Dympna Fay-Hart
Serving Chicago Area Sellers & Buyers

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Missed Out On That Perfect Home? Should You Submit A BackUp Offer?

When inventories of available homes are low, like they have been for quite some time now, competition among buyers escalates.  Depending on the location where you want to live, It can be difficult to find an ideal home before another buyer snags it. This can be a very frustrating and disappointing situation for buyers. 

You think that perfect home is in your grasp and then suddenly you find out the seller has just accepted an offer from another buyer. So what do you do?

First, an accepted offer is not necessarily a done deal. Lots of things can happen between the time a purchase offer is accepted and the time the transaction closes.  

There could be inspection issues that the buyer and seller can't agree on, the buyer's financing could fall apart, any number of contingencies in the agreement could not be released, or circumstances could change for the buyer that would cause them to not perform on the contract.  

So, there is a chance that you could end up with the home of your dreams . . .  by getting an accepted backup offer.  How do backup offers work?

If the sale with the first (primary) buyer doesn’t happen, your contract takes effect and you begin the process of purchasing the home for the price and terms agreed upon in the backup offer.

Some buyers fear that if they accept backup position they will halt their search effort until they know for sure that they can’t have the home they want. This is a factor you can control by making sure there is a provision in the backup position clause in the contract that says the buyers can withdraw at any time up until they are notified that the primary offer has collapsed and their offer has been elevated to the primary position.

By submitting a backup offer, you could potentially wipe out any possible competition you could have for the home should the first sale fall through. This can be appealing in a highly competitive market. You and the seller can consummate a binding contract for an already established price. You don’t have to worry about anyone else swooping in to take the house from you.

For an appealing home in a great location, there may be several backup offers. By getting yours in first, you could be first in line if the primary sale fails. Should you wait and place your backup offer later, you may be in line behind another buyer with a backup offer. Being second in line makes it even less likely that you will get the house.

One of the drawbacks with backup offers in a competitive buyer situation is that the backup offer may actually increase the chances that the primary buyer will close on the home.  Although the primary buyer may have plenty of potential reasons to back out of the contract, like they decide they don't like the neighborhood, there are inspection issues, or a home just came on the market that they like better, when there is a backup in place the primary buyer will often take on a protective stance. They know that others want what they have, and they are more likely to forgive inspection issues and be more cooperative in seller negotiations.  If the backup buyer's offer is at a higher price than the primary buyer's it creates even more of a sense to them that they're getting a great deal.

In a fast-moving real estate market, backup offers become more prevalent.  It is very important to understand that there are lots of nuances to backup offers, from both the buyer and seller perspective, as well as ethical concerns and clauses that should be in place to protect all parties.  It is important to have an experienced Realtor® representing your interests and ensuring you understand all the pros and cons from all sides before taking the leap.

I am always available to answer your questions about buying and selling in the Chicagoland area.  Please don't hesitate to contact me any time.