Just to clarify the answers below from 2 out of state agents--you are not "under contract" in NJ--or as they call it "pending" until attorney review is over. During that time, either party (buyer or seller) can get out of the contract for any reason. Therefore, it is perfectly legal (as you know) to host an open house.
As a sellers' agent, we have a responsibility to watch out for our clients fiduciary best interests. Ethically, we must do whatever it takes to ensure they are protected and represented to the best of our ability. When a seller is uncertain about a transaction (or just asks for an open house when a contract is in,) I do one.
Also, sometimes a house goes under contract after the ad has been placed and the open scheduled. Rather than cancel, some agents will host it anyway. As most in the business will tell you--open houses do not sell houses, they bring buyers to agents.
O.k. Bob - Do the math. If a house is sold at 400k @ 5% that is $20,000. commission
At 405k = $20,250. After the agency split of 50% ( example) the agent stands to make a maximum of $125 by increasing the offer up 5k.
Really? You think the agent was trying to get your price up $5,000 to make an extra $125 commission?
How about the agent was presenting you with the fact that there is another offer on the table and if You wanted the house.. maybe you should make a better offer. It is what we do. We have to present all offers to the seller and to be fair, we need to tell all the offers that they need to give their best shot. Period. Would the Realtor like to say.. yeah, this is it .. we are taking this offer , probably. But we cannot we do what the homeowner wants us to at the moment. Maybe the other people offered $5000 more than you did. That may work out to $30 per month over 30 years for you.. but to the seller it is $5000 more and that is where the decision lies, not the Realtor.
What you feel in your â€œmindâ€ is not how it works. A contract is a contract when all agree., You are entitled to feel as you wish, but it is not how selling a home works. Before you make assumptions about the greedy Realtor that wanted 5k more. Think about what you are saying.
The other factor is that the agent has advertised this property for a open house and arrangements where usually made prior to knowing the property was going under contract. Especially when the seller has not achieved their full asking price the seller will instruct their agent to continue with that open house to see if they could achieve their full asking price.
The short and sweet answer is : The property is not officially under contact until those three business days have past, so the seller is free to accept any other offer until that time has expired.
To add to the mix, even when OUT of AR and "under contract", the buyers can still walk away after the home inspection is done (and this happens a lot lately too). This can be two weeks or more after the attorney review period ends, and would mean that my sellers had the house off the market for all that time. So again, it is my duty as a sellers agent to try to have something "waiting in the wings", just in case. In a "buyers market", these things are necessary to protect the sellers.
Just to clarify - in NJ, unlike NY, we DO start with fully signed contracts - then we have this 3 day attorney review period during which time the attorneys can make their (usually) pretty standard changes to the verbiage - usually no surprises unless the attorney isn't a real estate attorney. The thing is - either party can get out of the contract during this tentative time. It's just the way the NJ law is.
Follwing the attorney review - the property is considered to be "UnderContract" and it usually is removed from the MLS. The buyers then have (usually) 10 days in which to complete inspections.....bring in the second deposit....and 30 days to get a mortgage approval. These time frames can be subject to change - usually done during the attorney review period.
Bob, I also think that whether an open house is conducted or not may have to do with the timing. I think it was mentioned below (am too tired to scroll down), but if a home goes under attorney review , say on a Friday, and the OH was already scheduled, it may just be the prudent thing to do ...not to menton the clock for the attorney review doesn't even officially start until Monday morning.
So..the answer to your question may be.....it depends!
This was created due to the number of lengthy short sales, numerous contracts with additional contingencies, and mortgage difficulties ..........sign of the times.
Oh, and my sellers turned down an offer 2 months ago that was also far below the number they accepted yesterday!
Today, in this unpredictible market - anything can happen!
Just so you know, generally, if a new offer comes in during attorney review, the first buyers may be given an opportunity to match it, as a coiurtesy.......in my situation yesterday, however, the new offer had such great terms, as well as price, the 1st buyers couldn't possibly match it .
Just recently, I have been on both sides of this situation. I showed a home that was under attorney review (on our MLS, the listing shows as "A", (active) but with * next to it = A* indicating the attorney review is in progress.
Anyway, I wasn't aware of this, as the agent hadn't marked it with a *, so I showed the home. my clients fell in love and wanted to make an offer, That's when I found out it was under attorney review.
Bottom line- we got the house - we made an aggressive, stronger offer, and the seller decided to go with it. It's legal, and in that case I worked for the buyer, so even though I didn't like being in the position of "spoiler" it was the legal and correct business action to take.
