Can I get outbid while under contract? Options?

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Can I get outbid while under contract? Options?

YiBing T.
Rental Property Investor · Gaithersburg, MD · Member since 2014 · 84 posts · 22 votes

Hello BP Community, 

I'd like to get your opinion on a situation. I found a property that was marketed for sale while I was on a home inspection of another property just a few doors down the street. I contacted the selling agent personally and started working on the contract. Long story short, after a few backs and forth, and a long delay from the seller's agent (due to health issues), we finally got the contract signed. Just about 30 minutes after I send back the ratified contract to the seller agent, the seller agent emailed me back and said they are receiving multiple offers and ask me to send in the best. 

My question is since I already have a ratified contract, could I still be outbid?

What are my options with the situation like this? 

If I decide to settle with the seller to void the contract we are in now, what would be a fair dollar value to settle (we prefer to settle without any legal actions)?

Are there anything else I should be aware of? Thank you. 

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Bob Floss II
Attorney · Northbrook, IL · Member since 2017 · 719 posts · 549 votes
8y

@YiBing T. I'm having trouble following the facts, but it sounds like you received a counter from the seller with the seller signature, and you then changed the contract again, signed it, and sent it back. When you made a change to the contract, you effectively made it a new offer and the sellers signature is irrelevant. You do not have a contract.

If I'm reading it wrong and you did not make a change to the contract, and you signed the offer that was sent to you by the seller, you have an executed contract. Your options at that point are to enforce your rights under the contract, however at this point the contract effectively becomes as-is. The seller will not give you any credits or make any repairs in an attempt to kill the deal. Forget getting so much as an extension on your mortgage contingency so get your lending in order and ready to close on time. 

To those asking about enforcing contract rights, there is a simple solution. You have the right to record the contract so it shows up on title. It creates a cloud on title the title company must address in order to close. The seller must provide proof the contract is no longer in effect or they cannot proceed to closing with a new buyer. Contact a local real estate attorney and they should be able to handle it.

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  • Account Closed
    Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes
    8y
    Originally posted by @YiBing T.:

    Hello BP Community, 

    I'd like to get your opinion on a situation. I found a property that was marketed for sale while I was on a home inspection of another property just a few doors down the street. I contacted the selling agent personally and started working on the contract. Long story short, after a few backs and forth, and a long delay from the seller's agent (due to health issues), we finally got the contract signed. Just about 30 minutes after I send back the ratified contract to the seller agent, the seller agent emailed me back and said they are receiving multiple offers and ask me to send in the best. 

    My question is since I already have a ratified contract, could I still be outbid?

    What are my options with the situation like this? 

    If I decide to settle with the seller to void the contract we are in now, what would be a fair dollar value to settle (we prefer to settle without any legal actions)?

    Are there anything else I should be aware of? Thank you. 

     Are you represented by an agent? What is their take on things? Do you have a signed agreement from the seller? If so, what does the contract say about "time is of the essence" and what does the contract say about contingencies? 

    Since the timing involved (30 minutes) is so tight, this is a tough one and you really will have to look at the contract and at how much you want the property to decide if it is worth a letter from an attorney to the seller's agent saying you are enforcing your agreement.

    On one such property, a long time ago, I wrote a letter to the broker of the selling agent. The agent was either inexperienced in such matters or didn't know what was happening and based on my letter, the broker resolved the issue in my favor just by my stating the facts. I hand delivered a copy and I also sent it certified. That way I would have proof for the judge if I ever needed it. I didn't need it. The mere fact that I was documenting everything convinced the broker I was serious & it made things go smoothly.

    0Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    8y
    Right off the bat before I’d start calling lawyers and looking up laws and regulations I’d call the agent and ask what their intentions are and how they think this is okay how is going back to bidding justified ?
    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    8y
    “We already have an executed contract and will be proceeding to closing”. Of course, don’t expect them to be flexible if you try to renegotiate later.
    1Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    8y
    You don’t have “attorney review period” there do you, or any other out for the seller?
    0Reply
  • Randy E.
    Rental Property Investor · Durham, NC · Member since 2014 · 1k+ posts · 1k+ votes
    8y
    Originally posted by @YiBing T.:

    Hello BP Community, 

    ...and a long delay from the seller's agent (due to health issues), we finally got the contract signed. Just about 30 minutes after I send back the ratified contract to the seller agent, the seller agent emailed me back and said they are receiving multiple offers and ask me to send in the best. 

