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What Is a Backup Offer?

Posted on 10/26/2021 to General
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After all the house hunting, open houses, and exploring neighborhoods, you’ve finally found it. Your dream home, within budget and in just the right area. But someone else thought it was perfect, too… and they beat you to the bid. 

Luckily, not all hope is lost. Real estate deals fall through all the time and for many different reasons. Financing could fall through, contingencies might not be met, and other reasons might come up. 

And that’s when your backup offer comes in. Let’s take a look at how backup offers work and why you should consider making one on a home. 

What is a backup offer?

A backup offer is made on a house that already has an existing, accepted offer. It puts you second in line, should the first offer fall through. Just like an offer on a home, it’s a legally binding contract that must be signed by both parties. 

When you write a backup offer, you’re acknowledging that there is already an offer on the house. But if the first one falls through, yours is automatically accepted and you’ll be under contract to buy the house. 

Why Sellers Accept Backup Offers

Why would a seller accept backup offers, if they already have an active one on their home? It will save them time and money if the primary offer falls through. Having a backup offer means that they won’t have to go through the time-consuming process of listing their house and negotiating contracts again. 

A seller is probably more likely to accept backup offers if they think the primary bid isn’t strong enough or has too many contingencies. Offers that have multiple contingencies, for example, have a higher possibility of not working out. 

Backup offers also give sellers leverage with the primary buyer. Knowing that the seller has backup offers in place might encourage the buyer to move forward even if there are contingencies that aren’t meant. For example, a buyer might choose to overlook the results of a home inspection if they know that a backup buyer is waiting in the wings. 

How to Make a Backup Offer on a Home

Making a backup offer on a home is a very similar process to making a primary offer on a home. You’ll put your terms in writing for the seller to consider and hopefully accept. 

When you make your backup offer, keep in mind that it’s legally binding. You’ll have to abide by the contingencies, earnest money, closing date, or anything else in the contract. 

One of the main differences is that a backup offer must contain acknowledgment that there is already an accepted contract in place. This must be done in writing, with what’s known as a backup offer addendum. 

Some buyers are hesitant because they don’t want to halt their home search while waiting to see what happens. You can easily overcome this by adding a provision in your backup clause that allows you to withdraw your backup offer at any time up until the primary falls through. This way, if you find another home you like, you can move forward with making an offer on it. 

Competing with Other Backup Offer 

Sellers can and do accept multiple backup offers. The seller ranks them according to their desirability. So if the primary bid falls through, the first backup offer will be automatically accepted. Should that one fall through, then the second one will be the one that’s accepted. 

When you submit a backup offer, you want to make sure that it’s the top one. Give your best terms and be willing to negotiate, just as you would with any other offer you make.

How Much to Offer

Offering the right price is crucial to your success. In a hot market, if you really want a home, you should offer the highest price you’re willing to pay. This will help yours be the first backup offer, increasing your chances of getting the house. 

However, you won’t necessarily have to offer more than the list price. You’re offering the seller the convenience and time-savings of having a second offer in place, should the first one fall through. Sellers might be willing to accept a lower offer just to not have to list their home again. 

A Realtor can help you decide on the ideal offer price, based on the current local market.



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