iowahomeloans

When the Stars Don’t Align: Use Backup Offers to Offset Contingencies

Posted on: August 21, 2014

Sometimes, the stars just don’t align properly for a new home purchase deal and you may find yourself with a contract full of contingencies. Generally speaking, the more contingencies you have, the less attractive your deal will seem to a seller. If you find yourself with a weak deal and fear that the seller might reject you outright, consider adding a backup offer clause to the sale. The ability to accept backup offers can help to allay sellers’ concerns about accepting your offer, and give you an opportunity to get your proverbial ducks in a row in time to buy your new home.

 

Why a Backup Contingency?

 

Sellers who are genuinely motivated to sell their home aren’t likely to accept a contract full of contingencies. If there are too many loopholes to slip through and too many conditions to be met, sellers won’t be comfortable with a contract. If you offer a backup offer clause, however, sellers might change their tune. When you give sellers the option of accepting backup offers, the risk of your offer is greatly diminished. It costs the sellers very little to accept your offer, and gives you a chance to iron out your issues and get the contingencies resolved in time to buy the home.

 

Different Types of Backup Offer Clauses

 

Most backup offer clauses work in one of two ways: the seller has a right to accept a backup offer if your sale goes through, or the seller has a right to accept a backup offer regardless of your sale status, and then gives you a specified amount of time to step up your offer. In both cases, the seller continues to show the home and may receive “backup” offers.

 

In the former case, if your offer falls through, the seller can just slip right into the backup offer. In the latter case, the seller may accept another offer, and you may have 24 or 48 hours to make your offer more favorable. If you can offer more money, reduce your contingencies or give the sellers another reason to accept you, you can keep the home. If the other buyers can make a better deal, though, the sellers can accept it. This gives you less certainty about a home deal, but it may make the sellers more comfortable in accepting your deal up front.

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