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Back-Up Offers

How to handle back-up offers!

What is a back-up offer? When a Seller accepts and signs a Buyer’s purchase offer, the first accepted offer becomes the primary contract. From that point on, all other accepted offers are referred to as “back-up offers.” Back-up offers are frequently submitted to Sellers when the marketplace is competitive and when Buyers are anxious to pursue a specific property.

When receiving a back-up offer, Sellers should carefully review and negotiate all terms of the back-up offer. Then, before signing, Sellers should consult their attorney before signing a back-up offer because you do not want to be liable for signing two contracts when you can only perform on one! Every back-up offer should clearly contain specific language identifying the offer as a “back-up offer.”

When a primary contract fails to close, Buyers and Sellers should always sign a release of contract. The release of contract should indicate who will retain the earnest money deposit. Once the release is signed, written notification should be given to the back-up Buyer indicating their offer is now the primary contract.

Why is it wise for Sellers to take back-up contracts? In real estate, you never know what might happen. Sometimes a Buyer may lose their job or be transferred out of state, or sometimes a Buyer’s financing may not be approved. In instances like these, having a back-up offer can be helpful. Sellers who sign back-up contracts can take great relief, especially during difficult marketing periods. Sellers should therefore always continue to show their properties until their property is sold!

Here are a few reasons why contracts fail to close.