The Power of Backup Offers

February 8, 2022

So you’ve seen a house you love either in person or online, and you find out that the seller has already accepted another offer.  Huge bummer.  However, if you really love the house, you may want to consider a backup offer; we got our last home using one.

A backup offer is the same thing as a standard offer with one difference – it does not become effective unless the first buyer’s contract falls through.  At that point, your backup offer automatically becomes a contract to purchase the home as if you were the first buyer.

Sounds great, right?  It is!  There are a few things to consider about backups in deciding whether writing a backup offer is right for you:

  • A backup offer is a binding contract to buy a property If the first buyer’s purchase falls through, then there is no re-negotiation of the price – the baton to purchase the house automatically goes to you at the price in the backup offer.
  • The seller has to counter-sign your backup offer for it to be effective.  If the seller does not sign your backup offer, then there is no contract.
  • Backup offers must specifically be identified as such.  Let’s say you submitted a written offer that does not get selected as the winning bid.  In order for for your offer to become a backup, the buyer and seller must sign an addendum for it to become a backup offer.
  • There may be multiple backup offers You want your backup to be in position #1, so your backup offer should be compelling enough to persuade the seller it is a good idea to put yours in first position. 
  • Mind your cancellation rights if you want to keep shopping for a house.  The standard backup offer form says a buyer can cancel in writing before the seller sends you written notice that the prior transaction fell through.  Once the seller sends that notice, your backup offer is now effective.  Thus if you enter into another purchase agreement, it is important to send a timely cancellation to the first seller so you are not stuck with two contracts.
  • Most of the time the original purchase will go through.  Be mentally prepared for your backup to not become effective. But sometimes it works! 😊

The nice thing about backup offers is that if it does become effective, you’ve automatically got a contract for the house!  At that point the escrow process begins.  And if it does not become effective, you are no worse off than you were before.  Your Realtor can help you navigate the backup offer process. 

The next time you see that house you love and it already has an offer accepted on it, consider making a backup offer – you never know!


© Jonathan Sarrow, 2022, all rights reserved