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What are the common reasons why backup offers fall through and how can you prevent them?

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As a first-time home buyer, you may have encountered the situation where your dream house already has an accepted offer from another buyer. However, you don't have to give up hope just yet. You can still submit a backup offer, which is a contract that states you are willing to buy the property if the first offer falls through. A backup offer can give you an edge over other potential buyers and save you time and hassle in case the market is competitive. But what are the common reasons why backup offers fall through and how can you prevent them? In this article, we will explain the factors that affect the success of backup offers and share some tips on how to make yours stand out.

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Secure financing:

Ensuring you have solid financial backing makes your backup offer more compelling. This might involve a cash offer or a larger down payment, which can give you an edge if the initial offer falls through.
Keep options open:

While waiting on a backup offer, continue exploring other listings. This keeps your home search active and provides alternatives in case the backup doesn't become the primary offer.

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1 What is a backup offer?

A backup offer is a legally binding agreement that you sign with the seller, stating that you will buy the property if the first offer fails to close. The backup offer is usually contingent on the cancellation of the first offer, which can happen for various reasons, such as financing issues, inspection problems, appraisal discrepancies, or buyer's remorse. The backup offer can also have its own contingencies, such as securing a loan, selling your current home, or conducting a home inspection. The backup offer is typically valid until the first offer closes or expires, unless otherwise specified.

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Michael Bishop

Empowering clients with Info, Numbers, Data: all tools used to educate and inform Buyers and Sellers in Central Ohio: Columbus, New Albany, Westerville, Gahanna, Worthington, Granville, Newark & beyond. I use deep data!
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Back up offers. I believe back up offers make a lot of sense for some buyers and first time homebuyers. The first hurdle is realizing that the offer that they've presented wasn't good enough to be the one accepted If taken as a second or back up offer. I encourage them not to discontinue watching listings. We continue going out to see anything that they consider equal or better to their back up offer. I've never had a back up, accepted so far. In most cases in Columbus, Ohio, we don't have to make the deposit until they become the offer accepted. It doesn't prevent them from shopping or making another offer. If they make another offer, I terminate their backup offer because they cannot execute both transactions normally.

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Laura Gray
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I don’t advise my buyer clients, particularly first time buyers, to put in backup offers for multiple reasons 1) I feel it’s setting them up for disappointment 2) It ties up their funds in an EMD 3) It prevents them offering on another property. If the client is set on obtaining a property, I advise them to make their “highest and best” offer, including escalations, appraisal gap clauses and limited contingencies.

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Shibasis Biswal(SAM)

AI/Software Product Sales(pre and post) and Services| Leads |Contracts| Non IT(Global) |BDM ||Customer Success| Ex Daimler/Mercedes Benz/Lumen/Target |XIMB| MBA - HR (Top 10)
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Primary offer success. Seller's change of mind. Contract contingencies. Financing issues. Timeline conflicts. Prevention tips: Clear communication. Contingency understanding. Quick response. Flexible timelines. Continued property marketing.

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2 Why do backup offers fall through?

Backup offers can fall through for several reasons, such as if the first buyer meets all the conditions and deadlines of their contract, if the seller rejects the backup offer, or if the backup buyer withdraws the backup offer. In the first case, the backup offer becomes null and void. The seller should notify you in writing if they reject your offer and you should get your earnest money back. As a backup buyer, you may choose to withdraw your backup offer at any time before it becomes effective. Reasons for withdrawal could include finding another house that you like better, changing your mind about buying a house, or encountering personal or financial difficulties. You should also notify the seller in writing and get your earnest money back if you withdraw your backup offer.

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John Exum

Manager at B&M Realty
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The biggest challenge with initial offers today is the consistently moving marketplace and increasing rates. A mortgage offer that is not "locked in" at a rate can wreak havoc with a sale! A backup offer should be backed up with research that includes a healthy vetting of the secondary buyer's financial ability to close under any circumstances! A cash offer preferably. But a willingness to bring forth a higher down payment to reduce DTI numbers can also help seal a sale!

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3 How can you prevent backup offers from falling through?

While you cannot control the outcome of the first offer or the seller's decision, there are steps you can take to make your backup offer more appealing and secure. When offering a price, strive for one that is competitive and realistic, based on the market value of the house and the demand in the area . Additionally, limit your contingencies to essential ones and avoid any unnecessary or unreasonable ones. Lastly, demonstrate your seriousness and readiness to buy the house by being flexible and responsive to the seller's requests and needs. Keep in contact with them regularly and follow up on the status of the first offer. Doing so may increase your chances of getting the house.

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4 What are the benefits of backup offers?

Backup offers may be a long shot, but they can still provide benefits for first-time home buyers. For instance, if the initial offer fails, you will have a signed contract with the seller and be able to move forward with the closing process quickly. Additionally, you may have more leverage to negotiate a better price, terms, or incentives with the seller. Furthermore, having a backup offer in place gives you more time to prepare for your next move, such as continuing your house hunting, securing your financing, and arranging your relocation.

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5 What are the drawbacks of backup offers?

Backup offers come with certain drawbacks, such as no guarantee of getting the house, less freedom to explore other options, and more emotional stress and uncertainty. When you submit a backup offer, you are committing to buy the house if the first offer falls through, which may limit your choices and opportunities in the market. Additionally, waiting for the outcome of the first offer can be emotionally stressful and uncertain, leading to feelings of anxiety, frustration, or disappointment. Furthermore, if your backup offer becomes effective, you may feel pressured or rushed to close the deal quickly.

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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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What are the common reasons why backup offers fall through and how can you prevent them?

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1 What is a backup offer?

2 Why do backup offers fall through?

3 How can you prevent backup offers from falling through?

4 What are the benefits of backup offers?

5 What are the drawbacks of backup offers?

6 Here’s what else to consider

Working with First-Time Home Buyers

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