Congratulations, you have sold your home! The buyers fell in love and made an offer, and you breathed a big sigh of relief when the contract was signed.
Then it happens – another offer arrives, and a better one on top of that. And now? Can you accept the highest bid? Here’s what door-to-door sellers need to know.
When is a sale a sale?
Although laws vary from state to state, in general, until the contract is signed by both parties, even after counter offers are sent, all new offers can be considered. and accepted. Once both parties sign it, however, the seller is pretty much locked into the agreement.
That’s why it’s so important for sellers to be sure they want to accept an offer before signing.
“As a seller, make sure you’re willing to accept an offer and know that you may not be able to get out of the deal,” says John Meyers, a realtor with Myers and Myers Real Estate in Albuquerque, NM. “It is absolutely essential that you as a seller understand the purchase agreement and any counter-offers you sign.
“Read the agreements to find out if you have contractual clauses,” says Meyers. “Purchase contracts are legally binding agreements, and sellers need to understand their commitments and their ability to opt out of the contract.”
Think you can get a higher price for the property? Then you need to stock up before the signing of the contract, says Bryan Zuetelattorney and real estate broker with Esquire Real Estate in Orange County, California.
You can, for example, insert terms into the purchase agreement that allow you, the seller, to continue to accept offers and the buyer to have the option to match or exceed any higher offer. Buyers can also take backup offers (more on those options later).
“The process is not truly complete until crook shut up,” says Zuetel.
There are also things that can and do happen between the time a home is under contract and closing that can give the seller options. For example, the buyer has specific obligations called contingencies, which include things like loan approval, home inspection, and a home appraisal. If the buyer fails to meet these contingencies by a designated date, the seller may cancel the agreement and accept another offer.
Also, various states have different rules regarding contracts. For example, in New Jersey, even after the offer is accepted and the contract is executed, it is not fully binding until a period of review by an attorney has passed. The lawyer review allows both the buyer and the seller to have a lawyer read the contract within three business days (or an extended period depending on the agreement between the buyer’s lawyers and of the seller) after it has been signed and to disapprove of the contract or to make changes to it. .
“As the seller in this case, you can always accept the other or better offer as long as you are still under review by an attorney,” says Lukasz Kukwa, realtor at Coldwell Banker Residential Brokerage in Westfield, NJ. “While this will cause some pushback and is sometimes not considered the most ethical, a seller may legally accept any other offer until the conclusion of the attorney’s review, as the agreement is not officially under contract.”
For the most part, however, buyers cancel contracts more often than sellers. In most cases, sellers may have to accept the original offer, even if they receive a better contract.
“Breach of contract could lead to legal action which would still result in sale to the original contract buyer, except that legal costs would reduce profit,” says Barry Richardsa realtor with EXITRealty Garden Gate Team in White House, TN.
Can door-to-door sellers accept relief offers?
The only type of offer a seller is allowed to accept while under contract with a buyer is a relief offer. A backup offer puts that buyer in line if for some reason the original contract fails.
A fallback offer puts sellers in a good position, and they should let the buyer’s agent know they have one, especially if the offer is significantly higher than the original accepted offer, says Richards. He says this gives the seller leverage to, for example, refuse certain requests from buyers, who could ask sellers to pay for repairs after the home inspection, to make price adjustments based on the assessment of home or allow an extension of the closing date due to lender issues.
Should homebuyers bother to make a replacement offer?
So if you’re a buyer and you find your dream home but it’s under contract, should you even bother looking at it? Experts say that while you shouldn’t hold your breath, you don’t have to completely cancel it.
“It never hurts to ask your buyer’s agent to ask about the contract and its progress,” says Richards. “Sometimes when a deal falls through, a seller would rather negotiate with someone who has already done their due diligence on their property than go back to the market and deal with more viewings.”
Whether or not a formal backup offer is written is up to the client, but Ryan GableCEO of StartingPoint Realty in Chicago says in most cases they don’t suggest it because it ties the buyer’s hands and hampers their home search.
“In our market [Chicago], it is generally better to continue the search for accommodation than to engage unilaterally with a seller who has already accepted an offer. But it never hurts to keep following a contracted first-choice. You have nothing to lose and the time investment can pay off.
But back to sellers: yes, having more than one bid on your property is always a good problem to have, but it doesn’t always mean you can take the highest bid.
Sometimes you may need to leave a few dollars on the table, but if you work closely with your real estate agent and consider an offer carefully before accepting it, you can always celebrate that your property has sold and take pride in the fact that you honored the commitment you made when you accepted the initial offer.