When you are house hunting, it is common to find that a home is either already in escrow or that your offer was rejected in favor of another home buyer. In both cases, sellers are often willing to accept backup offers.
This is just one of the many things your buyer’s agent can help you with in order to make your home buying process more successful. Before you submit a backup offer, make sure you read through these 5 tips and facts to ensure you make the most out of your backup offer.
What is a backup offer?
A backup offer is a secondary offer on a home that is already in contract. If the primary contract collapses, the backup offer contract becomes active without the home going back on the market. Traditionally, the backup offer also includes a deposit of earnest money, or a good faith deposit.
1. Submitting a backup offer is never a waste of time.
You have found the perfect home but someone else is one step ahead of you. You may be advised to just move on, but if you don’t want to, you have options. Submit a backup offer and if the seller accepts it, then you’re next in line. Some experts say that submitting a backup offer motivates the primary offer to close the deal on the house. Sometimes this is true, and sometimes it causes them to back out faster. You cannot control what a seller does with your backup offer. You submit it to put a claim on it and prevent it from going back on the market if the primary deal does fall through.
2. Backup offers are a legally binding contracts.
Like a primary purchase agreement contract, a backup offer is legally binding once it’s signed by both parties. Make sure you are fully ready to pay the amount you agreed upon, that you are willing to have your earnest money tied up in escrow, and that the home itself is exactly what you want. Once the primary offer falls through, your contract will become a Purchase Agreement, and you will not be able to walk away without losing your good faith deposit.
3. If the primary deal collapses, you’re in contract without competition or renegotiation.
The beautiful part of a backup offer is that you eliminate the competition factor. Once your offer is accepted as a backup, you are in line to buy the house. You won’t have an opportunity to renegotiate so include contingencies on the contract that protect your interests. Make sure you can walk away at any time by adding the backup offer addendum. Have your agent make the contract contingent on your approval of the inspections and the primary offer conducted during escrow. Your real estate agent will be able to advise you on the best contingencies to include in your backup offer.
4. Keep searching even if your backup offer is accepted as second.
A backup offer isn’t an active contract until the primary offer falls through. If you drafted a contingency that allows you to walk away from a backup offer position, then you have the freedom to keep looking for other homes while you wait. Don’t make the mistake of waiting around for a primary offer to collapse or go through before you get back into your home search. You’re just wasting time, especially if the home you’re waiting for closes.
5. Backup offers put muscle behind your interest in the home.
You may be advised not to submit a backup offer and instead express your interest to the listing agent and keep a watchful eye on the progress of the sale. While this may be a good solution for a slow market, in today’s market, someone might take the risk you wouldn’t and submit a backup offer. Now you have even less of a chance of buying the home. If you are truly interested in purchasing the home, put in a backup offer. Like with a purchase agreement, you will also be required to provide earnest money to hold your spot as a backup offer
If you have found your dream home, don’t let it get away without a fight. Submit a backup offer. Maybe it will get you the home and maybe it won’t, but it will increase your chances. As the 5 facts and tips above state, a backup offer is a contract. Make sure your interests are fully protected by contacting a First Team agent to help you draft a backup offer contract. Call or email us now and we’ll set you up with a top agent in your area.