What is a back up offer?

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What is a back up offer?

Dear Phyllis,

I have been visiting La Crescenta open houses for a few months. However, I am not yet prepared to buy a home. So, you can understand I don’t want to get too engaged with Realtors at this time. At one open house the real estate agent told me that they had multiple offers. At another, the agent told me the seller was already in escrow but looking for back up offers. I think I understand what multiple offers are. But can you clarify what is a back-up offer and why I might want to make one?

Thank you! Jerry

Dear Jerry,

Thanks for the question! At open houses, I often have buyers and real estate agents asking when we are reviewing offers.

It is customary in our Foothill neighborhoods, that an offer is submitted with proof of funds and a prequalification or preapproval letter. Most real estate agents will talk with the buyer’s lender prior to accepting an offer. They can then be assured that the buyer qualifies for a loan.

Likely the offer was written that in the event the home does not appraise, or the buyer doesn’t approve the condition of the property, the buyer can cancel escrow and have their earnest money deposit refunded. A backup offer occurs when the seller is already in escrow. They can then accept a backup offer subject to the first buyer failing to perform. If the original escrow is cancelled, the backup buyer is automatically next in line.

My sister lives out of state. She and her husband decided to move from their community to a neighboring one. In the same manner as the majority of home buyers, my sister found her dream home online. It was everything she and her husband were hoping for. It was on the water and best of all, in their price range. She quickly contacted a real estate agent and was crushed to learn the home was already in escrow (but accepting back up offers).

My sister did not let the fact that her dream home was already in escrow deter her. She asked the Realtor to prepare a backup offer. As fate would have it, the original buyer cancelled escrow. My sister and brother-in-law then closed escrow on their dream home.

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