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Steve McLinden, the Bankrate.com Real Estate AdviserRealty rarity: Home seller has multiple offers

Dear Steve,
I have multiple offers on my home. Can my real estate agent accept a conditional deposit from a backup bidder in case the original offer falls through?
-- Minnie Sutors

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Dear Minnie,
First off, let me say that tens of thousands of sellers around the country would love to be in your position right now. But they aren't -- and you are.

That means you are in a position to call a lot more of the shots in the selling process. And there's no law against demanding earnest money from a backup buyer upon the execution of a backup contract, provided that you make it abundantly clear that the house is under contract to another buyer and that the backup is still second in line.

In the meantime, that earnest money will be deposited with a third party, who can be an escrow agent, attorney or even a bank in many states. With that done, no other actions will be required of you until -- or if -- that backup contract becomes the primary contract. Of course, you can't leave your trusty backups hanging. They will retain the right to terminate that backup contract and get their earnest money back at any point while they are still slotted in second-banana position. That simply gives them the flexibility to jump on other home-buying opportunities.

I might add that you're also in a position to request more earnest money than is typical in your area, which you will collect in full if the primary buyer fails to perform, as stipulated in the contract. With that many offers on your house, you don't want to be left in a financial lurch by a time-wasting nonperformer. (Of course, earnest money deposits should be viewed as backup protection only, not a side business you start by finding loopholes in contracts.)

Realize, too, you may be party to a cat-and-mouse game here. Typically, sellers and their agents would love to inform all potential buyers that there's a multiple offer scenario in play to help create that desired sense of urgency. A backup bid, after all, makes the primary bidder realize that they can't drag their feet in the process. However, potential buyers often want to keep their own offers confidential and may instruct their agents to help keep them that way. So be careful what you tell other potential buyers about these offers! A seasoned agent should know how to handle this.

Here's something else to consider: You may have priced your property too low -- perhaps expecting fewer or lower offers in the wake of the national housing downturn. I can't tell where you are in the contract phase with these buyers, but I would discuss the pricing issue immediately with your agent.

Good luck and may your highest offer be genuine.

To ask a question of the Real Estate Adviser, go to the "Ask the Experts" page, and select "Buying, selling a home" as the topic.

Bankrate.com's corrections policy-- Posted: March 25, 2007
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