If you’re selling your home and finally accepted an offer you’re happy with, it seems like all your stress is over. It’s time to pack up and move on!
But sometimes life throws you a curveball—such as another buyer who is smitten by your fabulous home and steps up witha higher offer. What’s a seller to do?
It’s a good dilemma, to be sure, but that doesn’t make iteasy. Overall, switching to a higher offer after you’ve already accepted one isn’t something experts recommend—it’s unpleasant, unethical, and could even land you in legal hot water.
“Once a seller has accepted an offer, it’s very difficult to back out,even if you receive a higher one,” says Realtor®Bill Goldenwith Re/Max Metro Atlanta Cityside. “Most deals allow a buyer to back out, but not a seller.”
Still, money talks—and if the higher offer is something you want to consider, here’swhat you can expect.
Review your contract
When a seller accepts an offer, that doesn’t mean the deal is truly done. For one, did you sign acontract?Until you’ve got your John Hanco*ck on that document,a home isstill technically available, says Julia TowleofAvant Realty GroupinMassachusetts.
This contract—often called a home purchase agreement—defines theresponsibilitiesof each party, deadlines, and specific contingencies. Once it’ssigned, anyonebacking out couldface Lady Justice.
“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 Towle. That usually includes the nondefaulting party’s right to pursue “lawful remedy” against the defaulters.
Check your contract’s contingencies
Even if you have signed the contract, if itincludescontingencies, then there’s still some wiggle room. Contingencies coverthe obligations that must be met by both buyer and seller before a real estate transactioncan close. For the seller, a buyer closing a mortgage within 30 days is a typical contingency. If the buyer fails to meet that deadline, a sellermay be legally able to call the sale off.
For the buyer, one common contingency is that the home passesinspection. If it doesn’t because of major flaws with, say, the foundation or roofing, then the buyer may walk away without incurring penalties, or ask the sellerto pay for repairs. An inspection contingency is typically put in place to protect a buyer, but it could work in a seller’sfavor, too (see our next point).
Accept the higher offer as backup
Sellers don’t have tons ofoptions when it comes to backing out. But one thing a seller can do—though it’s not guaranteed to work—is to accept the higher offer as a backup.
“The seller can then play hardball with the first folks when it comes to any inspection items they want fixed,” says Golden.
The goal for the sellers would be to makethe buyerswith the initial offer back out on their own by not meeting their inspection contingency demands. Once theoriginal buyerswalk away, the seller could move on to the higher offer.
“The big danger, however, is that once you let one buyergo, the second folks could then ask for even more repairs or back out altogether,” Golden says. The bottom line when letting go of one strong offer in favor of ahigher one: “It’s a big risk.”
Fill the original buyerin
If a sellerdecides to go witha higheroffer, shemust communicate that to the original buyer immediately—and return any deposit presented with the initial offer. But here’s another option: A seller couldallow the original buyer to present a counteroffer. Granted, the buyermay not want to. Instead, hecould just collect hisdepositandtake the sellerto court.
Seek legal counsel
Realty laws vary from state to state, based on the contracts.
“Here in Georgia, if a seller just wants to back out of the contract, the buyer and the agents can sue,” says Golden. The suit can be used to force the seller to sell the original buyersthe home or to paya specified amount of damages—which could include the price of seeking alternate housing like a hotel and legal fees. Either way, it won’t be pretty.
“I would most definitely advise a seller to seek legal counsel before making any attempt to back out of a contract,” says Golden.
… or avoid such drama at the outset
One way to circumvent legal battles—and bad karma—is to ask yourself before you put your house on the market what you’d do in such a circ*mstance. If you’re the type of personwho wants to takeall comers, it’s advisable to list the propertyas “contingent, accepting backup offers.” This would “avoid any and all repercussions to the seller,” says Towle.
The reason: If asellercommunicates upfront that all backup offers will beconsidered, the buyer cannotreasonablyclaim herelied on the offeracceptance as a sign he’sguaranteedthe keys. The downside? Some buyers might be scared off, knowing that their dream home could disappear on a dime.
