Can A House Seller Back Out Of A Sale If They Receive A Higher Offer?

When selling your home, you may encounter the unique problem of accepting an offer and receiving an even higher bid soon after. This can lead to a lot of strategic juggling, but it should be noted that generally, a seller can't back out without facing legal jeopardy. Once you've agreed to a sale, you are bound by a set of terms drawn up by the real estate agents involved in the transaction (via ContractsCounsel). These are legally binding and often include terms about what will happen if the sale falls through.

Generally speaking, if a sale fails to occur after it's been agreed upon, there is typically an issue with the buyer's financing. This means the seller can keep a portion or perhaps even all of the deposit funds and relist the property. Alternatively, the seller can elongate the process and work with the buyer to hammer out any issues that have arisen.

These terms are set in place to protect both parties from unforeseen problems and challenges that may come about during this complex financial transaction. What contractual obligations don't provide for is a desire to back out of the sale for personal reasons. For example, a buyer who has accepted an offer must purchase the home or lose the deposit they have paid on the property. Similarly, a seller is obligated to sell the property and risks financial and legal consequences if they opt to renege on their end of the bargain.

While a seller is generally obligated to complete this real estate transaction, there are potential avenues to escape from a deal when a better offer has been made. Often, a sales agreement includes several contingencies that protect both the buyer and the seller from unforeseen issues in the property or the transaction (via Forbes). Typically, sellers are able to cancel a deal if the buyer requires longer than 30 days to organize the finances with their mortgage lender.

Motivated sellers are likely to be flexible because a broken deal means relisting the property and starting the process all over again. However, if you have received a higher offer, then allowing the 30 days to expire will enable you to simply accept the new price. Reviewing the terms of your contract to identify how long the buyer has to organize their finances can help you understand the potential for this financial boost.

On the other hand, buyers often include contingencies surrounding a home inspection. Having an inspector view the property gives the buyer confidence that they are purchasing a structurally sound home. If your house does not meet accepted standards, the buyer can impose mandatory updates or repairs as a part of the final agreement. Becoming intransigent over these repairs may turn the buyer off to the property and result in them walking away from the deal without adverse effects on you as the seller.

In either case, a seller who has received a better offer on their property might want to consider accepting the new offer specifically as a backup. Even after a sale has been agreed upon, it is not finalized until payment and keys have exchanged hands (via Pipedrive). This means that problems can arise at any moment throughout the sales process. Having a backup buyer on the hook can protect you in case of a problem with some part of the agreement.

It's also important to think about the ramifications of accepting a new offer. For example, many sellers might consider entertaining a second potential buyer disingenuous. However, once you've agreed to sell your home (or any other asset, for that matter), a buyer will start planning to acquire and use the property for their own needs and purposes. Therefore, backing out of a sale could be a minor inconvenience to the buyer or a major disruption to their life goals and plans. Therefore, you should always think long and hard before even considering an updated offer from a second potential buyer. Similarly, an updated offer might be only slightly higher than the original, leading to a situation in which pursuing this additional cash is far more trouble than it's worth.

On the whole, it's important to understand the entire picture and consider everyone involved in the transaction upon receiving a second offer on your home after agreeing to terms.