If you’ve bought, or are in the buying process, in real estate in the last 12-18 months, you’ve likely been a participant of a multiple offer situation. A multiple offer situation is when the seller receives more than one offer on the property they are selling. Oftentimes the seller may choose to negotiate independently but more often the seller will task the buyers to submit their strongest and final offer by a certain date/time. The seller will review all written offers, determine which offer hosts the best terms and conditions for them and award the successful bid accordingly. NOTE: For negotiation purposes, REALTORS® do not know details of other competing offers. If your offer is unsuccessful and you’re not in a hurry to get under contract with the next house, consider writing a backup offer. So what is a backup offer? A backup offer is made in acknowledgment of an existing offer and ensures a contract with the seller if that first (primary) offer falls through. It’s a legally binding contract that, if accepted by the seller, will put you next in line to purchase the home should the first buyer back out or is terminated for any reason. Should the primary contract terminate, the backup offer will step into the primary offer role. Meanwhile the property does not return to the market as active and available status nor does the seller need to continue the inconvenience of accommodating additional showings and offers. Backup offers are negotiated independently of the primary offer. For negotiation purposes, details of the terms and conditions of either offer are not disclosed. It is not until it becomes public record at closing when these details become available. For the seller, backup offers provide another layer of security in knowing their house will sell with some sense of a scheduled timeline. Additionally, having a back up offer in place provides the seller leverage for future negotiations within the terms of the primary contract. If the seller has a backup offer in place, she/he may be less likely to accept minimal, ‘nickel and dime’ repair requests based on the property inspection results. The buyer of the back up may favor the convenience of being in a backup position while continuing to shop for another home. If the (backup) buyer does find another home and is successful in the negotiations, he/she must terminate their backup offer. Although less than five percent of contingent offers are terminated, the purchase agreement offers terms and conditions the buyer (or seller) may terminate if negotiations and/or timelines are not met. One possible reason for termination in a multiple offer situation is if the buyer offers more in sale price (or appraisal gap) than they can realistically afford. You can see how backup offers can get complicated. Yet another reason working with a REALTOR®, who is hired to advocate for your best interest is key in navigating these complex transactions.
Until next week, love where you live. And if you don’t… contact your local REALTOR®.
Brian Haufe, 2022 MBOR President