Homes are flying off of the shelf like toilet paper and hand sanitizer during the pandemic. Demand is far greater than supply at all price points. As buyers approach homes with an Ebay auction mentality, often times offers can be made in haste. For this reason, backup offers have become a useful tool for both buyers and sellers.
One advantage of a backup offer to a seller is that the backup offer allows the seller to have another offer in hand in the event that the primary offer falls apart, thus saving the seller from having to put the house back on the market. Also, a backup offer permits the seller to negotiate with the primary buyer in a comparative nature to the backup offer. Having full knowledge of the terms of two different offers can either drive the primary offer out or conversely, all the way to the closing table. The backup offer allows the seller to play hardball with the primary buyer. With a backup offer in hand, the seller has flexibility in the way they approach the repair request made by the primary buyer after their home inspection. Last, backup offers allow the seller to provide the appraiser hired by the primary buyer with evidence of where the market is now, as opposed to where it was thirty or sixty days ago, when the comparative homes used by the appraiser actually sold.
For buyers, the backup offer can be a useful strategy. For starters, not many real estate agents will utilize the backup offer; they simply don’t keep it in their tool box. This is not only a disservice to their buyers, but evidence of their unwillingness to think outside of the box on behalf of their buyers during these competitive times. While buyers and their agents are constructing a backup offer, they need to maintain a mentality of impact and flexibility. This starts with the buyer’s agent having a conversation with the listing agent to determine what the most important elements of the transaction are for the seller. Price is not always the top priority for a seller, especially if they are entertaining the thought of letting a primary buyer walk away to make way for a better backup offer. In cases like this, time might be even more important than money. With this valuable information, the buyer’s agent can construct a strong backup offer that will appeal to a seller. The goal for the buyer and their agent is to create the picture of a seamless transition from a primary offer to a backup offer and a subsequent smooth transaction.
The backup offer is a tool that all agents should be familiar with and willing to utilize. Equipping oneself with this tool is the sign of a good real estate agent, as much as it is a sign of the times.