In today’s market, we are seeing lots of buyers missing out on getting their purchase contracts accepted. There are, however, opportunities for strong, committed buyers to be placed in a backup offer position. Have you wondered what the pros and cons are of submitting a backup offer? If so, here are a few things to consider:
1. You’re Next in Line if the First Contract Fails
If you are in a backup offer position, if the first contract fails, you are immediately moved to a first position place. You will no longer have to compete for the property. The price and terms are in place and you can proceed to open escrow.
2. You Can Continue Looking
Being in a backup offer does not prohibit you from continuing to look for other properties. Did you know that a backup offer can be withdrawn anytime prior to written notification that you are in first position?
3. You Will Not Have to Spend Any Money
Everything is in a holding pattern until your contract is moved to first position. You do not have to pay for a loan application, appraisal, or inspection until you become the primary contract.
Are There Disadvantages to Being in a Back-up Position?
Some might argue that a backup only serves to keep the first position offer in place. Granted, the primary buyer may be more watchful of timeframes knowing a backup is in place. No one will miss a step knowing there is a buyer waiting in the wings. A first-position buyer will also be less likely to ask for remedies and repairs. One of the main reasons a transaction fails is due to the home inspection and a failure to negotiate concessions on behalf of a buyer. But, in this market, most Buyers know their chances of obtaining concessions is virtually nil anyway. They also know that if they don’t perform, the Seller can likely go back on market and sell it again quickly and perhaps for more.
A Chance Worth Taking
So, even if a backup does serve to keep a first position buyer on track and in the game, keep in mind that transactions still fail. So, why not be in position just in case? I have seen first, second, and even third position backup offers move into first position. I also have worked with buyers who have submitted multiple backup offers. And yes, some of them have been happily moved to first position! There is no guaranty that being in a backup position will win you the property. But, there is a chance. A chance worth taking.
