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Professional Standards Manual

Trading Services

2. Acting For Sellers

(h) Offers - View Entire Section

(XI) Offers after an Offer Has Been Accepted (Back-up Offers)

Once an offer has been accepted but before the conditions have been removed, a back-up offer that is accepted by the seller sits in second position waiting for the first offer to collapse or firm up. Back-up offers should always have a clause such as the following written into the contract:

Back-up Contract Clause

Subject to the Seller ceasing to be obligated in any way under the previously accepted Contract of Purchase and Sale on the subject property on or before (date) .

This condition is for the sole benefit of the Seller.

It happens, at times, that the seller/buyer of the first offer may seek to renegotiate terms and conditions of the first offer. The listing licensee should counsel the seller to seek legal advice because renegotiations may result in activating the back-up contract. The risk is in selling the property to both buyers simultaneously! The licensee should advise the seller to obtain legal advice before changing the first offer when there is a back-up contract. The licensee should also advise the second buyer to obtain legal advice under the same circumstances.

Secondary or back-up offers frequently do not contemplate that the buyer may find another property and may wish to withdraw the back-up offer. Before preparing a back-up offer, the licensee should consult with the buyer as to what will happen if the buyer finds a more suitable property.

Licensees need to be aware that back-up contracts, while useful in some cases, can create serious problems when the contractual limitations and obligations of each party are not properly explained to all parties.

On the face of it, the intent is usually that a back-up contract will become firm and binding if the buyer under the previously accepted contract does not remove the subject to clauses by the date agreed to in the previous contract.

After conditions have been removed, but before completion, additional offers may be accepted as back-ups in sequence by the seller. Licensees should not stop presenting offers until transactions have completed. If a seller instructs the listing agent not to show the property after a transaction is firm, then the agent must obey these instructions, but the agent should advise the seller that firm sales can collapse before completion for a variety of reasons (death of the buyer or one of the buyers, loss of job, financial disaster, unforeseen problems with the property itself, etc.), and the seller is not protected until the transfer of title is complete and the money is in the seller’s hands.