It’s no secret that most of the country is currently experiencing a strong seller’s market. Yet even in this competitive environment, almost nationally 25% of all escrows fall through before closing. Home inspections, appraisal surprises, and loan approvals are just a few of the issues which can arise, causing the buyer to pull out of the deal.
A backup offer means that another buyer is willing to step in and close if escrow falls through. As you consider a backup offer, here are 4 things you need to know:
A back up offer is legally binding. A backup offer is a fully executed offer, just like the original, so make sure the terms are acceptable. Typically, the buyer will include a contingency in the event they find another home.
Multiple Back Up Offers. In a strong seller’s market, it is not unusual to accept multiple backup offers. Always clarify the position of each backup offer and whether you will continue to accept backup offers.
Leverage. Back up offers provide leverage during the escrow period as well as security for the seller. Use backup offers to discourage unreasonable requests for repairs or concessions during escrow.
Earnest Money. Back up offers do require the buyer to submit earnest money, just like the primary offer. This stays in an escrow account. Often this is smaller than a typical deposit with the condition to increase the amount if the offer becomes the primary one.
Backup offers are an important consideration in any home sale. Not only do they protect the seller if an escrow fails to close, but the buyer can also have another opportunity to close on a home they love.