If you are working with buyers in this market of limited inventory, you have no doubt encountered the multiple offer situation. And if you have encountered it, you have most likely encouraged your client to:
(a) Offer the best terms possible;
(b) Write an engaging letter describing why they are the best buyers on the planet;
(c) Prepare for losing out to another buyer; or
(d) All of the above.
Setting the expectations of losing out on a dream home is tough for any buyer. But there is some good news.
Several major title companies have recently stated that a very high percentage of new contracts “fall out” within the option period in this frenzied, scarcity market. I have heard statistics as high as 46%. And when those contracts terminate, the Listing Agent typically puts the home right back on the market and gets another round of multiple offers.
So listen up: Your best tool for these situations is the Addendum for Back Up Offer.
Why? If/when the offer that was selected instead of yours terminates, your buyer(s) will automatically be in first position.
How? This addendum is located in ZipForms. Submit your offer with this Addendum completed and wait for the sellers to respond to their plethora of offers. If your buyer(s)’ offer is not selected, request that they execute yours as a backup. You’ve already attached the form. Go, you!
Then what? When your buyer(s)’ offer is executed, it is a real, bonafide, executed contract and needs to be treated as if it were the primary contract. That means you DO need to submit earnest money and you DO need to submit the option fee. Most of the time, limited amounts are used for these, for example, a $10 option fee (with additional option fee due if contract becomes primary). Your Broker/Manager can advise you how to complete the form to limit your buyer(s)’ cash needed.
Won’t this just give the seller bargaining power with the primary contract buyer? Possibly. But keep in mind that this addendum is powerful. It automatically puts your buyer(s)’ contract in first position if the contract from the first buyer terminates.
So we just wait for the outcome? No. Keep looking. There’s always the chance that some other property will come along and your buyer will actually be the preferred offer. If that happens, you can terminate the backup offer, obtain refund of the earnest money and fulfill the contract agreement terms for the new property.
Don’t be shut out of this market. Be strategic and take advantage of this amazing promulgated form (TREC 11-7) and put your buyers in a position to win.