After weeks prepping and staging and hosting showings, accepting an offer is a hallmark move toward settlement day. But, what happens if you accept one offer, only to receive another, even higher offer from a very motivated buyer? Can you get out of the first offer to accept another?
Canceling an offer as the seller isn’t recommended, to say the least. Not only is it unethical, retracting after a home sale could bring on legal repercussions. After a seller has accepted an offer that has been agreed upon, signed, and delivered to all parties, it is nearly impossible for him to back out, even if it is for a higher offer. Most contracts allow a buyer to back out under specific circumstances, but not a seller.
But, if you find yourself in the tricky position of a second higher offer after a contract has been established, here is what you can do:
Check your contract and contingencies
First things first, double check to see if you actually signed the contract. The deal isn’t solid unless your actual signature is on the purchase agreement. “It’s important to fully understand the language in the sales contract to ensure each party is aware of their responsibilities and repercussions for breaching such obligations,” says Julia Towle of Avant Realty Group. Purchase agreements usually include the buyer’s right to pursue legal rights against defaulting sellers.
If you have signed the contract, check to see if it includes contingencies to cover the obligations that must be met by both buyer and seller. For the seller, a buyer closing a mortgage within 30 days is a typical contingency, but if they fail to meet the deadline, a seller may be able to call of the sale legally.
For the buyer, a common contingency is the home passing inspection, in case there are major issues like structural damage, a failing sewer system, etc. In which case, the buyer may walk away without incurring penalties, or ask the seller to pay for repairs. An inspection contingency is typically put in place to protect a buyer, but it could work in a seller’s favor, too, in the case of a second offer.
Keep the higher offer as a backup
If the original contract is signed and there aren’t contingencies that allow the seller to default, you can accept the higher offer as a backup. It’s not a guarantee, but it’s at least another option available for you if the initial buyers back out due to inspections or other reasons listed above. The backup offer also gives you the ability to be stricter if the first buyers come back with demands regarding items they want fixed or other contingencies.
Check the law
If you choose to risk it and attempt to find a way out of an accepted offer, be sure to hire a lawyer to ensure you aren’t setting yourself up for a lawsuit. The decision shouldn’t be taken lightly and should be done only on the advisement of your realtor and legal council.
Change property listing wording BEFORE you sell
One way to ensure you don’t run into the problem of having higher offers after you’ve accepted one, is to list your property as “contingent, accepting backup offers” advises Julia Towle. By listing in this manner, the seller can have the ability to accept a higher offer, or allow the current buyer to counteroffer at a higher price. This wording communicates that an offer acceptance isn’t a guarantee of closing. But beware, wording a contingency in the listing can ward off would-be buyers because it reads uncertainty on the part of the seller.
Beware of the risk
Regardless, it is always a risky move to try and dissuade one solid offer in hopes of another, even if more money may be involved. There is no guarantee the higher offer buyers will buy your home. Inspection reports can kill the deal, the bank appraisal may come in low and the buyer/seller has to renegotiate to selling price, etc. Before you know it, multiple offers could turn into none, and you could be starting over again.
Maureen Hughes is the Lead Listing Specialist of The Wayne Megill Real Estate Team of Keller Williams Brandywine Valley in West Chester. For buyer or seller representation, or for more perspective on the local and national real estate market, please email email@example.com and visit The Wayne Megill Team site at http://www.waynemegillteam.com.