In the world of real estate, competition can be fierce. Multiple buyers are not uncommon to be interested in the same property.
When another offer has been accepted on a house you set your heart on, there is still hope in the form of a backup offer.
A backup offer allows you to position yourself as a potential buyer should the primary offer fall through. Accepting backup offers is something many sellers will do.
We will examine the pros and cons of being put in a backup offer position, shedding light on this alternative strategy for acquiring your dream home.
What is a backup-offer position in real estate negotiation?
A backup offer position refers to the status of a potential buyer who submits an offer on a property that has already received an accepted contract.
The backup offer serves as a contingency plan, allowing the buyer to step in and purchase the property if the primary offer falls through. This position is typically granted to the backup buyer on a first-come, first-served basis, providing them an opportunity to secure the property if the initial deal does not proceed.
When a backup offer is accepted, it is placed on hold by the seller, who may choose to continue marketing the property while waiting for the outcome of the primary offer. Should the first offer fail, the seller can proceed with the backup offer and negotiate with the backup buyer.
Being in a backup offer position is a unique strategy that allows buyers to stay engaged in the purchasing process even after another offer has been accepted. It requires careful consideration and understanding of this alternative approach’s potential benefits and drawbacks to acquiring a home.
Pros of a backup offer
Increased chances of success
Being in a backup offer position means you are next in line to purchase the property. This gives you a valuable advantage, as you won’t have to compete with other potential buyers who might enter the market later.
In the event the primary offer falls through, you have an opportunity to secure the property swiftly.
Lower competition
When you submit a backup offer, the seller focuses mostly on the primary offer. This results in reduced competition, giving you a higher chance of negotiation and potentially acquiring the property at a lower price.
With fewer buyers vying for the same house, your backup offer stands out and could be more enticing to the seller.
Flexibility and control
You can continue exploring other options in the housing market. If you come across another house you like, you can still make an offer without being bound by the primary offer (in many circumstances).
This flexibility gives you more control over your home-buying journey while maintaining a fallback position on the initial property.
Time to conduct due diligence
Submitting a backup offer allows an extended period to conduct thorough house inspections, research the neighborhood, and arrange to finance.
Since the primary recommendation is in play, you have the luxury of time to ensure the property meets your expectations and to secure your financial arrangements. This can help prevent hasty decisions and provide peace of mind.
Cons of a backup offer
Uncertainty and waiting
One of the significant drawbacks of a backup offer is the uncertainty that comes with it. You have no control over the primary offer’s outcome, which could be successful.
The uncertainty can lead to an extended waiting period, leaving you in limbo as you await a decision.
Emotional investment
Making a backup offer can create an emotional attachment to a property, even if the odds of acquiring it are slim.
You might find yourself emotionally invested in the house, only to face disappointment if the primary offer remains intact. It is essential to manage your expectations and remain prepared for potential outcomes.
Limited negotiation power
When submitting a backup offer, sellers prioritize the primary offer. This can limit your negotiation power, as the seller might not be inclined to engage in extensive discussions or offer additional selling concessions.
As a backup buyer, you may need help negotiating terms and prices, potentially resulting in less favorable conditions than the primary offer.
Opportunity cost
While waiting for the primary offer to succeed or fall through, you might miss out on other suitable properties available in the market.
Investing time and energy in pursuing a backup offer may divert your attention from other homes that could better suit your needs and preferences.
Final thoughts
Backup offers provide a viable strategy for homebuyers to position themselves as potential buyers should the primary offer on a property falter.
Although backup offers offer increased chances of success, reduced competition, and flexibility, they also come with uncertainty, emotional investment, limited negotiation power, and potential opportunity costs.
Bill Gassett is a nationally recognized real estate leader who has been helping people buy and sell MetroWest Massachusetts real estate for the past 35 years.
