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  • Writer's pictureErika Gilmore


Updated: Jun 3, 2019

Why it's worth it to submit a back up offer.

Let's say you've found THE PERFECT HOUSE. Unfortunately, it was the perfect house for many people. Although you submitted your very best offer, over ask price, it was not the best offer the Sellers' received because Mortgage Bad, Cash Good. With your disappointment came the Sellers' request for a back up offer (BUO). With this request came more questions. What is a BUO? What are the important terms? What are the advantages and disadvantages? Is it even worth the time and effort? The short answer is yes, it could very much be worth your time and effort, mostly because it takes very little, but could produce a significant reward.

A BUO is a legally binding contract between the Buyer and Seller which comes into effect, if an only if, the first contract falls through. If this happens, the Seller will be obligated to sell and the Buyer will be obligated to buy the home in accordance with the terms of the BUO. The BUO can be advantageous to both parties. The Sellers probably had a lot of momentum and excitement about the house, which is why they received multiple offers in the first place. While that momentum is hot, the Sellers want to capture as many Buyers as possible, and avoid the hassle of marketing the home a second time. With a BUO, the Sellers get twice the results for half the effort. With two Buyers, the chances for a successful closing double. For the Buyers, they are now in second place. Second is much better than third, and exponentially better than nothing. If the first contract falls through, they are now in the exciting position of Buyers of their dream home. No renegotiation, further haggling, or competition from other Buyers. No redoing all the work.

There are some important provisions to include in the BUO, and BUOs can be negotiated and countered just like primary offers.

  1. Make sure the BUO becomes the primary offer if the first contact falls through. Best practice is to ask the selling agent for the name of the primary Buyer to include in the BUO, or at least include the primary Buyer's agent and the date the primary contract was executed (executed means signed by both parties). This will eliminate any chance another Buyer sneaks into the picture claiming to be primary. Important note to agents: make sure to get your client's consent before disclosing this information.

  2. Include language that the Buyers can terminate the BUO, at any time, without penalty, upon written notice to the Sellers, prior to being notified they are in first position. The Buyers are then free to purchase another house while they wait, without any penalty or loss of escrow deposit.

  3. The Seller may revise the primary contract, which should have no effect on the BUO.

  4. Don't exchange money until you're numero uno. The Buyers should hang on to their escrow deposit until 24-48 hours after their BUO becomes the primary contract.Finally, keep in mind those time specific clauses and push back your closing. The clock shouldn't start ticking until the contract begins.

Yes, then the Buyers must wait. But go ahead and look for another PERFECT HOUSE while waiting. Maybe you'll lose this house, but maybe you'll get a call that the first Buyers changed their minds. Either way, it didn't take much time or effort, so there is no harm in Backing that Offer Up.

Cheers, Erika

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