Executing a contract may provide assurance to the buyer and seller that the house sale is concluded. But there are times that another and better offer comes to the seller. Parties to these transactions should know about the potential real estate law consequences to executing these agreements.
Contract terms
In general, all new offers and counteroffers can be considered until both parties sign the contract. The contract is usually final, however, after it is executed by both parties.
Purchase agreements are legally binding. Both parties, particularly the seller, should be sure that they want to accept an offer before signing the contract. They should be sure of the purchase agreement and any counteroffers that they sign.
Contracts may contain terms that provide ways to get out of the agreement under certain conditions. An inserted term may allow sellers to continue to accept offers while buyers can match or exceed higher offers.
Until the sale closes
The process is not really over until escrow closes. Many things can happen from the time that a house goes under contract and the closing that provides options to sellers.
Buyers, for example, have obligations or contingencies such as loan approval, home inspection and home appraisal. A seller can cancel the agreement and accept another offer if the buyer does not fulfill these contingencies by a specified date. Buyers are usually more prone to back out of these sales.
Backup offers
Sellers may accept a backup offer. This offer places the buyer next in line if the original contract falls through for any reason.
Backup offers improve the seller’s leverage. Sellers should teller a buyer’s agent that they have this offer, especially if it substantially higher than the original offer that was accepted. This can provide leverage when a buyer makes requests for additional items such as repairs following the home inspection, price adjustments because of the home appraisal or a closing date extension.
Buyers may want to consider making a backup offer if they are really interested in a home that is under contract. It may provide some advantages if the sale falls through because they performed their due diligence on the property.
It is usually inadvisable for buyers to make a formal backup offer because it may limit their options and home search. But these purchasers may follow the original transaction in case the home becomes available again.
Different circumstances apply to each sale. An attorney can help parties use their options and protect their rights.