Yesterday - I was on the other side of this fence - i received an offer on a listing of mine that was in its second day of att. review - it was much stronger, not only in number, but in terms than our 1st accepted offer. With much discussion - the sellers decided to cancel the first deal and go with the new buyers. I had to make that uncomfortable call to the other (1st) agent to let him know what was happeneing. It's not something I liked doing, but it is business................
So............the seller ultimately calls the shots, and can continue to show the home during the review. In the case of holding an open house, if the seller wants to make sure they don't lose any exposure to the market while the attorney review is in progress - it's their decision, and it's legal - as far as ethics - well, it's good business, and it doesn't mean that the seller is necessarily shopping for a better offer. Remember - the buyer can also back out just as easily as the seller...........so it works both ways.
Good advice below - get out of attorney review as soon as possible!
During attorney review and inspection periods anything can happen.....
for one reason or another the buyer can back out..... So therefore until the attorneys have signed off and
there are no inspection issues, it is fair to still show the property and to still hold an open house, but telling everyone that the seller does have a signed contract going through the inspection and attorney approval period and if anyone makes another offer that it will be considered a back up offer.....
Seems on the surface not fair to the buyer with no intentions to back out, but what if and then it becomes suddenly very fair to the Seller, to have continued having his property open and shown....
Hope this explains it a little......
Once A/I period is over and the attorneys have signed off, it is a different sitution.
Take care and good luck!
Your Chicago and Northern Illinois Expert
I have shown numerous homes in attorney review and presented offers on homes in attorney review with another Realtor and my clients have wrestled the house away from them. It happens
Now, if you were out of attorney review.. that is a different story.
My Advice: Get out of attorney review.
As long as the listing (or hosting) agent is up front about having a contract on the home, it is absolutely ethical. It's really a good thing for all involved.
If the home is still in attorney review, it is not yet a pending sale. It's also likely that the open house has already been advertised since the attorney review period only a few business days. I would definately go ahead with the open house and note to all visitors that there is a contract on the home.
Most homes do not sell to open house visitors, but it does happen. With the high potential of a deal falling apart, it is in the best interest of the seller to get as much exposure as possible.
It is also in the interest of potential buyers. In our area, it seems most people visiting open houses are "just starting" and have not totally formulated what or where their "ideal home" even will be yet. Open houses allow people to see homes in a non-commital fashion and make contact with a number of agents in the process. If the home is in a development where it is "a typical model", potential buyers can get a perspective of the homes in the development like it (and if the agent is good, information about the development and area will be available as well). They'll have a better idea of whether they want to continue looking in that area or not. Although the price will not be known, the fact that there is a contract on the home shows there is interest in the home somewhere around the list price. Buyers will also get to "interview" a number of agents along the way and perhaps will choose one of them to work with going forward.
Hope this helps.
Had the same situation occur on both sides of the transaction. As a sellers agent, the OH was scheduled and advertised, the sellers still wanted the OH to occur, so we held it. We did however, tell every visitor that there was a contract in attorney review. Especially in the last year or so, many, many contracts fall apart in attorney review, and it was my sellers decision to hold an open house, in case this occurred. Do I think it's ethical? Yes IF you inform visitors there is a contract "pending".
I agree with Diane that 99% of the time a OH does not sell the house, but give the agent hosting it a buyer pool.
On the buyers side, it is frustrating, especially when you have a good, solid offer, and perceive the OH as a way for the seller to get more money (either from you or from a second offer). But again, OH's rarely sell a home, and I have found that most buyers won't even bother to look at a house already in AR because they don't want to get into a "bidding war". There is a lot of inventory out there and it's just isn't worth their while.
It's not unethical, it doesn't feel good when it happens to you as a buyer and I often counsel my sellers not to do it. But, in today's market deals often fall apart and it is in the seller's best interest to market the property as long as possible. It would be nice if the seller would agree tio back-up offers only, but truth be told, if they can get more money they might want to do that. In my experience, unlesss it's a new listing, you probably have nothing to worry about.
We certainly understand your point of view, and it is ironic that the second buyers never got their mortgage after you walked away from the transaction.
However, as a sellers agent, we also see the first contract buyers walk away during attorney review, or they walk away after home inspections. Or we find them not getting THEIR mortgage commitment, and that can be 30-40 days after the contract is out of attorney review and under contract. All that while, the house is "off the market" to the detriment of the sellers.
