BACKUP OFFERS, they are absolutely no guarantees, but it is amazing how more often than not, Backup Offers seem to be moving forward more frequently. There was a time when someone would make a Backup Offer on a house on the market, and the Realtor would have to bring the bad news to the buyer, that the deal had closed on the original contract. Now, Backup Offers are making an apparent rise, by this Realtor’s perspective.
It seems that now, the original contracts are carrying less weight. Whether it was a change of mind, financing fell through, appraisal too low, or inspections revealed too much work to be done, original contracts are not the solid contracts that they used to be, and many Backup Offers are falling in place, with greater security. But certain things should be in place for the buyer of the Backup offer as well, if a Backup Offer is going to pay off (consult with your Realtor for further details). Here are some suggestions (your situation maybe different):
First of all, after submitting a Backup Offer and it is tentatively accepted, if the buyer is paying cash, it would be important to secure that cash for a given period of time. I suggest putting it in a savings account for at least 30 to 45 days, or as long as the buyer is willing to wait to see if and when the original deal either closes or falls through. Financing is a different set of issues, but the principal of protecting your ability to move forward and buy is paramount if that original deal falls through. On the front end, when looking at putting in a Backup Offer, and financing is involved, be sure that your lender has you in a ready-set-go position in the event the 1st offer falls through. Your letter of pre-approval will be needed to go with the Backup offer, but additionally, we know that pre-approval still doesn’t mean you can buy the house. Use the time between submitting the Backup Offer to work with your lender to make sure that nothing on file will keep you from buying your desired house should it come back on the market.
Secondly, and this is not in a particular order, find out any deadlines within the original contract. From the moment a contract is written, there are a number of deadlines that the buyers and sellers have to meet. From the inspection to loan approval, to appraisal, all have certain timeframes in which they will need to be accomplished. Knowing, for example, that the original inspection may take 15 calendar days to be completed, and that there are approximately 72 hours for the seller to respond, and additional 72 hours for the buyer to accept what the seller is committing to, helps the buyer on the Backup Offer to determine whether or not they want to stick with the Backup offer. So, try to find out where the current contract is, where it does not infringe on, or compromises the current buyers’ or sellers confidentiality.
A third suggestion is to see if there is a current inspection on the property. Sometimes, a property may have been inspected before, either by the seller when they decided to put it on the market, or by a previous buyer. The request for an inspection report should not interfere with an existing offer on the table. If the sellers are willing to provide any previous inspection report, the inspection report should be at least within 6 to 9 months, to be sure that the buyer can have an idea of what they maybe getting into. A fee maybe charged by the seller. Note that receiving such a report, does not exclude any buyer from obtaining their own inspection/inspector. Wherever possible, obtaining a prior inspection gives the buyer in the backup position, an opportunity to determine how to move forward, should the current offer fall through.
Fourthly, the deposit. I personally, and professionally, discourage putting a deposit down on a Backup Offer. Why? Chances are slight, perhaps even slim, that the deal will fall through. And while I point to the increase of Backup Offers rising, here are 2 reasons why you shouldn’t put up a deposit.
The 5th suggestion to consider when putting in a Backup Offer on a desired property, is how much to offer. Very rarely, hardly ever, is it known how much the primary contract is for. My guess is, in case the initial contract falls through, the seller does not want to show their hand as to what they accepted. When putting in a Backup offer, make YOUR best offer. Your best offer maybe the Sales Price/Asking Price, or it maybe the Market Price, which maybe less than the Sales Price. Or, your offer maybe over the Sales/Asking Price and/or the Market price in order to gain an upper hand on any potential offers that are being submitted, or that may come in during the initial contracting process. Consult your Realtor and Lender, because your pre-approval amount should match the amount you are offering, even if in a Backup status.
As a bonus, let me share this with you, as a sixth suggestion: if you are in the market to buy a home, I encourage you to make your move as quickly as possible on the house that you most truly want. Whether it is a Buyer’s Market, or a Seller’s Market, MAKE YOUR BEST OFFER! And if you see a house that you decide to put an offer in on, find out if any offers have been rejected, see if you can find out what previous offers were submitted and turned down. Even if the house you are interested in is under contract, this bit of information can help you in making a good Backup Offer. Or, if a house has been under contract for a long time, there maybe a reason that the house is sitting under contract for so long. Have your Realtor contact the Listing Realtor to see if there are any cracks in the contract that the house might be going back on the market and if there are any Backup Offers on hold.
Each of the above ideas are suggestions, but are not a substitute for homework when looking to buy your home. Consult with your Realtor, your lender, others who have recently bought a home, or go on line to see what are some of the best ways to put in a Backup Offer. Good luck, and as always, MAKE YOUR BEST OFFER!
Information deemed reliable but not guaranteed. Not an intent to solicit the agents or clients of other Brokers or agents. Licensed in the State of Louisiana only.