Buying or Selling a Home/BackUp Offer

Advertisement

Expert: - 8/24/2008


Question
I submitted a contract after the property was in "contingent" status. Buyer 1 has a home sale contingency; I do not.  Seller signed contract contigent upon inspection and attorney review.  I know Buyer 1 inspection issues were minimal and taken care of by Seller.  I agreed to have home inspection/atty review prior to final contract signing, realizing I may lose money for inspection.  Is this situation common?  I understand seller's thinking in that they didn't want to lose 1st contract until they were certain 2nd contract will go through.  Is there a different way this could have been handled?  Beside the fact I may lose inspection money are there any other disadvantages for me, doing it this way?  Thank you, Dave

Answer
Hello David - Each state is unique in the rules and regulations, laws, administrative codes, and procedures. Obviously, I specialize in N.A.R. Code of Ethics and Professional Standards and in local (AZ) policies and procedures. That said, in AZ it would seem inappropriate for a buyer's agent or buyer to begin without the first offer (Buyer1) having been canceled by the Seller or at least with mutual consent moved to a position behind your offer, namely executable only after your offer has been canceled. I think it is poor representation/counsel to have allowed you to begin spending your money without knowing that that your offer is in first position and that the seller cannot move any additional offers into a position ahead of yours (at least without reimbursing any and all inspection and attorney fees exhausted during the due diligence period. In AZ I would never recommend commencing efforts without first having received a written notice of the cancellation of the first offer with specific wording that my clients offer is now in first position. In addition, this puts you in a less than favorable negotiating position with the seller. The seller may no longer be obligated to negotiate items of disapproval discovered during the due diligence portion of your inspection period since they have another offer to fall back on. If the first buyer performed an inspection with a professional inspection company, depending on the terms of your contract you may have a right to  review that inspection. In addition, the seller may be required to disclose information that the buyer1 inspection discovered as it is new information that the seller did not have when they listed the property or entered into the back-up offer with you. Once again, each state has their own governance of seller requirements to disclosure to buyers known, and should have known pertinent material facts. Normally I recommend the use of a REALTOR (member of the National Assoc. of REALTORS) or legal counsel (with an attorney who specializes in real estate) when there is any question to your rights under the governing rules and laws as well as rights under contract terms or local standards of procedure. In any matter, NEVER proceed without fully understanding the laws and rules governing you and the seller. Please remember I am not a real estate attorney and you may have other rights and responsibilities under the law. This is not to be considered legal advice, rather it is to be considered additional information that can expand the context of your situation and position you to additionally question the goings further of the transaction without proper local real estate or legal assistance. I hope this helps. - Todd

Buying or Selling a Home

All Answers

Answers by Expert:

Ask Experts

Volunteer

Todd C. Menard

Expertise

National Association of Realtors Code of Ethics and Professional Standards * Contract Questions: 05/05 Arizona Real Estate Purchase Contract, Exclusive Buyer Broker Contracts, Listing Contracts and associated contract documentation as it relates to boilerplate, covenants, contingencies, procedures and procedures. * ARMLS Arizona Regional Multiple Listing questions * Real Estate Professional Standards and Practices, Ethics, Obligations, Duties * Agency relationships in Arizona, Procurring Cause * Questions typicaly arising during the listing period * Questions typically arising during the escrow period * Questions about working with a real estate agent/REALTOR * Questions Related to New Home Builders

Experience

National Association of REALTORS Board of Director (2011) Arizona Real Estate Salesperson License (1991-1995), Arizona Real Estate Brokers License (1995-Present), Arizona Association of REALTORS Board of Directors (2008-Present), Arizona Association of REALTORS Professional Standards Committee (2008-Present), AAR Certified NAR Code of Ethics and Professional Standards Instructor, Southeast Valley Regional Association of REALTORS President-Elect (2011) Southeast Valley Regional Association of REALTORS Board of Directors (2008, 2009), Southeast Valley Regional Association of REALTORS Grievance Committee Chairperson (1998-2007), Southeast Valley Regional Association of REALTORS Bylaws Committee (2008-Present), Southeast Valley Regional Association of REALTORS Education Committee (2008), Arizona Association of REALTORS Forms Committee - Residential Purchase Contract (2005), Arizona Association of REALTORS Forms Committee - Residential Rental Agreement (2008), Arizona Association of REALTORS Forms Committee - Buyer Broker Agreement (2009), Arizona Association of REALTORS Presidents Advisory Group, Road to Professionalism (2009), Arizona Association of REALTORS GRI Curriculum Review Committee (2009), Arizona Department of Real Estate, Commissioner's Education Advisory Group Sub-Panel B (2010) Arizona Department of Real Estate, Commissioner's Statute and License Review Committee (2007)

Organizations
National Association of REALTORS, Arizona Association of REALTORS, Arizona Real Estate Educators Association (AZREEA), Arizona Regional Multiple Listing System (ARMLS), American Notary Association, Southeast Valley Regional Association of REALTORS (SEVRAR), Southeast Valley Regional Association of REALTORS Women's Council of REALTORS (2010-Present), Phoenix Association of REALTORS (1994-2000, 2005-2009), Scottsdale Association of REALTORS (1994-2000, 2005-2009), Maricopa/Glendale Association of REALTORS (1994-2000, 2005-2009),

Publications
"Real Estate in 2008"- Lifebushido Publishing (Contributory Author), SEVRAR Magazine, Internet Crusade, RealTown ListServe, Blogger.com, Active Rain

Education/Credentials
- AAR Certified Ethics and Professional Standards Instructor, Graduate REALTOR Institute (1993), Certified Negotiation Expert (CNE), Over 100 Hours of annual real estate continuing education, Annual Ethics and Professional Standards Development Workshops as required by the National Association of REALTORS, Approx. 36 hours of NAR Code of Ethics training annually, Numerous IDW, Seminars and Train the Trainer programs, Business Management Degree - 1981

Awards and Honors
2009 REALTOR of the Year Award, Southeast Valley Regional Association of REALTORS (10,000+ Members), Double Platinum Production Award ($45,000,000 Sales Volume)- Keller Williams Realty Int'l (2001), Top 15 Sales Production Keller Williams Realty International (2001), Top 5 Sales Producation Keller Williams Realty Southwest Region (2001), Top Recruiter Award - Keller Williams Realty Int'l, SW Region (2002), Who's Who in U.S. Executive (1983), Who's Who in U.S. Real Estate Professionals (2007)

©2012 About.com, a part of The New York Times Company. All rights reserved.