What Happens When A Seller Signs Two Contracts?

There are several situations in which a property seller may enter into two separate sales contracts at the same time. It is important to understand why a seller would do this and what rights both sellers and buyers have in these scenarios. With the help of an experienced real estate lawyer, most sellers and buyers can avoid many of the headaches that can be caused by multi-contract situations.

Second Contract Prior to First Signing

The first, and perhaps most straightforward example, would be a situation where the seller receives a better offer after receiving an initial offer but before executing or signing the contract. In this situation, it is clear that the seller can reject the initial contract and accept the second.

Contingent Contracts

Another common practice is to accept a contingent contract. In this scenario, the seller agrees to sell to one buyer (usually the one with the better offer), but also accepts a second offer, contingent upon the first one failing. In other words, if the first buyer falls through, does not get financing, wants to cancel due to a negative item in the inspection, or for any other reason chooses to back out of the deal, the seller has a backup offer they can accept. These contingent contracts are binding on the buyer if and when accepted. They only become enforceable upon the seller notifying the buyer that the first buyer has fallen through and the seller is acting on the contingent deal.

True Two Contract Scenarios

Finally, there are situations in which a seller truly signs two contracts, attempting to hedge his or her bets and ensure that a deal is made. This is not generally appropriate and can wind up in litigation. In many cases, nothing bad will happen. One buyer backs out, and the second buys. However, one must consider what happens if both buyers have active and valid contracts to buy the same property, but the owner chooses one and breaches the contract with the other. This can put the parties at odds with each other and lead to court battles.

Colorado Real Estate Law

Many people, including realtors and experienced investors alike, choose to use pre-generated real estate contracts and forms. And for many simple transactions, these may do fine. Colorado even has some pre-approved forms that can be used for residential contracts. However, none of these can take into consideration the various unique issues that can arise in a commercial context. This is especially true when you are entering into multiple contingent contracts or have time-limited purchase options.

Colorado Real Estate Lawyer

One of the easiest ways to prevent these mistakes, whether accidental or intentional, is to hire an experienced real estate attorney. At the Law Offices of Eric L. Nesbitt, P.C., our team devotes considerable time and resources to making sure we remain up-to-date on the latest in real estate law and trends in the market. We serve clients throughout Colorado from three convenient locations. So if you need experienced guidance through a complex commercial contract, or just need help on your next residential real estate deal, give us a call today.