Reading through a real estate ad and see the phrase “Back-up Offers Only”, don’t worry if you’re left wondering what that means.
Let Home Team Ottawa explain.
Back-Up offers Only is a REALTORS® polite way of saying, “we have accepted an offer…but I’m not sure it’s going to come together. So if you are thinking of buying this home you can put in a legally binding back-up offer so if the first one falls apart you are the next in line.”
What that means for you is you are committing to buy this home if the first offer falls apart, so it should only be used in cases where you really, really want the home.
It’s best in cases where you are looking at your dream home or a fairly unique home for sale.
There are usually two cases where REALTORS® will promote and accept back-up offers. The First is called a first right of refusal, when the potential buyer still has to sell their current home in order to buy.
In this case your back-up offer will run like a typical offer, you’ll have conditions like financing and inspections and once the conditions are completely fulfilled they will give the buyers 24-48h notice to either firm up or back out so you can have the home.
The second situation where back-up offers are encourage is when the REALTOR® has a suspicious about the buyers ability to buy, some times they will ask for longer than usual to get financing, ask to extend some conditions or generally dragging their heels.
Occasionally they will re-open negotiations trying to squeeze the sellers for more money once they have effectively take the home off the market for a week or two, wasted the best adverting time for a new to the market home.
This is the best time to slip in and win back the home you want.
A Back-up offer will be very similar to a traditional offer, usually including one additional clause that the seller be released from the previous offer.
In the first scenario you will do your due diligence before the seller ask the first buyer to back out. In the second scenario the seller will try to get the buyer to back out before or while you are doing your due diligence.
At the end of the day the seller is looking to ensure the home sells to the better offer, and slipping in with a back up offer is a risk that you as the second buyer take to try and win the home that’s right for you.
While this strategy is not for everyone, and not useful in every situation it’s just one of the tools in our REALTORS® play book.
Hope this helps you understand real estate a little better.
As always if you have any real estate questions ask them below, or contact us directly at 613-788-2113