We don't know for sure that the second offer wasn't sent directly to the attorney if "Frustrated" was in fact the first buyer .
If that's the case, if second offer was a better offer, the sellers canceled "Frustrated''s contract on May 25, while still in the AR period, and accepted the second offer. Also, though there are not facts to support my theory, I suspect that the second offer,, ince it's scheduled to close so soon on July 2, went right from signing on May 26, to AR to Under Contract within 24 hours or less.
As you said, this situation happens all the time and is very frustrating to the first buyer, but not uncommon or illegal IMHO.
That being said, I would imagine if Frustrated's attorney thought something wasn't right, he/she would have said something to Frustrated already.
Feeling Duped - A seller should not be signing a second contract. An offer received from a second buyer should be sent to the seller's attorney. The seller's attorney can terminate the executed contract and the seller can then proceed with the second buyer. If you were the second buyer and the seller signed a contract with you, I would suggest that you discuss that with an attorney. It's beyond my scope. If you were the first buyer, and your contract was terminated in favor of the second offer - it's unfortunate.....but completely within the practice of real estate. We see it every day.
From what I understand from your question - you were the SECOND buyer? When you made your offer and the seller signed it the home was ALREADY IN ATTORNEY REVIEW (and you were not told that the seller ALREADY ACCEPTED AN OFFER WITH ANOTHER BUYER? If yes, your offer was presented to the seller directly and not through the seller's attorney? I'm not sure of any legal action however I do think that the listing agent (seller's agent) should've told your agent that the seller had accepted an offer and it was in attorney review and that your offer would be sent to the seller's attorney. You should see what your attorney says because obviously we cannot offer legal advice.
I've been part of quite a few transactions on the buyers and sellers side that were in attorney review when other offers have come in and the second buyer was always told from the beginning that they were the second offer and that offer went straight to the attorney bypassing the agents and seller. Sometimes the second offer bumped out the first and sometimes it didn't but the second buyer was fully aware that they were, in fact, the SECOND offer and the seller was already in attorney review with another buyer.
You were not in a binding contract however the seller's agent should've told your agent when the offer was being submitted that the seller was in attorney review and to submit your offer to their attorney.
Most contracts here in New Jersey state something to the effect " the Buyer or the Seller MAY choose to have an attorney review this contract...this contract will become legally binding within 3 days unless the attorney for the buyer or the seller reviews and disapproves of the contract"
Essentially this means that within this 3 day period, either party can "disapprove" of the contract and effectively cancel it without penalty.
Sorry you lost the house, but sometimes it's for the better.
The seller does not sign the second contract, but rather it is sent directly to the seller's attorney.
The seller's agent is legally obligated to assist the seller exercise the seller's legal rights and proceed in accordance with the seller's wishes.
If a contract is in AR, the seller can still show the property. Actually a seller can show his/her property up until the minute of closing if they so wish. If buyers had an interest and were told that the property were still in AR, their buyer agent would submit their offer directly to the seller's attorney. The seller's attorney would then advise the seller of his/her rights and they would make their decision.
I have had sellers receive a second, and even third offer, while in AR, and decline to treat either as anything other than a back up - despite a 10K++ differential. I have also had sellers terminate a contract for a lower price, but faster closing. It is the seller's legal right.
Seller's agents and seller's attorneys are required to provide these options to sellers. To fail to do so would give a seller cause for legal action against them.
It doesn't sound like either party did anything illegal. It's unfortunate and I wish that AR was not a loophole for shopping an offer. The AR period was not intended to be that, but it does become that sometimes.
A seller has no obligation to return to the original buyer and offer them an opportunity to modify their price or terms. Sometimes they do........and find themselves with angry buyers for that, too.
I am sorry this was a disappointment for you. I have been the agent on both the seller side and the buyer side when a buyer has been deeply disappointed.
My comments are not legal advice as I am not qualified to provide such.....I am not an attorney. If you believe that you have been wronged, you should consult an attorney who will review all of the details and be able to provide you legal advice.