We were involved in competing offers on a house and the seller accepted a lower offer than ours. Isn’t the seller obligated to accept the highest bid?
This can happen for a variety of reasons, but the simple answer is “no”.
In real estate transactions, the seller can choose the offer he wants and there is no obligation to accept the offer with the highest price. In fact, the seller is not obliged to accept an offer.
It’s tempting to think something fishy is going on when this happens, but the selling price is just one of many factors that influence a seller’s decision.
In your situation, although a competing offer might have included a lower price, it might be more attractive for other reasons. For example, the seller may prefer to choose an offer that does not include a financing condition, or other conditions regarding inspections or the sale of the buyer’s home. Sometimes commission rates are adjusted, which can also affect a seller’s bottom line.
Another common distinction is the closing date: the offer they choose may have a closing date that suits them better than the one you offered. Timing can be everything.
Since price is only one factor for the seller to consider, it may be worthwhile for you, the buyer, to start eliminating terms designed to protect you. If, for example, there is no financing condition, you could lose your deposit or, even worse, incur financial penalties if you cannot obtain the funds necessary to complete the transaction. And without a condition home inspection, you could be forced to make costly repairs down the road.
These are serious risks, and you should make sure you understand the trade-offs before disregarding these conditions. It is best to discuss this with your real estate professional to assess your risk tolerance.
It can also be helpful to consider what the transaction looks like from the seller’s perspective.
A seller considering competing offers needs to think about how they want to handle the situation. The seller can decide to accept the best offer, negotiate with one or a few buyers, or reject all other offers.
This means that even if your original offer was higher, the seller could have chosen to enter into negotiations with another offer with more favorable terms.
Negotiations can be tricky. Even in a competitive bid situation, a buyer has other options and can choose not to continue participating. A seller may attempt to negotiate, only to find that this was the best offer the buyer could submit. In the meantime, other buyers have moved on to other properties that interest them.
With the weather warming up and the market showing no signs of cooling, it’s a good idea to hire a real estate professional who can provide advice and guidance to help you understand the options ahead. offer to you and the obligations that may come with each one.
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