Jim Valentine on Real Estate
In our current dynamic market there is a lot of competition such that no matter how quick or good your actions are, you can miss out on a property that you want to buy. When that happens all is not lost. Talk to your agent about making a backup offer.
Backup offers can be good for both buyers and sellers. It gives sellers a fall back in case something goes wrong in the primary transaction, and it gives buyers hope while they continue to look for other properties. If the primary transaction goes awry both parties, buyer and seller, can move comfortably into the new transaction and both get what they want, the purchase and sale of the subject property.
A backup offer is just what it says, an offer backing up another offer. It is actually behind the primary offer and subject to the rights of that offer. You can’t interfere with the contractual rights of the other party, but you can have an accepted offer that is ready to be activated in the event the first offer falls apart.
Sellers benefit by telling the primary offeror of the backup offer. That can eliminate desire to try to make changes in the transaction along the way. If something comes up that is really serious and would likely affect any buyer in the same way don’t rely on the backup offer to look past it. You might kill one transaction by not being flexible only to find you will lose the backup buyer for the same reason.
Buyers benefit in that if the primary falls apart they become the primary automatically without having to submit another offer and compete with other buyers again. The backup offer is written like any other offer but it contains language saying that it is subject to the rights of the primary offer.
The buyer has the right to rescind at any time until being notified in writing that he has been moved to primary position. That is why it works so well for the buyer. He can look at other houses, make other offers, and, if one is accepted, rescind the backup offer. If you move to primary position you get what you wanted, the opportunity to buy the house you want.
Ironically, being in a backup offer position gives you the market separation you’ve been wanting. In the typical situation, when a transaction falls apart it is put back on the market. The MLS designation for such properties is BOMK. Naturally, when that happens in a dynamic market the buying frenzy begins anew.
With a backup offer you avoid the exposure to the market that invites competition. You simply move to primary position and begin the escrow process.
Make sure that you have language in your offer that provides for the time for acceptance to begin when the offer is moved into primary position. That will then be the trigger date for the timing of the conditions in your offer. Backup offers allow everyone a little relief in these hectic times, except for the buyer with the primary offer. They have the right to continue their transaction and perform in accordance with the terms that were originally agreed to, but if something changes and they are delayed, or otherwise need to modify the agreement they may find themselves with an inflexible seller.
The second offer doesn’t have to be for a higher price to be better. A backup offer does not stop a seller from extending the close of escrow for a primary offer, or making other changes, but it does help keep the seller from getting shoved in a box with no room to move when things come up.
Don’t think a backup offer is a waste of time. Things really do come up that weren’t anticipated and what looks like a solid deal can go south in a hurry. You can be in a great position for taking the time to submit a backup offer.
When it comes to choosing professionals to assist you with your Real Estate needs… Experience is Priceless! Jim Valentine, RE/MAX Realty Affiliates, 775-781-3704. dpwtigers@hotmail.com
