Buying a home is a huge investment if you know how to take care of the property and make on-time monthly mortgage payments. Over time, you will build equity in that property, which will benefit you when you sell the house. Selling a home can be stressful, especially if you want to get as much money from the deal as possible.
When sellers want to profit from selling their homes, it could lead to some questionable decision-making. Some homeowners wonder can a seller accept another offer while under contract. Let’s discuss how real estate contracts work and when sellers can back out of them to accept a backup offer.
Understanding Real Estate Contracts
A purchase agreement is one step in a real estate transaction. It happens after a buyer makes an offer on the home and the seller accepts it. The two parties then sign a legally binding purchase agreement.
This agreement completes the transaction as long as both parties meet all conditions. Breaking this contract could result in a lawsuit. This may be the case should a seller accept a backup offer.
Contingencies
Contingencies are certain conditions that must be met for the purchase. A financing contingency means that a buyer has a certain amount of time to secure financing, and if the buyer fails to meet that deadline, the seller can back out.
An inspection contingency states that the purchase can be nullified if too many issues are discovered in the home inspection report. An appraisal contingency can halt the sale if the home is determined to be worth far less than the asking price.
Many contingency agreements include an attorney review period to ensure the buyer and seller agree to the conditions. It’s common for a lawyer to recommend a kick-out clause. This contract means the buyer can accept a better offer, and they are not legally bound to the first one. It puts the final price more in the buyer’s hands.
Good Faith
There is also the concept of a good faith agreement between consenting parties in real estate transactions. If there are no contingencies or grounds for breaking a legal contract, both parties are expected to honor that existing contract. However, most sellers understand if the deal falls through for certain reasons, such as not being able to secure financing.
Accepting Another Offer While Under Contract
If you are under a sales contract with the buyer, there are few circumstances under which you could break that agreement and avoid legal trouble, barring any contingencies. Here are a few scenarios where accepting another contract could be permitted if the original contract falls through.
Backup Offers
Sellers are allowed to accept backup offers even if they are under contract. However, if you accept a backup offer while under contract, it must be contingent upon the failure of the original contract. You must accept the first contract and forego the backup offer if the buyer meets all conditions.
Many sellers receive multiple home offers, so agreeing to a backup offer is normal if the first offer falls through or the buyer backs out. You can usually only accept a higher offer from other buyers if a clause states you can do so. This is especially common in a market with low inventory.
Breach of Contract
Another reason to accept another offer while under contract is if the buyer breaks the first contract somehow. For example, maybe the buyer did not make a good-faith offer and couldn’t afford the home in the first place, or perhaps they missed certain deadlines for signing legal documents for the home sale.
However, if you, as the seller, break the original contract, you could face legal action from the buyer. Perhaps you live in a seller’s market and accept one offer but receive a higher one later. Backing out purely for profit is not a legal excuse to break the contract with the original buyer.
This is why following through on the original commitment is essential unless you have legal grounds for terminating the sale agreement. If you’re negotiating terms, understanding what a counteroffer means in real estate can help clarify the dynamics of contract acceptance.
Situations Where a Seller Might Accept Another Offer
Many real estate deals fail for various reasons. If the original buyer or seller cannot meet the contract terms, the contract can be terminated lawfully, and another offer may be accepted. Here are some situations in which a seller may accept another offer.
Contingencies Not Met
If the first buyer violates the contract’s contingency requirements, the seller can legally back out of the sale. Whether they miss a financing deadline or do not pay legal fees in time to close the deal, this could nullify the contract and free the seller to accept other offers on the house.
Buyer Default
Buyer default could be the reason a deal falls through. Typically, this occurs when the buyer refuses to complete the deal by closing or cannot secure enough financing to buy the home. It could also happen if the buyer makes an earnest money deposit but backs out. At this point, if the seller decides to terminate the agreement, they have the legal right to do so.
Mutual Agreement to Terminate
Both parties can agree to end the contract even if no contingencies are broken. For example, the seller may agree if the buyer asks to end the transaction because they found a better home. Ending the contract allows the seller to consider other offers without fear of legal repercussions.
Legal and Ethical Considerations
Before you accept more than one offer as a seller, even if it is a backup offer, always consider the legal and ethical implications. Here are some elements to be aware of that will impact your real estate market transaction.
Seller’s Obligations
The seller must honor their agreement unless they have legal grounds for terminating the contract. Even if a better offer is on the table, it would be illegal and unethical to accept it simply for more money if you signed a good faith agreement.
Buyer’s Rights
The buyer has rights according to the contract you signed. If you violate these rights by accepting another offer while under contract, they can pursue legal action against you. This is not a fight worth having, as it could cost you a lot of money for legal damages and attorney fees.
The Role of Real Estate Agents
Real estate agents help facilitate these transactions to ensure they proceed legally and ethically. They will help you handle multiple offers and choose the best one to sign a purchase agreement. If you have concerns about backing out, ask your realtor or a real estate lawyer before taking decisive action.
Get a No Obligation Cash Offer for Your House
Since selling to traditional buyers can be risky due to financing issues or other defaults, you could sell to a cash home buyer like A-List Properties. Our team can typically purchase your home in 14 days or less, so there is no risk of broken contracts or delays. Call us today at 972-526-7042 or complete the online form to request a fair cash offer for your home.
Zach Shelley
Zach Shelley is a seasoned real estate investor with a diverse network spanning across the nation. As the founder of his own real estate venture, Zach is committed to offering innovative solutions to homeowners facing various real estate challenges.. Through his dedication and strategic approach, Zach continues to make a significant impact in the real estate industry, providing homeowners with alternative pathways to navigate their property transactions.
