Wednesday, February 1, 2012

Why Writing Backup Offers Is a Good Idea

What is a Backup Offer?

Let's start by looking at what makes your offer a backup offer. First, the seller has already accepted another offer. That first offer is probably a contingent contract, which depends upon a certain number of events that may or may not happen to close. Some of those contingencies might be:

  • Contingent on the buyer selling an existing home
  • Contingent upon inspections, which include a satisfactory home inspection
  • Contingent upon the home appraising for the sales price, and a low appraisal is a possibility
  • Contingent upon the buyer obtaining favorable financing, and anything can happen in underwriting
Writing a Backup Offer Is a Good Idea
If any one of those situations hit a snag, the transaction might cancel. If the transaction cancels, then the seller would need to put the home back on the market and start showing the home again. A backup offer acknowledges the existence of an existing offer and says if the first buyer cancels, then you are automatically in contract with the seller.
A backup offer needs to be signed by all parties to the contract to be effective. Sellers can sign more than one backup offer providing the seller makes the position of each party known. For example, you could be in #3 or #4 position if there are four backup offers. Ideally, you want to be in #2 position.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.