You can submit an offer as a back up HOWEVER recommend move forward with search another home
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There is a new Real Estate Association on New Mexico (RANM) short sale addendum that very clearly states the owner may keep the property on the market and accept back up offers. Some brokers will then submit every offer to the bank and the seller may in fact have accepted several offers pending bank approval of short sale. Is that ethical? Even though there is an addendum and a therefore a loophole it still seems wrong for the seller to accept multiple offers, but in fact it is done all the time.
It seems like every listing agent does a short sale a little differently. Take what you've learned here and ask your agent some more detailed questions and see if they can give you specific answers.