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 with a higher offer. What's a seller to do?
It's a good dilemma, to be sure, but that doesn't make it easy. 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 Golden with 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's what 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 a contract? Until you've got your John Hancock on that document, a home is still technically available, says Julia Towle of Avant Realty Group in Massachusetts.
This contract -- often called a home purchase agreement -- defines the responsibilities of each party, deadlines, and specific contingencies. Once it's signed, anyone backing out could face 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 it includes contingencies, then there's still some wiggle room. Contingencies cover the obligations that must be met by both buyer and seller before a real estate transaction can 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 seller may be legally able to call the sale off.
For the buyer, one common contingency is that the home passes inspection. 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 seller to pay for repairs. An inspection contingency is typically put in place to protect a buyer, but it could work in a seller's favor, too (see our next point).
Accept the higher offer as backup
Sellers don't have tons of options 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 make the buyers with the initial offer back out on their own by not meeting their inspection contingency demands. Once the original buyers walk away, the seller could move on to the higher offer.
"The big danger, however, is that once you let one buyer go, 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 a higher one: "It's a big risk."
Fill the original buyer in
If a seller decides to go with a higher offer, she must communicate that to the original buyer immediately -- and return any deposit presented with the initial offer. But here's another option: A seller could allow the original buyer to present a counteroffer. Granted, the buyer may not want to. Instead, he could just collect his deposit and take the seller to 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 buyers the home or to pay a 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 circumstance. If you're the type of person who wants to take all comers, it's advisable to list the property as "contingent, accepting backup offers." This would "avoid any and all repercussions to the seller," says Towle.
The reason: If a seller communicates upfront that all backup offers will be considered, the buyer cannot reasonably claim he relied on the offer acceptance as a sign he's guaranteed the keys. The downside? Some buyers might be scared off, knowing that their dream home could disappear on a dime.