     How long after receiving the contract did you sign and return it?  Did you have and hold it for 2 days or 4 weeks?

    Was the contract you signed and returned already signed by the seller or was he/she to sign after you returned it to them?

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  • Carl FischerPro Member
    Rental Property Investor · Ambler, PA · Member since 2015 · 2k+ posts · 1k+ votes
    8y

    @YiBing T.

    The paperwork will dictate the outcome. Check dates and times in the contract and discuss with all parties. See if it can be resolved and why both parties think they are correct. Decide if you want to pursue after discussion. 

    [email protected]215-283-2868
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  • YiBing T.
    OP
    Rental Property Investor · Gaithersburg, MD · Member since 2014 · 84 posts · 22 votes
    8y

    @Account Closed

    0Reply
  • Randy E.
    Rental Property Investor · Durham, NC · Member since 2014 · 1k+ posts · 1k+ votes
    8y

    @YiBing T.,

    I may be wrong but ...

    If you received a contract signed by the seller which you then had your agent revise before you signed it, then the act of making revisions nullifies the seller's signature and the seller would need to sign the revised contract.

    If that is how the series of events unfolded, I would think you never had a valid contract signed by both the seller and the buyer.  And without a valid signed contract, the seller is free to negotiate and sign with any other buyer.  

    It sounds like you almost had a deal, but it never quite got done.  Tough luck.

    Still, you may want to ask your agent and/or attorney for guidance here.

    2Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    8y
    If you “revised/redrafted” the signed counter the owner sent you, then their signature on That document is no longer Valud. Did the seller sign your revised counter offer After you revised and signed it and sent it back?
    2Reply
  • Bob Floss II
    Attorney · Northbrook, IL · Member since 2017 · 719 posts · 549 votes
    8y

    @YiBing T. I'm having trouble following the facts, but it sounds like you received a counter from the seller with the seller signature, and you then changed the contract again, signed it, and sent it back. When you made a change to the contract, you effectively made it a new offer and the sellers signature is irrelevant. You do not have a contract.

    If I'm reading it wrong and you did not make a change to the contract, and you signed the offer that was sent to you by the seller, you have an executed contract. Your options at that point are to enforce your rights under the contract, however at this point the contract effectively becomes as-is. The seller will not give you any credits or make any repairs in an attempt to kill the deal. Forget getting so much as an extension on your mortgage contingency so get your lending in order and ready to close on time. 

    To those asking about enforcing contract rights, there is a simple solution. You have the right to record the contract so it shows up on title. It creates a cloud on title the title company must address in order to close. The seller must provide proof the contract is no longer in effect or they cannot proceed to closing with a new buyer. Contact a local real estate attorney and they should be able to handle it.

    6Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    8y

    Based upon the stated information by the op, I do not believe there is a ratified contract.  As Waybe pointed out, when a revision was made, that makes it a counter offer.

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  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    8y

    @YiBing T. I have seen cases where even with signed contracts, sellers back out or ask for more money. Ultimately you cannot make them close on the deal. You can take them to court and sue them for failure to perform on the contract and seek damages, but how much time and money is it worth sinking into this? 

    I would make it clear to them that you have a signed and agreed upon contract and ask them to uphold the legal contract. I would tell the agent that it is unethical to represent a client that is trying to back out of a contract. I would ask for their help resolving it or I would make it clear I plan to report this to the realtor board if they don't make this right. I would also tell the agent I plan to record the contract so it shows up on the title search. Basically the message to the seller is that you can make things very difficult for them. 

    Still at the end of the day, you need to decide how much money and time this deal is worth.

    0Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    8y

    I would contact the broker. It sounds like this agent is acting unethically at the very least. If he dodges your call, time to go over his head. Let the broker know EXACTLY what is going on, and send them copies of any correspondence between you and the agent. Sellers can crawfish, but when represented it is pretty hard if the broker takes charge. You have an executed contract, so stick to your guns. If all fails, file a complaint with the state board. However, IF INDEED YOU ALTERED THE OFFER, you DO NOT have a ratified contract. ANY TIME a counter is made, even the original offer is VOID. 

    0Reply
  • YiBing T.
    OP
    Rental Property Investor · Gaithersburg, MD · Member since 2014 · 84 posts · 22 votes
    8y

    Great feedbacks. Thank you all.

