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What are some best practices for negotiating backup-backup offers with sellers and other agents?

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As a first-time home buyer, you may have heard of backup offers, which are contracts that sellers accept in case their primary offer falls through. But did you know that there is also such a thing as a backup-backup offer, which is a third-in-line contract that sellers can accept if both their primary and backup offers fail? Backup-backup offers are rare, but they can be a smart strategy for buyers who want to secure their dream home in a competitive market. Here are some best practices for negotiating backup-backup offers with sellers and other agents.

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Lucy Novak

Referral Realtor for Coldwell Banker D'Ann Harper Realtors

1 Know the market conditions

Before you make a backup-backup offer, you need to assess the market conditions and the likelihood of the primary and backup offers falling through. In a hot seller's market, where multiple offers are common and buyers have less leverage, backup-backup offers may not be worth the effort and risk. However, in a balanced or buyer's market, where sellers have fewer options and buyers have more room to negotiate, backup-backup offers may give you an edge over other buyers. You also need to consider the strength and contingencies of the primary and backup offers, such as financing, inspection, appraisal, and closing date. The more conditions and uncertainties there are, the more chances there are for the deals to collapse.

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Lucy Novak

Referral Realtor for Coldwell Banker D'Ann Harper Realtors
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You also need to consider if you find another home and go under contract there, that you should withdraw the backup offer. Never have great hopes for getting a back up offer, the chances are very low. In fact, in the time it takes to write up that offer, you might have found another perfect alternative.

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2 Communicate with the seller and the listing agent

One of the most important aspects of negotiating backup-backup offers is communication. You need to express your interest and motivation to the seller and the listing agent, and show them that you are serious and ready to buy. You also need to ask them about the status and terms of the primary and backup offers, and how they will notify you if there are any changes or problems. You may also want to ask them to sign a disclosure form that allows them to share information about the other offers with you. This can help you make a more informed and competitive offer.

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Diana Otteson

General Manager at Real Estate 360 Property Advisory
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I use the following conditions in my back-up offers. Number one, the seller and their agent cannot reveal the existence of the back-up offer to the 1st buyer. Number two, they agree not to remind the 1st buyer or their agent to waive any conditions. Number three, they agree not to extend any conditions from the 1st buyer. This tactic will only work if the 1st offer is not in dual agency and the back-up offer needs to be strong. Sometimes, the 1st buyer or their agent will get a little complacent about completing conditions within the agreed time, or confirmation of financing may be delayed. I have actually had my back-up offer move to the front of the line because the 1st offer didn’t remove the water test condition within the agreed time.

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3 Make a strong and flexible offer

When you make a backup-backup offer, you want to make it as attractive and appealing as possible to the seller. This means offering a fair and realistic price, a large earnest money deposit, a pre-approval letter from your lender, and a short inspection period. You also want to avoid asking for too many contingencies, concessions, or repairs, as these can make your offer less desirable and more likely to be rejected. Additionally, you want to be flexible and accommodating with the seller's preferences and needs, such as their preferred closing date, possession date, and personal property. The more you can align your offer with the seller's goals, the more likely they are to accept it and move you up in the queue.

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4 Be patient and prepared

Negotiating backup-backup offers can be a long and uncertain process, so you need to be patient and prepared for any outcome. You may have to wait for weeks or months before you know if your offer will be accepted or not, and you may face multiple counteroffers or requests from the seller or the listing agent. You also need to be prepared for the possibility that your offer will never be accepted, and that you may have to look for other homes in the meantime. You should keep an eye on the market trends, the inventory, and the prices, and be ready to act quickly if you find another opportunity. You should also keep in touch with your buyer's agent, your lender, and your inspector, and update them on any changes or developments in your situation.

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5 Understand the risks and benefits

Finally, you need to understand the risks and benefits of making a backup-backup offer, and weigh them carefully before you decide to pursue this strategy. On one hand, making a backup-backup offer can give you a chance to secure your dream home in a competitive market, and save you time and money in searching for other homes. It can also give you an advantage over other buyers who may not be aware of the availability of the home or the possibility of making a backup-backup offer. On the other hand, making a backup-backup offer can also tie up your earnest money deposit, limit your options and flexibility, and expose you to legal and financial liabilities if you change your mind or breach the contract. You also need to be prepared for the emotional stress and disappointment that may come with waiting for your offer to be accepted or rejected.

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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?

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Daniel Forte
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Absolutely be aware of closings costs, and the difference between deposit and downpayment, and when both are due. Closing costs have to be paid in full, and can't be added to your mortgage or paid for on a line of credit. Working with a professional whom explains this PRIOR to your search beginning is imperative.

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What are some best practices for negotiating backup-backup offers with sellers and other agents?

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1 Know the market conditions

2 Communicate with the seller and the listing agent

3 Make a strong and flexible offer

4 Be patient and prepared

5 Understand the risks and benefits

6 Here’s what else to consider

Working with First-Time Home Buyers

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