Many home buyers understand the concept of a “back-up offer” – a seller accepts a preferred offer in a multiple offer situation, but wants the option to have a back-up offer in case subjects are not removed on the accepted contract. But many home buyers don’t realize that you can actually write up an offer even after there has been an accepted offer on a property.
However, both buyers and sellers need to know a few things before entering into a back-up offer situation.
First, for sellers, you must make sure that your real estate agent, upon accepted a back-up offer, writes a back-up clause into the secondary offer, preventing you, the seller, from being legally bound to selling one property to two different buyers (awkward…). Make sure that your contract is rock solid – that is, one contract at a time.
An accepted offer is a legally binding contract. But for those of you who have bought a home know, a change to that Contract of Purchase and Sale usually constitutes a rejection of the previous contract (this is how the offer-counteroffer process works). If you have an accepted offer with a backup offer and you re-open negotiations, you could actually be rejecting your initial contract and therefore legally activating the backup offer. So always get legal advice from a lawyer well-versed in real estate transactions if this is the situation you may be finding yourself in.
For buyers, the backup offer may be a great idea in case subjects are not removed on that home you were just too late to get in. Deals fall apart all the time. However, what if you write up that backup offer and then find something else that you like? Well, just like any other offer, it can revoked prior to acceptance (we’ll leave the complications of revocation for another post). However, just make sure that this possibility is addressed in the backup offer in case of acceptance. Have your agent write in the proper clauses so that you are able to collapse the accepted offer in case that “other dream home” pops up. Just remember, certain clauses signal to the seller’s agent that your offer is leaving too many “outs”, which may weaken your negotiating position. Sellers want to see serious contracts with buyers that have the full intent to purchase.