What is a backup offer?
Wondering what a backup offer is? It’s a smart move for sellers who want to keep their options open even after accepting an offer from another buyer. Essentially, a backup offer puts you first in line for a property if the primary offer falls through for any reason (think inspections, appraisal, financing, etc). Plus, it gives the seller a fallback contract for added security.
Making a backup offer is pretty straightforward. You negotiate just like any other buyer, but with the added assurance that you will be first in line should the primary offer fall through. Of course, there’s a contingency in place to ensure that the backup buyer isn’t left hanging by a non-performing primary offer. So, if the first buyer falls through, your backup offer becomes the primary offer and we’ll make sure the details are all ironed out in the purchase agreement.
Hints for Home Buyers
We always recommend that inspection periods do not start until a back-up offer becomes primary because there is no reason to spend money inspecting a home that you may not ever get a chance to purchase. Loan approval dates and closing dates are usually based on the date that an offer is accepted. In the case of a back-up offer, those dates would be based on when the offer becomes the primary one. For example: Inspections would be performed within x days of the offer becoming primary rather than within x days of acceptance of the offer.
When it’s time to write a backup offer, calling on an experienced agent is key! We’ll make sure you’re covered in all possible scenarios. And if your mortgage interest rate is set to expire before the primary offer closes, chat with your lender about an extension. Plus, a savvy buyer agent will ensure you have an exit strategy in case things don’t work out. Don’t let yourself get stuck in a backup position with no way out until the original offer closes.
Hints for Home Sellers
Don’t give away your confidential information during the negotiation of a back-up offer! Telling a potential buyer “well, the other people offered us $xx” is never a good idea since you have no idea what the next buyer may be willing to pay and you could be shortchanging yourself.
Having a back-up offer may give you some peace of mind, but don’t let it cloud your judgment during inspection response negotiations. It’s important to be fair and open-minded even if you have another potential buyer lined up. Rejecting a buyer’s repair requests based solely on the presence of a back-up offer can be risky. Remember, you never know if the next buyer will ask for even more repairs. So, consider each request carefully and make a decision based on what’s best for you.
NEW ORLEANS HOME SELLING GUIDE
Do you need to know more about backup offers? Call us at 504-327-5303 and we will be happy to chat with you and answer any questions you might have.
