If you’re considering making a backup offer, there are some pros and cons you should think about first.
Getting Accepted Means You're Under Contract
A true backup offer situation is one in which both the buyer and seller sign a contract which goes into effect if and when the primary purchase agreement ends. A home buyer with the second-best offer won’t automatically be in the backup position should the primary contract fail.
For the seller, the benefit of accepting a backup offer is that, if it’s accepted, you’re seamlessly under contract with the backup buyer if the first buyer backs out. You won’t have to relist, restage and reshow. For the backup buyer, it means that the house won’t go back onto the market and you won’t have to fight with other bidders to put in the winning offer.
The Odds You'll Be Accepted Are Low
Although it’s likely you’ve heard a horror story or two about home purchase agreements that fall through after home inspection or appraisal problems, in May 2023, 95% of home buyers who entered purchase agreements went on to close on those homes, according to NAR’s May 2023 REALTORS® Confidence Index Survey. The percentage of contracts that didn’t go on to close decreased, from 7% in May 2022 to 5% in May 2023.
Backup offers can also be a hindrance on your home search. Most home purchase contracts go on to successfully close. The odds are that your backup offer won’t come into play, and the time you spend waiting to find out could’ve been spent looking for houses that don’t have any offers on them.
However, if you already own a home and are only interested in buying that particular home, you may get lucky with a backup offer. Be careful because the first contract may have ended due to problems revealed in a home inspection. We’ll discuss that below.
It Can Be Hard To Back Out Of A Backup Offer
If you continue house hunting while you wait for a verdict on the home you have a backup offer on, you could end up in a tricky position if you find a different house you prefer. Even if you’re able to back out of the offer, it may take some time getting your earnest money back. If you need that money to make another offer, you may have trouble acting fast enough to secure the home you want.
Inspection Contingencies Are Essential
If the primary offer does fall through and your offer goes under contract, you should also consider why the first offer didn’t work out. If there were issues on the buyer’s side, such as financing falling through, that’s less concerning than if the buyer backed out due to issues with the property.
Though you want to be careful about including too many contingencies, the inspection contingency – which gives the buyer the ability to have the home inspected and back out of the contract if repair issues cannot be resolved – is vital to most real estate contracts. It’s especially important when making a backup offer, to ensure that you’re not stuck under contract on a home that has significant issues.
If sellers won’t consider an offer with any contingencies, you may have no choice but to waive the home inspection contingency. You can and should ask for a home inspection regardless of whether you include the contingency so you know what repairs you’ll need to make.
Having a backup offer in place means the buyers who submitted the first offer are likely to be more motivated to speed up the time frame and close on the property. A backup offer can lock you into a legally binding agreement if it's accepted, even if you want to move on after issuing one.
Making a backup offer is similar to making a regular offer. A seller considers and accepts a backup offer just as they would a primary offer, so it's important to strategize if you want yours to be accepted.
There is no guarantee that a backup offer will ultimately lead to a successful purchase. It's always possible, but statistically, it's not very likely. In fact, just 5 percent of home purchase contracts fell through in the last quarter of 2022, according to a year-end report from the National Association of Realtors.
A kick-out clause allows a seller to accept another offer unless the buyer drops their contingencies. Kick-out clauses are most often employed during a seller's market. Home buyers must determine whether they want to follow through with a contingency-free purchase -- and possibly put themselves at risk.
The 3-2-1 backup strategy simply states that you should have 3 copies of your data (your production data and 2 backup copies) on two different media (disk and tape) with one copy off-site for disaster recovery.
You can withdraw the backup offer at any time, like if you found another house you want to make an offer on, but if the seller decides to accept before you withdraw, the offer is binding.
This term is the same as contingent. During the initial buyer investigation, most listing agents will continue to show a property for backup offers. Secondary buyers can submit an offer and if the seller accepts, they are then in a backup position.
A backup offer contract is not a binding contract until the first offer is terminated. You need to include a backup addendum and a termination clause in your backup offer contract to specify the conditions and timelines for your backup position.
Disclosure Obligations: Sellers may have disclosure obligations to both the primary buyer and backup buyers. They must be transparent about the existence of multiple offers and the possibility of accepting a backup offer.
Bottom line. “Generally, a seller can't cancel without cause,” Schorr says. “You could build in some contingency, but absent that, you had better be committed to the sale.” Reneging because you fear you underpriced the house, or you actually receive a better offer, doesn't count as “cause.”
Is OfferUp legit? Most of the time, yes. While criminals and scammers use the OfferUp app to try to take advantage of people, you'll mostly be dealing with people like you. The app is generally safe to use if you follow its guidelines and keep your transactions within its system.
Introduction: My name is Corie Satterfield, I am a fancy, perfect, spotless, quaint, fantastic, funny, lucky person who loves writing and wants to share my knowledge and understanding with you.
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