The Backup Offer: How to Proceed When a Seller Chooses Another Offer

placing backup offers You are on the house hunt in a fantastic neighborhood where you have always wanted to live. Almost about to give up on the home search, you finally find the house that has everything for yourself and your family.

You contact your real estate agent who then sets up a showing. Before the tour is over, you know that you have to have this house, and eagerly ask your real estate agent to begin preparing an offer. Unfortunately, just that morning, another buyer had looked at the property and placed an offer that the buyer accepted. Although it seems like this is where things end for this home, you actually do still have options.

In many parts of the country, the real estate market is a real-time competition between buyers. But all may not be lost. If another home buyer outbids you, it doesn’t necessarily mean that you’ve lost your chance to buy that dream house. Consult with your agent about the pros and cons of place a backup offer.

What is a Backup Offer?

A backup offer is another way for determined home buyers to possibly secure a home, even if they were outbid by a competing buyer. (Note that everything isn’t about price – a competing buyer’s offer may have been chosen based upon terms, not price.) A backup offer places your offer in front of the seller as a type of security blanket. It lets the seller know that there is another buyer who is very interested in purchasing the home even though the seller is going ahead with a different buyer’s offer.

If, for some reason, the first offer falls through and fails to complete during the closing, the seller can still move forward by completing the home transaction with you. This type of backup offer is often contractually binding. If the seller agrees, then the offer will become a contract when and if the contract between the seller and first buyer terminates.

There are many common reasons why the first contract might fail to close: the buyer may not be fully approved for financing; they may discover something wrong during the home inspection that discourages them in purchasing the property; or, the first buyer may find another home that is a more suitable for them.

Benefits of the Backup Offer

Backup offers can provide both buyers and sellers many advantages. The seller avoids placing the house back on the market and potentially increasing their expenses and continued carrying costs, like mortgage payments and interest, maintenance, etc. The seller is at the stage where they need to move on, and desire to have the uncertainties of selling the house off of their shoulders.

Of course, the home buyer’s primary advantage is giving them an extra opportunity to purchase the house. In most cases, buyers can continue looking at other available houses on the market while the other deal proceeds forward.

However, there is one major disadvantage, in that a buyer will be precluded from formally negotiating on any other homes that may interest them in the process – having to wait for the backup offer and contract to either come to fruition, expire, or be rescinded.

Alternatives to a Written Backup Offer

As a home buyer in a competitive market, you can of course let the seller know of your extreme interest in the property at any time. Simply ask your real estate agent to discuss your situation with the seller’s agent. If the deal falls through, then the your agent may be among the first to hear about it. If however, you want something more binding, then your real estate agent can draft a backup offer contract. This contract must be agreed to, and signed by both the seller and the buyer in order to be binding.

As with any other offer and contract, a backup offer can include in several terms and contingencies to make the contract more agreeable to the buyer’s needs, and allow plenty of protection. The most common would include a time-limit and expiration on the offer to encourage the buyer to accept the deal, a financing contingency, and a home inspection contingency.

If there is a home that you absolutely would love to have, but are outbid on, you might want to consider placing a backup offer, keeping in mind that nothing is a guarantee.


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