What is a Back Up Offer?
In hyper-competitive real estate markets, particularly when inventory is low, it’s not unusual for a newly listed property listing to receive an offer within just a few days. It’s a situation that can leave prospective buyers feeling both frustrated and discouraged.
But even if someone else’s offer got accepted before you got the chance to bid, it doesn’t necessarily mean all is lost. Real estate deals have been known to fall through, for any number of reasons: for example, financing not being secured as expected, contingencies not being met or the home inspection uncovering something the primary buyer is not willing to take on. In such cases, it can be advantageous to position yourself as next in line. You can do this by submitting what’s known as a backup offer. It’s no guarantee, but if it pays off, you might still land that property you fell in love with.
What is a backup offer?
A backup offer is an offer submitted even after the seller has accepted an offer from another buyer. Securing backup offers is a step that’s often taken by sellers in markets where inventory is low and there’s significant competition.
A backup offer is made in acknowledgment of an existing offer and ensures a contract with the seller if that first offer falls through. It’s a legally binding contract that, if accepted by the seller, will put you next in line to purchase the home should the first buyer back out. In return for the seller’s promise that the buyer is next in line, the buyer makes an earnest money deposit into an escrow account.
The terms “under contract – accepting offers” or “pending” mean that the seller is still showing the home in case the contingencies included in the first contract aren’t met. These are not true backup offers, they may become contracts while the new parties wait to see if the first party completes the deal.
If the original offer successfully closes, you’ll be released from your contract and any earnest money you put into escrow will be returned.
To learn more about how to get your offer accepted in a competitive market, contact me today!