Contracts for the sale of real estate can fall apart for any reason: financing, inspections, title flaws, and cold feet can all sink a deal. If you’re selling your home, make sure to tell your agent that you want to accept backup offers. This can save you time-on-market and provide leverage in negotiations.
A backup offer is an offer that comes in after another has already been accepted. There’s no limit to the number of backup offers in a transaction. The buyer and seller in a backup offer have no contractual obligation to one another until the primary offer has been terminated. The order of each backup offer is clearly stated in the contract (i.e. “Buyer acknowledges that Seller has entered into one or more contracts on this property prior to the execution of this contract. This contract will be in position number __”).
Why accept a backup offer? The majority of activity for a home occurs shortly after it’s listed. After about a month, activity declines significantly. If a home is on the market for a long period of time, it can become stigmatized. As a seller, it’s best to take full advantage of your home’s market freshness (I made that term up). By accepting backup offers, you can capture all that new interest in your home that may not be there in a couple months.
Another reason to accept backup offers is to provide leverage for negotiations with the primary offer. Buyers can often be unreasonable with what they’ll ask a seller to fix or pay for in contract negotiations. With no backup offer, the seller faces the prospect of putting their home back on the market and starting over if they don’t acquiesce to a buyer’s demands. Having a backup offer in hand puts the seller in a much stronger position since they need just pick up the phone to put their other offers in play.