In fast moving markets, many listings are sold in the first few hours or days on the market. But more and more sellers are continuing to show their home....in search of backup offers. What does this mean to you as a buyer? And why would sellers opt to do this? I can answer those two questions in this post. Then you can decide if entering into this type of offer benefits you in the long run.
What does a backup offer mean to a buyer?
A backup offer is when the sellers have already accepted an offer on their home, but due to inspection, appraisal and financing contingencies, there are continuing to show their home to other buyers in hopes of obtaining another acceptable offer. That way, if something happens with the first buyer, the seller can move forward quickly without losing traction in the market.
Should you even see a home that already has an accepted offer?
As a buyer, the inventory that is available in your price range may be very limited depending on the time of the year. And because inventory is low and demand is high, there may be cases where a multiple offer/competing offer scenario is common. As a buyer in backup position, there are advantages as long as the time is limited for this status. For instance, usually a backup offer is only binding for the ten day inspection period and the buyer can ask to be released at any time in writing should they find another home that is available.
Why would a seller choose to continue to show their offer after they have accepted an offer?
The reasoning for continuing to market after an offer has been accepted can vary, but the most common reasons are:
1. The house has only been listed for a day or two with a lot of initial interest. If the seller were to remove the home from the market, it is difficult to restart if it needs to come back onto the market a week later if something happens with the initial buyer.
2. The seller has an offer on a replacement property and they don't want to lose that home. That means that if the first buyer for their home withdraws, they are no longer under contract and they can lose the home that they were hoping to buy next!
3. The seller has been burned before or is concerned about what the first buyer may ask for upon inspection for repairs. Having a back up offer gives the seller leverage to be able to encourage the first buyers to be reasonable and not ask for everything on the inspectors' list.
Ultimately, as a buyer you need to decide whether or not you want to view a home that you may not be able to buy. It is a risk to be the backup offer and the reality is that most of the time, the first buyer continues on to purchase the home and you are left out in the cold. But there are scenarios where it might make sense to be the second in line depending on your unique situation. This is why hiring a real estate professional is so important! Call me today and I will assist you in navigating all of these scenarios in the search for the perfect home for your family and your budget!