When housing inventory is low,
are more likely to find that their
is already under contract. But real estate experts say that
shouldn't stop you from making an offer.
Homebuyers can submit what's known as a backup offer, which
would be next in line if the primary offer falls through.
"If the client loves the property, they are in the first
position to get the property should the first offer fall out, says
Shawn Shackelton, a real estate agent with Ventana Fine Properties
in Scottsdale, Ariz.
In addition to increasing your odds of getting the house by
being next in line, you might also wind up paying less with a
backup offer. If you wait to see if the primary offer falls
through, you could wind up in a bidding war with other buyers. With
a backup offer, your only competition is the buyer in the primary
How to put in a backup offer
If you decide to submit a backup offer, here are a few tips to
keep in mind:
Don't get carried away.
"I always suggest offering list price," says Juniper Cooper of
Juniper Realty Group in Boise, Idaho. "It is not a good strategy
to get stuck paying a lot more for a home than it is worth. There
are other homes out there."
Show them the money.
"I always urge buyers to get pre-approved for their mortgage
prior to placing any offers," says Brad Malow, a
real estate agent
with Rutenberg Realty in New York City and founder of
BuyingNYC.com. Malow also recommends including verification that
and financials have been reviewed by your lender.
"Some sellers may want to close as soon as possible," says Malow.
"Others may have broader timelines. Be open to working with what
the seller may desire."
"Removing as many contingencies as possible will always make the
offer more attractive to the sellers," says Shackelton. For
example, if you make an offer on a home that is contingent upon
selling your current home, the seller will probably pass if they
have another offer without contingencies.
Court the sellers.
When competition for properties gets stiff, some buyers will give
their agent a personal letter to deliver to the sellers,
introducing themselves and talking about what they love about the
home. If your backup offer is one of many, a personal touch just
might get your offer accepted in the primary position. "When four
offers come in and three are anonymous and one is from the 'older
gentleman' or 'teacher,' the seller might be more inclined to
consider that offer,'" says Cooper. Obviously your offer still
has to be competitive, but if you're head-to-head with other
offers, it's certainly worth a shot.
How backup offers work
There are a number of reasons a primary offer can fall through.
Sometimes the primary buyer has trouble securing financing.
Sometimes there are issues with the home inspection, or maybe the
contract wasn't completed on time. If that happens, a backup offer
could be your ticket to get your dream home, even if it was under
Backup offers have the same elements as a primary offer, but
they include an extra document: the backup contingency. The backup
contingency states that the sellers are accepting the contract as a
backup offer and specifies the date by which the primary offer must
close. It also states that the backup offer is void if the primary
deal closes, and that the buyers in the backup position will get
their earnest money back.
The backup contingency also says that the seller will send
written notification to the backup buyers if the backup offer
becomes the primary offer. From there the deal proceeds like any
other real estate contract.
There's also a provision that the backup buyers can withdraw their
offer at any time up until they are notified that the primary deal
The drawbacks of backup offers
One problem with backup offers is that they could strengthen the
resolve of the buyers in the primary position to move forward with
the deal. For example, the primary buyers might be less likely to
demand money for minor repairs since they know the sellers have
another offer in waiting.
Putting in a backup offer also can cloud your judgment, says
Shackelton. "Sometimes buyers are hooked on a property and continue
to compare it to all the other homes they see."
"There is no such thing as the perfect home" says Malow.
"Chances are you'll run into something else that works
Finally, even if your backup offer is accepted, don't halt your
home search. You might not get the house, so keep looking at other
homes on the market while you wait.