Backup Offers: What You Need to Know
What is a Backup Offer?
You may know that when a home seller and a home buyer reach an agreement on the terms of a home sale that they go “under contract.”
But what you may not know is that between 20-25% of those houses that are under contract won’t close!
Why? The reasons vary...
Sometimes the buyer will back out because they have cold feet.
Sometimes there’s something revealed in the home inspection that becomes a “deal breaker” for the home buyer ... or the home buyer isn’t satisfied with the remedy the seller is willing to do as a result of the findings in the home inspection.
Sometimes something happens to the home buyer’s ability to buy the house, like getting laid off. So even though they’re “pre-approved,” they no longer qualify and are denied the loan.
Sometimes the home doesn’t appraise for the agreed upon sales price and the home buyer and home seller can’t reach an agreement on how to address the situation.
And the examples could go on and on...
Because there are many ways a contract can fall apart, smart real estate agents talk to their home buyers and home sellers about a “backup” offer.
A backup offer is a legally binding contract between a home buyer and a home seller that if the current contract falls apart, then once notified, that back up offer goes into effect and the backup buyers are now under contract to buy the home instead.
As a Seller, Do I Need a Backup Offer?
While you might not need a backup offer, it certainly doesn’t hurt to have one.
You might be wondering, "If I had multiple offers, can't I just go back to them?"
Not necessarily. Offers expire after a certain date and time. If you don't accept them within that timeframe, they're no longer valid. Your agent could reach out to those previous buyers, but having a backup offer in place saves you hassle and headaches.
Why Secure a Backup Offer?
If you received multiple offers, it's a great idea to get secure a backup offer while buyers are still eager. As a seller, you want a backup offer for a few reasons:
- No need for additional showings
- It provides leverage when negotiating with the primary buyer
- Less uncertainty if the primary deal falls through
- A smoother transition if the backup buyer steps in
Can the Backup Buyer Back Out?
Yes, the backup buyer can terminate the agreement at any time before being notified they are the primary buyer. However, if demand is high and the supply is low, buyers who sign a backup offer are usually still searching and eager to move forward if given the chance.
Can We Have More than One Backup Buyer?
You can have as many backup contracts as buyers willing to sign them! And if there’s demand for the house, I highly recommend it. In Georgia, there’s an order that is assigned when you go under contract with a backup, so the home buyer will know if they’re the number 1, number 2, etc. backup offer.
Having more than one back up give you negotiation power as the home seller. But there is a psychological perspective to consider. Back up number 2, 3 or 4 will likely start to doubt there decision when they hear how many people have backed out before them. You’re best to work with a good real estate agent who can negotiate well on your behalf to hold the first or second deal together.
People get very emotional when it comes to a purchase as important as a family home and they don’t always act rationally. Having two great real estate agents involved can make a big difference in finding a way to get the house bought and sold, which is ultimately what everyone involved wants.
Home Buyers - Should You Put in a Backup Offer?
Absolutely! If you love the house and really want it, talk to your agent about doing a back up offer! There’s very little for you to lose.
With a backup offer, you can still put in a due diligence period, get a home inspection, and assuming you have a due diligence period, you change your mind if you fall out of love with the home.
If you find a house you like better, you can send notice to terminate that back up offer.
And because so many contracts do fall apart, you just might get that amazing house that you thought you wouldn’t get. Think how sweet that would feel!
Final Thoughts
Having a backup offer provides benefits for home buyers and home sellers alike.
It helps ensure your house gets sold to a home buyer who really wants it and can buy it.
As a home seller who’s received multiple offers, secure one or more backup offers to keep your selling process moving smoothly.
As a home buyer, you might just end up with that home you’re sad you lost.
Need Help Selling Your Home?
If you’re thinking about buying or selling a home in the north metro Atlanta area, I’d love to help. Let’s talk about how to make your move easier.
Call or text me, Kelly Vandever, at 770-597-1108 and allow me to make your move easier.
