Understanding the Back-up Offer

“I’m so sorry, that property is pending.” As brokers, this is one of our least favorite sentences to say. Nothing is worse than being the bearer of bad news that amounts to a buyer’s heartbreak. However, a property that is in pending status means that it hasn't sold yet. While the laws vary in different states, generally a real estate contract is binding once both parties sign the offer. At that time the closing process begins. This is also the time when sellers must stop considering other offers, but they can accept back-up offers. In a market like ours, back-up is a pretty good place to be if you are a buyer.

What is a back-up offer? This is when the seller accepts an offer contingent upon the first one falling through. There are many reasons why the home purchase might not close—the buyer may fail to secure the loan, the home inspection may find issues the two parties can’t resolve, it could even be that the Homeowner’s Association has rules that the buyer is unprepared to accept. Whatever the reason, real estate brokers know that the deal isn’t done until it closes.

A back-up offer should be carefully executed. Both buyer and seller must be able to pursue other options. The back-up offer should be written to allow for the possibility that they find an alternative home in the meantime. That means you can keep shopping for a home and making offers even if you are in back-up position for a property. The seller, on the other hand, must make clear they are currently obligated to another buyer and will consider the back-up offer only if the current one cancels.

Back-up offers can be a great tool in a fast-moving real estate market. Writing the offer virtually guarantees the listing agent will notify you if the home becomes available again. Better yet, being signed into back-up absolutely guarantees you’ll have a chance to buy the home if the first buyer does not. This gives the buyer an advantage in a seller’s market, increasing the opportunity to capitalize on a home that fell out of contract.

While the current market can be tricky, a trusted and knowledgeable guide will make all the difference. We’re ready to help you meet your next real estate goal. Buying or selling, we want to help you find a home where you love to live! Get in touch today!