Q: A few months ago I made an offer to buy an Upper East Side co-op. The owner countered and we agreed on a price. I got my financial documents in order and my letters of recommendation to present to the board. I also hired a real estate attorney who began working on the transaction and recommended I hire an engineer to check out the apartment. About 10 days later, the owner took the property off the market. I had already paid the attorney half of her fee. Can I ask the seller to refund that money to me, since she did not follow through on her part of the deal?
A: An accepted offer is not a binding agreement. Until the buyer delivers a deposit, and a fully executed copy of the contract has been delivered to the buyer or their attorney, either party can walk away for any reason or no reason at all.
The seller is not responsible for any money you’ve spent up until that point. As a buyer, you have no guarantees, but you still need a lawyer to review all the documents and draw up the contract. Attorneys don’t start working until they’re paid a retainer and generally do a bulk of their work before the contract is signed. They read the board minutes, analyze the financial statements and negotiate the contract with the seller’s attorney. If your lawyer recommended that you hire an engineer, she had probably invested many hours working on your deal.
So, if the deal falls through for whatever reason, the lawyers still get paid for work done. “Lawyers are paid based on their time spent on matters regardless if the deal closes or not,” said Pierre E. Debbas, a Manhattan real estate attorney.
If there’s any balance left on the retainer, then the lawyer should return that money to you. But the seller is under no obligation to reimburse you for the work your lawyer did.
All of this is cold comfort to a buyer who laid out a large sum in good faith that the deal would happen. Unfortunately, it is a risk of buying an apartment. The other side of this coin is that if you had uncovered any problems during this period, or decided that you simply no longer wanted the apartment, you too would have been able to walk away from the deal, paying only your legal fees and nothing more.
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