How to Write and Submit a Backup Offer
Strategically navigate real estate by learning to prepare, submit, and manage a backup offer to secure your desired property.
When a highly sought-after property is already under contract, a backup offer provides a strategic pathway to secure it if the initial agreement falters. A backup offer is a formal proposal submitted on a home that already has an accepted primary offer. This mechanism allows a buyer to position themselves next in line, should the current transaction not proceed to closing. It offers a structured approach for buyers interested in a specific property.
Understanding the Backup Offer Framework
A backup offer operates under a distinct contractual framework. It becomes a legally binding contract only upon the failure of the primary offer and its subsequent activation. This means the backup offer remains contingent and non-binding for both buyer and seller as long as the initial primary contract is actively moving towards closing. Sellers cannot legally accept two offers simultaneously for the same property, which reinforces the conditional nature of a backup agreement.
The seller’s commitment to the primary buyer takes precedence. A “backup clause” or “backup addendum” defines the unique terms of this arrangement. This addendum outlines the precise conditions under which the backup offer transitions to the primary contract. These conditions typically include the formal termination of the primary contract and a specified notification process to the backup buyer, often within a defined timeframe.
For a buyer, being in a “backup position” means their offer has been formally acknowledged and accepted by the seller, but with a key condition. Their purchase agreement is on standby, waiting for the primary transaction to terminate. This conditional acceptance provides a defined path to acquire the property without actively competing with the existing primary contract. The backup addendum safeguards both parties by clarifying responsibilities, timelines, and the trigger for the offer’s activation.
Developing Your Backup Offer Terms
Formulating a backup offer requires careful consideration of financial and contractual elements, similar to a primary offer, but with strategic adjustments. The proposed purchase price is a central component, influenced by market conditions, seller motivation, and details about the primary offer. Buyers might propose a price close to or slightly above the asking price to enhance competitiveness.
The earnest money deposit demonstrates the buyer’s financial commitment. While typical amounts range from 1% to 3% of the purchase price, this varies based on local market norms. This deposit is held in an escrow account by a neutral third party and becomes at risk once the backup offer transitions to primary status, subject to agreed-upon contingencies.
Contingencies protect the buyer by allowing them to withdraw from the contract without penalty. Common contingencies include financing, property inspection, and appraisal. For a backup offer, buyers might shorten the timeframe for these contingencies to make their offer more appealing. A “sale of existing home” contingency can be included but might reduce the offer’s strength.
Setting a realistic closing date is important, as it dictates the timeline for the transfer of funds and property ownership. While a backup offer’s closing date is uncertain, it should align with typical transaction periods, often 30 to 60 days from activation. Specifying inclusions or exclusions of personal property clarifies what conveys with the home.
To translate these decisions into a formal document, buyers typically obtain standard real estate purchase agreement forms that comply with local requirements. These forms are designed to be universally applicable within a given jurisdiction. The decided terms, including purchase price, earnest money amount, specific contingencies with their timeframes, and the agreed-upon closing date, are inputted into the designated fields, ensuring legal compliance.
The specific backup addendum must be properly incorporated into the main offer form. This involves attaching the addendum and ensuring clear cross-referencing between the main agreement and the backup provisions. Buyers should review all terms for accuracy and consistency across the entire document before the offer proceeds, which helps prevent future misunderstandings.
Submitting and Managing the Backup Offer
Once the backup offer document is prepared, including all terms and the specific backup addendum, the next step is its formal delivery. The buyer’s real estate agent typically facilitates this submission to the seller’s agent, often through secure electronic platforms, ensuring a verifiable record of transmission and receipt. All necessary signatures from the buyer and their agent must be in place before submission.
If the seller accepts the offer into backup position, the buyer receives notification. This confirms their offer has been formally acknowledged and positioned as next in line, but it is not an outright acceptance to purchase the property. The earnest money deposit usually remains with the buyer or their agent until the backup offer formally activates.
The backup offer activates when the primary contract formally terminates and the seller notifies the backup buyer. This notification often triggers a specific timeframe, typically 24 to 72 hours, during which the backup offer transitions into a fully binding primary contract. At this point, the earnest money deposit becomes immediately at risk and is deposited into escrow, and contingency timelines begin.
Should the buyer decide to pursue a different property or change their mind while in backup position, they can formally withdraw their offer. This withdrawal must be communicated in writing to the seller’s agent before the backup offer transitions to primary status. Properly documented written notice releases the buyer from future obligations and secures the return of any held funds.
If the primary contract successfully proceeds to closing, the backup offer automatically becomes null and void, with no further obligation for the backup buyer. Any earnest money held is returned to the buyer without penalty. The real estate agent plays a key role throughout these procedural steps, from ensuring correct document submission to facilitating communication and managing the activation or withdrawal process, providing guidance to the buyer.