A Backup offer is 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. In return for the seller’s promise that the buyer is next in line, the buyer makes an earnest money deposit into an escrow account. Securing backup offers is a step that’s often taken by sellers in markets where inventory is low and there’s significant competition.
Making a backup offer as a buyer: If you have your heart set on a property that’s already under contract, making a backup offer can be a smart move. For one thing, it gives you a chance to still buy the home, should the primary deal fall through. You’ll want to strategize with your real estate agent about making the strongest, most competitive offer possible, just as if you were making the primary offer. However, the mere existence of a backup offer can sometimes strengthen the resolve of the primary buyer, shoring up the deal and possibly even driving up the price.
Accepting a backup offer as a seller: For a seller, there are very few downsides to having a backup offer in hand. In fact, knowing there’s someone else waiting in the wings can make the primary buyer more determined to close quickly. And if the primary deal does fall through, having a backup offer eliminates the need to market the property all over again and host a new round of showings. Homes that are relisted as “back on the market” are sometimes viewed in a negative light. In such cases, the seller may ultimately make less money on the sale. However, there is a caveat to consider. As a seller, you are bound by the legal contract you enter into with a backup offer. If home prices increase during that time period, you may feel like you’re leaving money on the table.
