Selling a property can be an exciting but complex process, especially when multiple offers come into play. Understanding your legal obligations and making informed decisions can help you avoid costly mistakes. Here’s a real-world case study from a Toronto seller who received a better offer while already under contract with a buyer.
The Situation
A homeowner listed a vacant property for sale and accepted an offer with a closing date of May 31. The buyer requested due diligence until April 2 to ensure they could build on the land. As of March 31, the buyer had not waived their conditions.
Unexpectedly, the seller received a second offer that was $25,000 higher with a faster closing date and no conditions. This raised several questions:
- What are the seller’s legal options?
- Can they simply accept Offer2?
- Do they need to give Buyer1 the opportunity to match?
- Should they inform Buyer1 about the second offer?
- Can they cancel Offer1?
Realtor’s Advice & Legal Considerations
The seller’s real estate agent suggested signing back Offer2 while simultaneously requesting a release from Buyer1. However, this advice raised concerns, as the seller was already contractually bound to Buyer1’s conditional offer. Canceling or walking away from a signed contract without proper legal steps could lead to legal disputes and potential liabilities.
Expert Opinions
Several real estate professionals and legal experts weighed in:
- Legal Obligation to Buyer1: Since the seller had already accepted Buyer1’s offer with due diligence conditions, they were bound by its terms. If the seller tried to back out, it could be considered a breach of contract, leading to legal consequences.
- Backup Offer Strategy: Rather than outright rejecting Offer2 or trying to terminate Offer1 improperly, the best approach was to accept Offer2 as a backup offer. This means the second offer would only proceed if Buyer1’s offer fell through by April 2.
- Communicating with Buyer1: The seller’s agent could inquire whether Buyer1 intended to waive their conditions before the deadline.
Final Decision & Outcome
After considering all options, the seller decided to extend Offer2’s validity until April 2, ensuring it remained a viable backup offer. If Buyer1 waived their conditions, the seller would proceed with the original deal. If Buyer1 failed to waive conditions, Offer2 would become active.
This approach allowed the seller to honor their initial agreement while keeping the opportunity to secure a better deal if the first one didn’t close.
Key Takeaways for Toronto Home Sellers
- Understand Conditional Offers: If a buyer submits an offer with conditions, such as financing or due diligence, the deal isn’t firm until those conditions are waived. Sellers must wait until the conditions expire or are fulfilled before considering another offer.
- Consult a Lawyer Before Acting: Real estate transactions are legally binding. If you’re unsure about your contractual obligations, always consult a real estate lawyer before making decisions that could have legal repercussions.
- Backup Offers Can Be Valuable: Instead of trying to cancel an existing deal, securing a backup offer ensures that you have an alternative if the first deal falls through.
- Work with a Knowledgeable Realtor: A competent real estate agent should guide you through negotiations while keeping you compliant with legal and ethical standards.
Final Thoughts
Toronto’s real estate market is competitive, and it’s tempting to jump on a better offer. However, legal commitments must be respected to avoid unnecessary risks. By handling multiple offers strategically, sellers can maximize their profit while staying within the law.
If you’re selling a property and need guidance on managing multiple offers, consult with a professional Toronto realtor and a real estate lawyer to ensure a smooth transaction
Richard Wang 