What are the benefits and risks of making a backup offer on a USDA home?

1 What is a backup offer?

A backup offer is an offer that you make on a property that already has an accepted offer from another buyer. The backup offer is contingent on the first offer falling through for any reason, such as inspection issues, financing problems, or appraisal discrepancies. If the first offer fails, the backup offer automatically becomes the primary offer and the seller can accept it without having to relist the property or look for another buyer.

2 How to make a backup offer?

To make a backup offer, you need to follow the same steps as making a regular offer, such as getting pre-approved, finding a real estate agent, and submitting a written offer with earnest money and contingencies. However, you also need to include a backup offer addendum that states that your offer is secondary to the existing offer and that you are willing to wait until the first offer is resolved. You also need to specify how long your backup offer is valid and under what conditions you can withdraw it.

3 What are the benefits of making a backup offer?

Making a backup offer can be beneficial for buyers searching for a USDA home, as it can secure their position in case the first offer falls through. Additionally, it can show the seller their interest and commitment, potentially increasing their chances of getting the home if the seller is unhappy with the first buyer or wants to negotiate. Furthermore, buyers can take advantage of the USDA loan program, which offers 100% financing, low-interest rates, and flexible credit requirements for eligible rural properties.

4 What are the risks of making a backup offer?

Making a backup offer can also have some risks for you as a buyer, particularly if you are not prepared to wait or lose the opportunity to buy another home. For example, you may lose your earnest money if you withdraw your backup offer without a valid reason or breach the contract terms. Additionally, you may miss out on other homes that come on the market while waiting for the first offer to be resolved, limiting your options and increasing frustration. Furthermore, making multiple backup offers on different properties or accepting another primary offer while your backup offer is still active can result in lawsuits or damages.

5 How to decide whether to make a backup offer?

Making a backup offer is a personal decision that depends on your situation and goals. Before you make a decision, consider how much you love the home, how likely the first offer is to fall through, how strong your backup offer is, and if you have a back-up plan. Additionally, think about the terms and conditions of your backup offer and how flexible you are to negotiate with the seller. Making a backup offer on a USDA home can be a smart strategy to get the home of your dreams, but it also comes with some challenges and uncertainties. Therefore, it's important to weigh the pros and cons carefully before making a backup offer, while also consulting with your real estate agent and lender. Be prepared to act quickly and confidently if your backup offer becomes the primary offer.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?