Accepting back-up offers

In this market I would absolutely take back-up offers, usually until the P&S is signed. If they had some more exotic financing or low down payment I would take offers until the mortgage contignency is satisfied.

Where buyers are getting cold feet and lenders are denying mortgages I would want to have a fall back plan. Taking a property off the market for a month only to have the buyer not meet his mortgage commitment can mean the difference of several thousand dollars. When inexperienced buyers and agents see a property come back on market after being under agreement they assume that there was something wrong with the property, not the buyer. With this assumption, usually buyers try to underbid and it tarnishes the listing.

It also incentivizes buyers to take it or leave it after a home inspection. A good example; there was a listing and the buyers were trying to negotiate after the home inspection. We collected another offer from another buyer and used it as leverage to decline any negotiation. While I am sure buyers were not happy with that, we were representing the seller and this was in their best interest.

About the MLS system. It is very flawed, many buyers skip over the red Actives. It might as well be marked as UAG.

Rona - I always accept back up offers as a seller and I have for years . I think that you have your facts wrong.. I will accept offers until the closing takes place. I am not trying to muddy the waters , I just want to sell the property. In this crazy market , you never know what will happen with a potential buyer.
I had a buyer walk five hours before the closing because they found a sweetheart deal that they could not refuse. I didn't have to start at ground zero as I had backups in place ,and closed to buyer #2 in three weeks.
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When my spouse and I were house hunting at the end of the last down cycle, we were the third back-up offer on a house. There were at least one or two more offers in the queue after ours. We ended up getting the house because the offers in ahead of us fell through after the buyers either couldn't get the loan that they needed, or they couldn't sell their own houses. We were told that this was so common that collecting multiple back-up offers was becoming the norm.

We were startled when we saw that another open house was being conducted after our offer was accepted, because we knew that we had the down payment and the loan pre-approved (and no house to sell).

We went to the open house and were rather irritated to hear the sellers' agent confiding to some prospective buyers that our offer "looked shaky!" It looked nothing of the sort, and this manipulative lie got other people's hopes up and wasted their precious time. But we understood that the seller was panicking because he was afraid that he would lose the house that he was trying to buy. Our buyer's agent laughed at this because she said that the house he wanted so much (and later hated) did not have one offer other than his in the two years it was on the market. He was overpaying, to boot. Oh, well...

In my experience back up offers can be accepted -- if they are subject to the prior accepted offers. Specifically, the terms of the first contract control until that first contract is voided. Sellers who are taking back up offers may also want to consider "kick out" clauses, where they can potentially use a second offer to force the first buyer to waive contingencies in their contract, such as a home sale contingency, or even to void the first contract. Note -- these clauses can be tricky, thus I strongly suggest consulting a real estate attorney to ensure that your rights are protected.

Back up offers cannot be accepted, as a contract, unless the first signed contract is voided. A seller cannot cancel without reason. MWest is right; some contracts have kick-out clauses. However, contracts are like marriage -- another contract cannot intentionally interfere with a contract in progress. If that was so, there would be no need for written contracts.
Would-be buyers are confused by the term "accepted." When an agent says "I regularly accept back up offers" many buyers think that any offer they make, by signed contract, can be voided at the whim of the seller. This is not so. I wish agents would use the term "hold' or "collect" instead of "accept" when referring to back-up offers, which do not come into play unless something changes in the Offer to Purchase that is already signed.
RR

I have had clients who made back-up offers be the successful buyers after the original buyers disappeared, usually due to financing problems. This seems to be happening more frequently now, but even a few years ago I saw a buyer pull out 2 days before closing. Backup offers can work, but the buyers MUST understand what it means.

As an agent, I appreciate the red flag on MLS because that tells me the listing agent is following the rules; some keep the fact of an accepted offer quiet until my clients have put something together (these agents go on my "don't trust anything they say" list). The term "manipulative lie" used by another poster is appropriate to this practice, which violates MLS and ethics rules.