Your sellers have accepted an offer for their home and then they get a pleasant surprise: another offer comes in and it’s higher than the one they just accepted. What do they do? A recent Realtor.com article by Margaret Heidenry highlighted steps to take to handle such an issue.
Review your contract — If the sellers haven’t signed a contract, the home is technically still available, real estate agent Julia Towle noted in the article. “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,” she said.
Check your contract’s contingencies — If they have signed a contract, they may be able to accept the new offer if the contract includes contingencies. For example, if the buyer doesn’t close the mortgage within 30 days — a typical contingency according to the article — the seller may be able to kill the deal. Similarly, a buyer’s contingency may be the home passes a professional home inspection. “If it doesn’t because of major flaws with, say, the foundation or roofing, then the buyer may walk away without incurring penalties,” Heidenry wrote.
Accept the higher offer as backup — The idea behind this it to accept the higher offer then play “hardball” with the original buyers regarding inspection items they want fixed, according to the article. “The goal for the sellers would be to make the buyers with the initial offer back out on their own by not meeting their inspection contingency demand,” Heidenry wrote. “Once the original buyers walk away, the seller could move on to the higher offer.”
Fill the original buyer in — Sellers must immediately inform the first buyer that they have received a higher offer. They can allow them to counter or if the buyers choose to move on, the sellers must return the initial deposit. Be aware, however, that the original buyers could sue.
Seek legal counsel — Before backing out of a contract, it’s best the sellers seek legal counsel. Contract laws vary from state to state. The result of a lawsuit could range from the sellers being forced to sell to the original buyers to the sellers having to pay damages.
…or avoid such drama at the outset — The best way for sellers to handle this kinds of dilemma is to avoid it altogether, according to Heidenry. A good way to do that is to add a line to the listing such as “contingent, accepting backup offers,” she wrote.
Source: “You Accepted an Offer, Then Got a Higher One? Here’s What to Do,” Realtor.com (Aug. 3, 2016)