The Back-Up Offer Part 1

A back-up offer is a second offer on a seller’s home. The seller already has an accepted offer to buy and cannot legally sell the home twice.

To resolve this, the back-up offer has a condition to protect the seller. It basically states that if the first offer is released by mutual agreement or becomes somehow become null and void, the back-up offer would then be binding on the seller.    

So When and Why Use a Back-Up Offer?

There are a number of possibilities for using a back-up offer. Most commonly, the first offer is conditional on mortgage financing, which may become an issue for some of the following reasons.

  1. The buyers are not pre-approved for a mortgage; so they may not obtain the financing needed to remove the mortgage condition in the offer.
  2. The buyers are less than cooperative and disclose little or no information about their ability to buy.
  3. In this case, a good salesperson may choose not draft an offer until convinced that the effort is worthwhile. However, buyers can always find a real estate agent willing to negotiate an offer to purchase on the hope that it will lead to a sale.
  4. The buyer’s rep is reluctant to ask the right questions and confirm with the appropriate lender whether the buyers qualify financially.
  5. The mortgage agent pre-approved the buyer prematurely without verifying income and gives uncorroborated assurances to the buyers and salesperson.
  6. The buyers are dealing directly with a bank’s consultant who does not take the time to properly qualify them.

Cause for Suspicion Equals Continued Marketing

The seller’s agent, on questioning the buyer’s agent becomes suspect and, in negotiating the offer, informs the seller that the buyer’s financial qualifications are unverified. The seller then directs the agent to continue to show the property and present any resulting offer(s).

A Heads up from the Buyer’s Rep

Within days of offer acceptance, the buyer’s agent informs the seller’s agent that the buyer is having trouble obtaining the needed mortgage. The seller agrees to continue showing the home in the hope of obtaining a back offer. There are times when the mortgage is withdrawn or denied after an offer is firm and scheduled to close—covered in Part 2.

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Eugene Pilato

Eugene Pilato

Broker of Record
CENTURY 21 Today Realty Ltd., Brokerage*
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