Addendum for Back-Up Contract Texas Real Estate
What is it?
In a nutshell the backup contract is an agreement between a prospective buyer and a seller to purchase the property when there is already an existing contract in place. The backup buyer and seller agree that if the first contract terminates by a certain date the backup contract will become effective immediately.
Does buyer need to perform per the contract while in the backup position?
The prospective buyer does need to submit earnest and option monies upon execution of the back-up contract, however no other duties are required of the buyer. All other duties of the contract will be performed upon termination of the first contract.
What is the effective date of the contract?
The effective date of the back-up begins on the date of termination of the first contract. This is when the option period would begin and all other "time is of the essence" components to the contract. Seller must notify back-up immediately upon termination of the first contract.
If the back-up contract never moves into first position does the back-up buyer receive a refund of earnest and option monies?
The earnest money is refunded to the prospective buyer but the seller will retain the option money. Keep this in mind when you put up option money in the back-up position. The reason it's not refunded is because the prospective buyer retains the ability to terminate the contract at any time during the back-up position.
May the seller amend the first contract while another buyer is in the backup position?
Yes. The seller may amend their first contract and that does not make it void. Only upon termination between both parties does the back-up become effective.
May a seller get more than one back-up contract?
No. A seller may not get a back-up to a back-up.
If the first buyer terminates is it possible for the seller to put the property back out there to entertain more offers?
Absolutely not. The back-up contract is a binding contract that becomes effective upon termination of the first.
I hope this gives some insight into the nuances of the back-up contract and how it is used in Texas Real Estate.