How Does a Back Up Offer Work in Real Estate?

Want to know how back up offers work in real estate? You’ve come to the right place. Many times a back up offer happens after you lose in a multiple offer situation. Or sometimes, in slower markets, somebody just beat you to writing an offer before you got the chance to. Well good news, you have the option of being a back up offer.

So how do back up offers work? Here’s what you need to know.

Back up offers come into play as soon as the initial offer falls apart. Yes, initial offers do fall apart. Unless an offer is subject free, offers can and do fall apart sometimes. The most common reasons for offers falling apart are because the first buyer couldn’t get financing or perhaps a building inspection doesn’t go as expected and the buyer chooses to walk away.

Therefor, if you have a back up offer in place then you are next in line. A  back up offer looks the same as any other offer except it will contain a subject that looks something like “Subject to the Seller ceasing to be obligated in any way under the previously accepted Contract of Purchase and Sale on the subject property on or before (date). The Seller reserves the right to amend or renegotiate the previously accepted contract in any manner whatsoever including amending subjects, terms, closing, adjustment and possession dates and purchase price.”

This subject allows the seller to negotiate the first original offer should things go awry. However, should the deal fall apart completely then your back up offer automatically kicks in. It’s important to remember that if you’re writing a back up offer you should not be writing offers on other properties during the waiting period.

If you were to start writing offers on other properties while you have a back up offer in place, you could run the risk of potentially owning two properties should the back up offer come into play and you get an accepted offer on another property. This could lead to some serious legal issues.

If you really like a property that you lost out on you should consider all your options including writing a back up offer. Just know that this basically ties your hands the first offer either removes all their subjects or falls apart, which usually takes about a week or so.


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