Deciding to be a back-up offer isn’t a buyer’s ideal situation, but in a competitive, fast-paced real estate market when offers are reviewed on Tuesday evening, then being #2 really isn’t such a bad thing.
And sellers, you should feel lucky to have a back-up… just in case.
Back-up offers provide home buyers and home sellers unique opportunities.
Typically, buyers prepare contract offers with their agent to submit to home sellers to review with their agent.
In Virginia where I work, offers are written on a standard contract produced by the local Realtor Association and include a copy of an Earnest Money Deposit and a pre-approval letter from a mortgage lender.
In any hot market where a home looks great and seems to be priced appropriately (within reason), more than one home buyer will say, “honey, it’s our dream house!”
Home Buyer’s Remorse
Any experienced Realtor will tell you about deals falling apart.
About the “all-in” buyers who discovered something spooky during the Home Inspection.
About the “all-in” buyers who suddenly thought they over-bid, didn’t like this or that, or really didn’t qualify for the financing.
One client a few years ago changed his mind because the garage wasn’t big enough. Yup, he backed out!
So, if you are a home buyer who is the primary back-up contract then know you may still get the house if #1 gets cold feet.
And if you are a seller, you can feel confident #2 can be called when #1 falls apart.
- Even great buyers get cold feet
- A back-up contract may save the day
Hey, Mr. and Mrs. Back-Up Offer
It is tough to lick your wounds and settle for the #2 spot… especially after you put in a great offer and could picture yourself mowing the yard or painting the living room.
But remember, the #2 spot doesn’t prevent you from continuing your search and bidding on another house.
Imagine that next Wednesday another amazing home pops up for sale around the corner. You can write up an offer on that one.
Once again you will go through the highly competitive, multiple-offer Vienna real estate song and dance… but, this time you are the winner! Ding!
At that moment, you need to deliver proper written Notice to the other seller that you are withdrawing your back-up contract.
Following me?
What you don’t want is a situation where you have two contracts… consult your friendly lawyer buddy to explain that one.
- You can still search for a home if you are #2
- Understand what “giving Notice” means
From the Seller’s Point of View
Every year I have at least one listing which seems to be that weekend’s home du jour.
These hot properties accumulate multiple-offers.
Clients who see multiple offers live in a moment of euphoria… like it is their 10th birthday again.
My process is to review each offer and list the basic facts and figures in an effort to help distill down to an apples to apples comparison. The sales price is essential, but other terms like deposit amount, settlement date, contingencies, and financial qualifications factor in too. Ultimately it is important to determine who will best be able to complete the sale.
Agents need to be balanced giving objective opinions, but know that today’s Seller’s may be on their loptops entering the buyer’s mortgage guy’s name into Google to read his profile. Or the Settlement Agent. Or the other Realtor.
So, once the seller is confident then signatures will be made. All too often though, there is a small change which makes it a counter-offer (this is often when buyers back-out). If all pages get everyone’s initials then there is a ratified contract between the two parties.
If there is still a strong second offer then I recommend my clients send a counter back to buyer #2 writing “First Back-Up Contract” on the front page.
Smart buyers will be open to being #2 especially when the house is within their grasp.
- home du jour
- all aspects are being evaluated
Recommendations
Having been on both sides of the table, I have seen many different real estate situations develop which have caused contracts to fall apart.
For buyers, the strategy to win in a competitive market is to deliver an offer that is strong and conveys confidence to the seller that a Settlement will happen on time.
The strategy for seller’s reviewing multiple offers is to pick the strongest possible yet not burn any bridges with potential back-up contracts.
