In Westchester and the surrounding counties of New York, quite a bit can happen between the acceptance of an offer and contracts being signed. Once an offer is accepted, the buyers still have to do their home inspection and settle those matters before memos go out and contracts are drawn. Even then, there is still the back and forth between attorneys on verbiage and pet riders before signatures and deposit. It can take weeks. And in those weeks, another offer can come in and change the game.
But if a higher offer comes in, is the seller obligated to take it? Should a seller switch horses to an unknown quantity when they have already been through inspections with buyer number 1? And isn't there a risk in switching, because if the new deal dies and the old deal is alienated, isn't that a great way to go from 2 offers to zero? These are things we face frequently in Westchester that seldom happen elsewhere.
First, the seller does NOT have to switch to a higher offer when an accepted offer is on the table. They often do, and it can screw things up if it doesn't work out, but there are many reasons why a seller might choose to stay with their first accepted offer, even if a higher offer comes in. The key is not simply price. It is also terms.
- The higher offer might be caught up in the competition. 11th hour high bids often get remorse once they leapfrog over other offers and stall or back out. People want what they can't have. When they get it, they sometimes lose their inspiration and flake out. We have observed that people who don't ante up by the deadline are a reversion risk after it passes.
- The higher offer might be monopoly money. Simply put, they might not qualify for the higher number. I have seen bids that were not accepted in favor of another come in a week later and assure us that they could in fact qualify for full price or close to it. Some do. But some don't. It was wishful thinking, borne of competition and wanting to "win."
- The higher offer might still be selling something. This is especially a concern when the buyer is selling a co op, which is common in New York. Co ops can take 3 months to close, and there are instances where the buyer gets their mortgage but is turned down by the board, killing the deal after a long wait. But deals on other properties also die. I often hear buyer agents, when they present an offer, make it clear that their client "has nothing to sell." That is wise to emphasize.
- The high offer might take longer to close. The end of the year is coming, and some people want to close before the end of December. Time is money. A buyer with a higher offer might not want to close that soon- their lease might not be up until March. They are planning a wedding. It can be anything. Long waits tempt fate.
What matters to sellers, sometimes more than mere price, is certainty. More money might not be worth it if it is riskier, or if it adds to the stress of the transaction because of a longer wait. Certainty has value. This is why some believe that a cash offer might be more attractive than a bid with a mortgage contingency. Time is indeed money, and sometimes there is a premium for cash. Certainty has value. Even if offers come in simultaneously, the higher offer may not be the right one.
Price does not occur in a vacuum. There are other factors, such as timeframe, terms, certainty and plenty of other variables that might make a lower offer the better choice for some sellers. Sellers and their agents would be well advised to evaluate context and the Big Picture before making a judgment based on raw numbers alone.