Saturday, July 20, 2013

Honor and Money or When a Deal Isn't Necessarily a Deal

It’s a deal. Or is it?

After apartment-hunting in Williamsburg, Brooklyn, for months this spring, Dr. Ronald Nath finally lucked out with a two-bedroom duplex at the top of a condominium, listed at $800,000.

A day after a crowded open house, Dr. Nath, a Massachusetts surgeon, offered $803,000 for the unit, which was to be a home for his son David, a television news producer. But because of its location and the outdoor spaces on both floors, the unit attracted more than a dozen offers, which prompted the seller to request higher bids.

For his “best and final” offer, which usually signals the end of the haggling process, Dr. Nath promised $912,000, which seemed to do the trick. The seller congratulated Dr. Nath and told him the unit was his; a contract was drawn up.

Not so fast. A few days later, like a kite in a gust of wind, the price soared again, to $995,000. Insulted by what he described as being “played,” Dr. Nath refused to raise his offer and ultimately lost the unit to a buyer who plunked down $1.1 million. “I was absolutely outraged,” he said. “When you give your word that a deal is done, you’re supposed to fulfill your agreement.”

A real estate deal, like any other business transaction, isn’t ironclad until signatures wind up on a contract, said Tom Le of the Corcoran Group, the seller’s broker, who defended his clients’ right to get the highest possible price for their unit, even if it left some raw feelings.
Read the rest here.

Unfortunately I have had some experiences of a similar nature. It's a long story but the executive summary is that back when I was on the parish council of the church that I was received into Orthodoxy through, money was tight. We were experiencing some real financial hardships and the decision was taken, albeit reluctantly to part with some land we had hoped to build a permanent church on.

Twice we entered negotiations with a certain individual, and twice that individual stiffed us and reneged on his word trying to drive the price down Of course he knew our backs were against the wall. In the latter case he did so after contracts had actually been signed. Because of the way real estate law works in California, and the fact that he had "accidentally forgot" to deposit the security deposit check into escrow we were left with no practical recourse other than to just accept the fact that we had been cheated.

It happens. Sadly not everyone in the world is on the up and up and some people are highly unethical.

FWIW here is my take on the ethics (which is not the law) on real estate and business negotiations in general.

An asking price is just that. Nothing is firm. Offers and asking prices can go up or down UNTIL everyone says "we have a deal" and shakes hands. After that, it is grossly unethical and dishonorable for either the buyer or seller to withdraw from that deal for anything other than the most extraordinary reasons. And in the case where one or another party does break their word without good cause, the other party should immediately withdraw their offer or consent to any deal and have no further dealings with them. By continuing to deal with someone who has demonstrated an  unscrupulous character you are enabling this sort of knavery.

I may be the last man on Earth who still holds to the view that a man's word is his bond, but that's my take on things. If I can't trust your word and a handshake then your signature isn't worth the paper it's written on. How can you trust anything they say about anything? A man who negotiates in bad faith is a liar. He can, and will, lie about any number of other things.

Such persons should be shunned both personally and professionally.

1 comment:

Chris Jones said...

This sort of thing mystifies me. You speak of the point where "everyone says 'we have a deal' and shakes hands," but when I have purchased property, it's more than a handshake: there is an offer to purchase, signed by the buyer and accepted and signed by the seller. It's a written contract, not an oral agreement. It's followed up a few days later by the Purchase and Sale Agreement, a more detailed and more formal document that supersedes the accepted offer; but even without the P & S, the offer to purchase is a binding contract.

Perhaps what is needed is a few buyers willing to take sellers to court for specific performance on the basis of the accepted offer. Then maybe sellers will begin to take the offer to purchase seriously as a legal contract.