How to Know If Your Offer Has Been Outbid by Another Homebuyer

Couple standing in barren room, smiling

LWA / Getty Images

It's a daunting question for any would-be homeowner. If a seller accepts your offer, can another homebuyer outbid you?

The answer depends on whether the offer is legally binding, and the definition for that varies from state to state. What's true in Arizona might not be true for real estate in New Jersey. Typically, the contract is binding once the purchase agreement is signed.

Learn more about when and if a seller can accept a higher offer.

When Can a Seller Sell to Another Buyer?

In general, the seller can't accept another offer once all parties have signed the purchase agreement. Ask your real estate agent about the laws in your state, though. For example, in New Jersey, either party can have an attorney review the contract. The purchase agreement isn't binding until the three-business-day attorney review period is over.

This might seem straightforward, but there are situations where you might think your offer has been accepted, but it hasn't. For example, you might put in an offer, and instead of writing a counteroffer, the seller's agent verbally negotiates with your agent. You come to an agreement on the price, but the purchase contract hasn't been signed. In that case, the seller could accept another offer, even though they've technically accepted yours, because the purchase agreement hasn't been signed.

If you feel your offer was passed over due to your race, religion, gender, sexual orientation, disability, or family status, you can file a complaint with the Office of Fair Housing and Equal Opportunity.

Short Sale Offer Acceptance and Offer Bids

Short sales work a bit differently. Generally, many short sales will be further by a document called a short sale addendum (SSA). The SSA is used to protect sellers and buyers in a short sale transaction. It modifies the purchase contract.

In most real estate transactions, the process goes like this:

  • The offer is presented to the seller.
  • The seller accepts the offer and signs it.
  • The executed offer is delivered to the buyer.

A slight variation happens when the seller needs to clarify part of the offer or otherwise needs to change some aspect of the offer:

  • The offer is presented to the seller.
  • The seller issues a counteroffer.
  • The buyer accepts the counteroffer.
  • The executed offer is delivered to the seller.

This is the process for a short sale as well. The main difference is the short sale addendum can change how offers are presented, accepted, countered, and delivered. The SSA also addresses:

  • The time period all parties agree to wait for short sale approval
  • The number of offers sent to the bank
  • Whether the seller needs to inform the buyers if other offers are sent to the bank

Acceptance of the offer happens when confirmation occurs. The contract dictates who is to receive the contract for confirmation. In California, for example, contracts allow either the agent or the buyer to confirm receipt, depending on whose name is entered on the signature page. Some agents forget to put their name on that page, so the offer must be confirmed by the buyer, which adds additional time.

Sending Short Sale Back-Up Offers

For the most part, a seller can sell only to one buyer. The seller cannot agree to sell to multiple competing buyers at the same time. Moreover, the seller generally cannot cancel your contract if you are in compliance simply because the seller received a better offer from another buyer.

But there are ways around this. One of those ways is for the seller to send a second offer (a backup offer) to the bank that is higher than your offer because the bank might ask which offer the seller would like the bank to accept. In that instance, the seller might point to the second offer. If your offer is contingent on bank approval, you could lose your offer to the buyer who overbid you.

This is rare, but it can happen. Another buyer can also send an offer directly to the bank and bypass the listing agent and the seller altogether. Again, it's rare, but a buyer could do it. For protection, short sale buyers are advised to get legal advice.