Accepting Backup Offers: What Does It Mean for Sellers & Buyers?

House hunting can be a whirlwind! You find your dream home, put in an offer, and…silence. Is your offer the winner? Maybe not. But there’s a way to stay in the game: the backup offer.  Intrigued? Read on to learn what accepting backup offers means for sellers, and how it can benefit (or backfire) on you as a buyer or a seller.

What Is A Backup Offer?

A real estate backup offer is a plan B for buying a house. It’s a contract you make with the seller even though they already accepted another offer. If the first deal falls through, yours becomes the active offer, giving you a chance to snag the house.

Pros Of A Backup Offer

For Buyers:

Chance to Buy the Desired Property: If the first deal falls through, you’re next in line to snag the house you want.

Time for Due Diligence: The wait for the primary offer’s outcome allows you time for inspections and financing.

Potential Leverage: A backup offer might motivate the seller to keep things moving with the first buyer.

For Sellers:

Security and Speed: A backup buyer means a smoother transition if the first deal falls apart, avoiding a re-listing delay.

Negotiation Edge: Having a backup offer can push the primary buyer to close faster on the original terms.

Cons Of A Backup Offer

For Buyers:

Uncertainty and Waiting: You could be stuck in limbo for weeks waiting on the first offer, limiting your search for other options.

Emotional Attachment: Waiting can lead to emotional investment in a house you might not get.

Weaker Negotiation: Backup offers often have less leverage, so you might have to accept the original terms.

For Sellers:

Offending the First Buyer: A backup offer can signal doubt in the first buyer, potentially causing friction.

Contract Complexities: Backup offer contracts can add complexity, requiring careful attention to details and potential timelines.

How Do Buyers Make A Backup Offer On A House?

Discuss with an Agent: Consult with a real estate agent to understand the process and assess if making a backup offer is a good strategy.

Draft the Backup Offer: Create a purchase agreement that clearly states the offer is a backup, including all terms and contingencies. The agreement should specify that it becomes active only if the primary offer falls through.

Include Earnest Money: Be prepared to provide earnest money, similar to a primary offer, to demonstrate seriousness and commitment.

Submit the Offer: The agent will submit the backup offer to the seller’s agent. It should include any necessary addendums specifying it as a backup offer.

Negotiate Terms: Be ready to negotiate terms with the seller, just as with a primary offer.

Monitor the Primary Contract: Stay in touch with your agent to get updates on the status of the primary offer.

Remain Prepared: If the primary offer falls through, be ready to proceed quickly with inspections, appraisals, and other due diligence.

What To Consider Before Making/Accepting a Backup Real Estate Offer?

For Buyers:

Market Conditions: Assess the competitiveness of the market. In a hot market, the primary offer is more likely to fall through, increasing your chances.

Property Appeal: Ensure the property truly meets your needs and is worth waiting for, considering its location, condition, and price.

Terms and Conditions: Carefully review and match or improve upon the primary offer’s terms to make your backup offer more attractive to the seller.

Financing and Contingencies: Confirm your financing and be clear about contingencies, such as inspections and appraisals, to avoid complications if your offer becomes primary.

Commitment: Be prepared to wait and potentially miss out on other opportunities, as your earnest money may be tied up with the backup offer.

Timing and Flexibility: Ensure you have the flexibility in your timeline to act quickly if your offer moves to primary status.

For Sellers:

Market Demand: Consider the level of interest in your property. In a high-demand market, having a backup offer can provide additional security.

Primary Offer Strength: Evaluate the strength and reliability of the primary offer. If there are concerns about the buyer’s financing or contingencies, a backup offer provides a safety net.

Backup Offer Terms: Compare the terms of the backup offer to the primary offer. A strong backup offer can sometimes be leveraged to encourage the primary buyer to expedite their process or improve their terms.

Legal Implications: Ensure the backup offer is clearly defined as secondary and legally binding only if the primary offer falls through to avoid any potential disputes.

Communication: Maintain transparent communication with both the primary and backup buyers to manage expectations and ensure a smooth transition if needed.

Flexibility and Timeframe: Be clear about your timeline and flexibility in moving forward with a backup offer if the primary offer fails.

What Does ‘Accepting Backup Offers’ Mean For Sellers?

When a seller is “accepting backup offers” it means they’re looking for a safety net. They have a main buyer but want someone lined up in case that deal falls through, saving them time and the hassle of re-listing.

Should A Seller Accept A Backup Offer?

Yes, sellers should consider backup offers. It puts them in a stronger position, potentially pushes the main buyer to close faster, and avoids a selling delay if the first deal falls through.

Can Buyers Or Sellers Withdraw From A Real Estate Backup Offer?

Withdrawing from a backup offer depends on the contract wording. Ideally, both buyer and seller have an “out” clause allowing them to back down before the primary offer fails. This protects them from being stuck if circumstances change.

How Many Backup Offers Can a Seller Accept?

There’s no limit on how many backup offers a seller can collect, but they can only accept one to become active if the primary deal falls through. It’s like having a waiting list to ensure a smooth transition if needed.

Is a Backup Offer Likely to Become a Sale?

A backup real estate offer is statistically unlikely to become sales itself (around 5% fall through), but they offer a valuable chance and can nudge the main buyer to close faster.