    I apologize for not making it clear in the original post. The correction that I made on the signed contract were mis-spell of my name. Nothing relates to the price or contingencies involved here. 

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    8y
    Did you simply scratch out/rewrite your name (not sure if that makes any difference though) and sign OR did you rewrite the whole thing, corrected, and sent it back?
    0Reply
  • YiBing T.
    OP
    Rental Property Investor · Gaithersburg, MD · Member since 2014 · 84 posts · 22 votes
    8y

    @Wayne Brooks I scratched out/rewrote the correct spelling using DocuSign right on the signed form and initialled right next to the new spelling.

    Do you suspect this could be an issue? I have seen those type of minor changes before in my friend's contracts and they were not being challenged.

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    8y

    Well, technically you changed the document, which would require the seller's initials also.  Yeah, lots of things never get challenged, until someone Wants to challenge them.  You say your attorney says you have a ratified contract....is he aware of this specific thing, you changed the name, intialed and they haven't?

    1Reply
  • Charlie MacPherson
    China, ME · Member since 2014 · 3k+ posts · 4k+ votes
    8y

    @YiBing T. The one thing I didn't see mentioned is whether money changed hands.  "Consideration" (a thing of value) is one of the three key elements to forming a contract.  Offer and acceptance being the other two.

    If no money changed hands yet, you may not have an enforceable contract, even if fully executed by both parties.

    HOWEVER, my attorney and I have discussed this a few times.  He said that there is a legal theory that the offer itself is a thing of value and could - if it went to court - be interpreted as fulfilling the requirement for consideration.

    0Reply
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y

    Here's a question for you...

    Does Docusign think you have a ratified agreement? If I recall correctly it sends out a "completed" email when all parties have signed.

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  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y
    Originally posted by @Charlie MacPherson:

    @YiBing T. The one thing I didn't see mentioned is whether money changed hands.  "Consideration" (a thing of value) is one of the three key elements to forming a contract.  Offer and acceptance being the other two.

    If no money changed hands yet, you may not have an enforceable contract, even if fully executed by both parties.

    HOWEVER, my attorney and I have discussed this a few times.  He said that there is a legal theory that the offer itself is a thing of value and could - if it went to court - be interpreted as fulfilling the requirement for consideration.

    Many people think earnest money is an essential element of a real estate contract. This is not the case in any jurisdiction we cover.

    Sure, consideration is required... that's the purchase price.

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    8y

    Administrative court would likely say you do have a ratifed contract. District court would likely say you do not.  Mediator would likely say you do not (and that is where it would go first) and MREC would likely say that you do.

    So, it is not as simple as if you do nor not.

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  • Charlie MacPherson
    China, ME · Member since 2014 · 3k+ posts · 4k+ votes
    8y

    @Tom Gimer  My understanding both from my (1995!!!) business law class and my much more recent licensing class is that unless something of value changes hands, there is no contract.

    Here in MA, we're a 2-contract state. As I understand it, most others go straight to P&S. We do: written offer with EMD (normally $500 - $1000) > signed acceptance (creating a binding contract) > due diligence > signed P&S with second (generally much larger) deposit > underwriting > closing.

    I'm told that we could technically close right from the written offer without ever executing a P&S. We just do things differently here.

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  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y

    @Charlie MacPherson The value is in the mutual promises. I’m no MA lawyer but from what I can tell EMDs are not required in MA. What you are referring to are local customs...  of agents representing clients. Who wants to deal with a default and $0 to forfeit? 

    It’s interesting to hear how things are done so differently around the US. 

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    8y

    @Tom Gimer @Charlie MacPherson EMD is not required in MA. Ive closed 3 or 4 deals in MA with zero EMD. The consideration is the purchase price. Ive also closed deals in MA with a consideration of "love."

    [email protected]301-893-4635Podcast Guest on Show #192
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  • Amy A.
    Portland, ME · Member since 2012 · 616 posts · 550 votes
    8y

    Is this by any chance a HUD owned home? If so, they have sent out automatic highest and best disclosures to me in the past after we have signed a contract. The agent has to go into the hudhomestore website and fiddle with something and that triggered the auto-email. It upset me the first time it happened because it looked like it came from the same agent who I had just received the signed contract from minutes before. He assured me that we were still under contract and we closed without issues. I've found that many REOs send out automatic highest and best disclosures after offers are made, but HUD was the only one that sent it after signing the contract!

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