So, you’ve found the home of your dreams, but in a cruel twist of fate, it already has an offer on it. Though it can be that you’ll just have to take the loss and proceed in your search, all hope isn’t lost.
Home buy transactions fall through for all kinds of motives, from contingencies not being met to funding issues, so it can’t hurt to place yourself to possibly pick up the bits of a busted deal and get to a house you’d had your eye on. This is where the backup deal comes in.
In home buying, a backup offer is made in acknowledgment of an present offer and guarantees a contract with the vendor if that offer falls through. It’s a legally binding contract which, if accepted by the seller, will place you in line to purchase the house should the initial buyer back out.
If the original offer successfully closes, you’ll be released from your contract along with some earnest money which you put to escrow will be returned. Additionally, you should be able to withdraw from the backup offer while the initial offer is still active in case you decide to proceed; however, you need to double-check your realtor to make sure, and be aware that you should only make a backup offer on a house if you are intent on shutting on it. If the principal offer does fall through, your offer will move into the primary position and the procedure to close on the house will start.
Making a backup offer is much like creating a normal offer. A seller considers and takes a backup offer just as they would a key offer, therefore it’s important to strategize in case you want yours to be accepted.
Pricing your backup offer can be somewhat tricky. After all, you want to price it so it’s likely to be accepted by the vendor. How much you need to offer is dependent on the property market in your region .
If you are buying in a cooler market where homes typically spend longer than average on the market before being sold, you could be able to offer listing price or slightly less. The reasoning behind this is that your backup offer gives the seller a security net that prevents them from having to reenter the marketplace if their principal offer falls apart. That security could be worth accepting a slightly lower cost than the current deal.
On the other hand, you may have to offer more. If you are buying in a hot market, at which bidding wars are frequent, you’ll want to create a competitive offer to have the best odds of your backup offer being accepted. In some really popular markets on exceptionally sought-after properties, it’s possible for a vendor to take multiple backup supplies, lined up in the order in which they were approved. But it’s already unlikely that the first backup offer will wind up coming into play — farther backup offers are highly unlikely to go into the primary position.
Work with a skilled real estate agent to negotiate a decent price, as they will be the professional in the regional marketplace and also have a much better grasp of what a competitive offer resembles.