What Happens When Another Buyer Submits a Higher Offer?

When you submit an offer to buy a house, it is crucial to understand the sequence of events and legal implications, especially if another buyer offers a higher amount. This article will guide you through the process, addressing key scenarios and your rights as a buyer.

Offer Acceptance and Escrow

Once you submit an offer to purchase a house, the seller has the option to accept it, which makes it binding. If the seller has already accepted an earlier offer, that becomes the active agreement, and any concessions or repairs requested by subsequent bids may be disregarded. However, if you are the first to make a valid, non-retracted offer and the seller chooses not to accept it, they are free to consider other offers. It’s important to note that such absence of acceptance allows multiple offers to be evaluated by the seller before a final decision is made.

Gazumping and Buyer Risks

Gazumping, or the practice of another buyer offering a higher price after you have made a firm offer, can be frustrating and legally complicated. If you have not paid a deposit, a higher offer can indeed rush you out of the deal. Should someone else beat your offer, you may be left in a vulnerable position, especially if you haven't paid a deposit. In such instances, you may be able to take legal action for breach of contract, provided there are provisions in the contract to protect your interests.

Deposits and Inspections

Payments are often required during the offer process, and these can be based on known issues discovered through inspections. For instance, if the inspection reveals problems such as termite damage or structural concerns, a deposit can be paid upon these identifiable issues. In a scenario where you have made a deposit based on these inspections, you are legally protected if the seller reneges on the deal—you may have grounds for legal action. It's always advisable to hire a lawyer to review your contracts and discuss potential legal remedies.

Legal Protections for SELLERS

In most jurisdictions, once a seller accepts an offer, they are legally bound to the terms agreed upon. However, the seller may attempt to avoid the deal by exploiting contingencies in the contract, such as delays in financing or inspections. It is important for buyers to be aware of these contingencies and to act promptly when required to secure the property.

Conclusion

The house-buying process, particularly when another buyer submits a higher offer, can be complex and emotionally taxing. Understanding your rights and the legal protections available to you is crucial. If you find yourself in a situation where gazumping is a concern, consulting a legal expert can provide you with valuable guidance to navigate the complexities and safeguard your interests.

About the Author

For detailed legal advice and guidance on house buying, consider consulting a professional real estate lawyer. This article offers general information and guidance, but it is not a substitute for personalized legal advice.