Rethinking Backup Offers Like with any professional, there are tools and techniques available to help with particular situations. They might be more popular at certain times and might even be put aside or forgotten at others. For real estate professionals, one of those is the backup offer. In a situation where there are multiple offers, the seller can accept any offer for whatever reasons are important to them, leaving the makers of the other offers disappointed. There is always some uncertainty that the buyers on a contract will close accordingly. To hedge on that possibility, the seller may choose to make a counteroffer to one or more of the other offers to be a backup should the primary contract not close. From a buyer’s perspective, the purpose of a backup offer is to be next in line to have the chance to purchase the property should the first contract fall through. The benefit is that you’ll be next in line to purchase the home without having to submit another offer and possibly, get into a bidding war. It simply moves from the first backup to the primary contract position. The buyer in the backup position also experiences uncertainty if it will work and possibly, feeling like they could be wasting their time while waiting to hear the outcome of the first contract. Some of these buyers will continue to look at homes in the likelihood that another acceptable or better property becomes available. Should this situation occur, the buyer in the backup position may or may not have the ability to withdraw from their contract. It will depend on how the agreement is written. It is important to understand the rights and limitations, as well as when they can be exercised. A backup offer can lock you into a binding contract until the primary contract’s buyer is approved and closed or until it fails to close and the backup buyer becomes the primary. The backup may or may not have a unilateral way to withdraw the offer prior to one of these outcomes. Considerations that need to be understood by sellers and buyers alike are:
- Can a buyer in a backup contract unilaterally withdraw at any time?
- Will the earnest money be deposited on a backup offer?
- Will the timelines for contingencies like mortgage or inspections need to be made before becoming the primary contract?
- Will there be any fees incurred by the backup buyer?