As sellers agents it is still our duty to get the best possible price for the sellers and sometimes that means holding an open house, even after there is a contract in attorney review, and especially if the OH were already scheduled.
Also remember that while in attorney review, another buyer can, and often does, submit an offer directly to the sellers attorney who reviews it with the seller. While in attorney review the seller (or the buyer for that matter) can walk away with no reason. Consider it time for seller or buyer remorse, OR the seller receiving a better offer.
I have been on both sides of this situation and it's not pleasant for anyone. It is however a "business deal" and if you can separate the emotion from the transaction it makes it a lot easier on both sides.
I DO hope you finally found a home and have since moved into it.
Happens all the time! Could be many reasons for this. One problem is the advertising deadline for the Open House is days before the actual Open House. Can't tell you how many times I have paid the advertising fee for an Open House and received an offer the next day. Might be a new strategy to get homes sold!
Seriously, the listing agent's duty lies with the seller. That agent should do everything possible (ethically and legally) to get a seller's home SOLD. Even if you have a contract in attorney review, many things can happen: the attorneys cannot reach an agreement for the existing buyer and seller; the buyer fails to get a mortgage; there are home inspections issues that cannot be agreed on between the existing parties; lose of buyers job, etc.......
Once the home is considered Under Contract (attorney review period is completed) Open Houses should not be conducted.
Since you don't understand how the process works in NJ, it's best not to give advice which may only further confuse the buyer.
Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
An offer is considered to be a "back up" offer once the contract has been ratified by both attorneys, or the time period has passed, and been satisfied.
Quite frankly, back up offers may be taken throughout the entire process - even up to clolsing. Whether they can be acted on or not, depends on the contract terms and status.
Absolutely.....but the open house visitors need to be told the current status. I have seen a number of contracts fall through without exiting attorney review. Until it is a binding contract which has concluded AR, I encourage all sellers to continue to show. I wouldn't book an open house after AR started, but would hold one that was already on the schedule.
Most recently had the same situation wherein I represented the buyers. While I am not going to comment on ethics, I can tell you that when I learned of it, I immediately consulted with my buyers. They advised me to let the listing agent know that if the open house was held, they would rescind their offer . . . . further requiring me to visit the property on the Open House day to ensure that it was not held . . .. they meant business. The Open House was cancelled.
In this ever challenging market with a high inventory, hence a plethora of choices for buyers, I personally would not advocate same to my sellers as if a buyer backs out for what they may perceive as an unethical tactic, it could be some time before the next buyer comes along. However, if this a risk the seller is willing to take, then I, as a seller's representative must comply.
Love and Peace,
Francesca Patrizio, ePro, SRES
I just covered this very topic with a prospective listing client - not good business habits and potentially destructive to a good sale.
Unwavering Commitment to Service
I had a transaction in which the listing agent never changed the status - showing it as active and continuing to show in spite of our requests to show it as under contract. In the end, the deal did collapse and while there were a number of factors, the uneasiness caused by the continued trollling for offers was the beginning of the end. In this example, my buyer had offered full asking price.
The others agents are correct in reminding us that this market is uncertain and deals do hit bumps and for that reason it is a good idea to keep your options open. However, it is also possible that being too clever or opportunistic can result in a seller losing his/her best buyer.
Unwavering Commitment to Service
It is at your own disgressin you can hold an open house if you like in attorney review even if you accepted the offer. I would ethically let the other realtor know that is what you intend to do unless you specified that you wouldn't hold one and that was a condition of the offer. If you did like the offer and just wannna make sure it goes through I would lt the other realtor know that you would be holding one just for back up offers. Chances are in real estate that your first offer is always your best offer and chances are even if you hold the open house your probably not gonna have another offer come in, I mean it has happenned but unlikely. So yes it is ethical to do but I would also let the other realtor with the offer know.
Ron SImone Jr.
All Towne Realty
NJAR Circle of Excellence: Bronze Producer 2005 Silver Producer 2006-2009
Top 1% in sales of over 16,000 Union,Hudson,Bergen,Essex & Middlesex County agents in 2006 & 2009
"A referral of your friends & family is the finest compliment I could ever receive"
I hope this information helps! Best Wishes!
One time I actually pulled into an open house and the agent admitted to me that he was falsely staging an open house just to hustle buyer clients!
I don't think it is ethical however, many do. This is just one of the cheap things that Realtors do that make our profession seem like we are unprofessional.
Authenticity is rare in our business. Keep it authentic and the public will see your professionalism through the fakers!!!!