Since the earlier post on backup offers, several readers have wondered if backup offers are legal. Since I’m not a judge or jury or even an attorney, I can’t really answer that question, but can provide some information on the status of backup offers as a well established real estate contract contingency. If for some reason you feel that a specific backup offer situation is violating some law, your best bet is to consult a local attorney familiar with your own state’s laws and local practice, not a national website. That said, I would respond to the question with a question of my own: Why wouldn’t a backup offer be legal?
With regard to backup offers specifically, I can’t speak to law because I’m not a lawyer, but I can speak to professional ethics. Not only do backup offers not violate professional ethics, in some circumstances they’re actually ethically required. From the National Association of Realtors Code of Ethics:
REALTORS® shall recommend that sellers/landlords obtain the advice of legal counsel prior to acceptance of a subsequent offer except where the acceptance is contingent on the termination of the pre-existing purchase contract or lease.
[Realtor Code of Ethics Standard of Practice 1-7]
The phrase “contingent on the termination of the pre-existing purchase contract or lease” in layman’s terms is “backup offer” and, in fact, “contingent on the termination of [X offer]” is typical of the wording used in actual backup offers. So, if a seller has accepted a previous offer Realtors required to recommend legal advice if another offer comes in unless it is a backup offer - Realtors are ethically free to recommend accepting a backup offer without consulting an attorney.
In Missouri, while I can’t speak to the legality of a backup offer, I can say that as a real estate licensee I am legally required to present backup offers. This is specifically required by state regulation 20 CSR 2250-8.100 (which has the force of law):
Every licensee shall promptly tender to the seller or seller’s agent every written offer to purchase and shall promptly tender to the buyer or buyer’s agent any counteroffer made
by the seller, including any back-up contracts properly identified
as such… [Emphasis mine]
So, in Missouri, whether the backup offer is legal may be open to question, but the real estate agents obligation to present it is not. With national codes of ethics and at least my own state’s real estate license law requiring agents to present backup offers, as an agent I have to proceed under the assumption that they are valid and must be presented. In practice, backup offers are obviously an accepted real estate contract contingency.
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