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Once a home purchase agreement is signed, the seller is legally bound to its terms and cannot accept another offer—with very few, specific exceptions. Understanding the binding nature of a real estate contract and the potential consequences of a breach is critical for any seller. This guide breaks down the legal obligations, the role of contingencies (conditions that must be met for the sale to proceed), and the safe, legal alternative of a backup offer.
When a property goes "under contract," it means the seller and buyer have signed a legally binding purchase agreement. This document outlines all terms of the sale, including price, closing date, and any contingencies. At this point, the seller's ability to entertain other offers is severely restricted. They are legally obligated to proceed with the sale to the designated buyer unless a contractual clause allows otherwise or the buyer fails to meet their obligations.
The seller must typically:
While the contract is binding, certain provisions can create flexibility. Sellers cannot arbitrarily back out, but they may have legal pathways if the agreement includes specific clauses.
1. Contingencies Most contracts include contingencies that protect both parties. If a buyer cannot meet a agreed-upon contingency—such as securing mortgage financing or selling their current home—the contract can be legally terminated. This frees the seller to accept a new offer. For example, if a buyer's loan application is denied by their lender, the financing contingency allows them to back out without penalty, nullifying the agreement.
2. Kick-Out Clause A kick-out clause (sometimes called a 72-hour clause) is a specific contract addendum. It allows a seller to continue marketing their home even after accepting a contingent offer, often one dependent on the buyer selling their own home. If the seller receives a superior, non-contingent offer, they can notify the original buyer, who then has a set period (e.g., 72 hours) to remove their home-sale contingency or lose the deal.
3. Attorney Review Period In some states, including New Jersey and Illinois, contracts include a brief attorney review period (typically three business days). During this window, either party's attorney can cancel or renegotiate the agreement for any reason. While a seller could technically consider new offers in this short timeframe, it is a risky and uncommon strategy.
A seller cannot accept a second primary offer, but they can legally accept a backup offer. This is a formal, signed agreement that places another buyer in a "second position." The backup offer only becomes active if the primary contract falls through due to failed contingencies.
This strategy benefits sellers by providing a safety net. Industry data suggests that roughly 10-15% of real estate contracts fail to close, often due to financing or inspection issues. A backup offer ensures there is another qualified buyer ready to proceed, minimizing the seller's downtime and potential relisting costs.
Attempting to back out of a signed contract without a valid, contractual reason is a breach of contract. The consequences for the seller can be severe:
Based on our experience assessment, navigating a multiple-offer situation after being under contract requires caution and strict adherence to the law. Sellers are legally bound once a purchase agreement is signed. The safest way to manage interest from other buyers is by formally accepting a backup offer. Attempting to break a contract to accept a higher offer carries significant legal and financial risks that rarely outweigh the potential benefit.
