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What is a Backup Offer in Real Estate?

When housing market competition increases, it can sometimes be difficult to find an ideal home before another buyer gets to it. You may think your dream home is in your grasp, and then it is suddenly taken by another buyer. So what do you do?

In this case, it may be time to consider putting in a backup offer. A backup offer is a contract stating that a buyer will purchase a home from a seller with agreed-upon terms if the primary contract is terminated. 

Do backup offers get accepted?

Even though a contract has been signed between the first buyer & the seller, it does not mean that the sale will go through. The first offer could fall apart for many reasons, like home inspection issues, issues with the buyer’s financing, or failure to meet contingencies.

If you’ve made a backup offer and one of the contingencies is not completed, you could find yourself first in line to buy the property. A backup offer can become a legally binding contract depending on the state you live in. This means that if the offer with the first buyer doesn’t happen, your agreement will take effect.

Backup offers are commonly made & accepted. Many real estate transactions have scenarios where something causes the first buyer to back out, but the seller will still have a second offer waiting in the wings. 

Sellers don’t have to accept the second best offer as-is. Counteroffers are acceptable in a backup offer situation, as well. If you’re going to accept a backup offer, you should try to get terms that are suitable for you as well as the backup buyer. 

Why do sellers take backup offers?

It protects sellers from having to put their homes back on the market and restarting the process. Sellers will often accept what they think is the best offer, but sometimes it can fall through. For example, if a home inspector reveals an issue in the inspection, the first buyer may not want to move forward. This would allow the secondary buyer to be in the first position to get the home. 

Is a backup offer binding?

Bidding wars are likely in high competition markets. It’s important that buyers understand that backup offers are legally binding contracts. An accepted backup offer is an executed contract that should be followed just like the original accepted offer. 

Pros & cons of backup offers as a buyer


Eliminate the competition

By submitting a backup offer, you could potentially wipe out any possible competition you could have if the first sale falls through. The seller may like your offer enough to not put their home back on the open market. This is especially a benefit in low-inventory markets because you wouldn’t have to worry about anyone swooping in to take the property from you. 

Beating other backup offers

There can be multiple backup offers submitted to a seller. But, yours could be the first in line as long as you submit it early. If you wait to place your backup offer, you may be in line behind other offers. 


Motivating the primary buyer

By placing an offer on a house, you’re showing that the property is desired. This can cause the initial buyer to feel protective of the sale and do everything possible to hold on to it. 

Being under contract

You’ll probably still be looking at other properties while you’re waiting to hear how the backup offer plays out. You may even find another home that works just as well. The only problem is that you’re now obligated to buy the other property if there is a contractual agreement made with the seller. 

Discuss backup offers with your REALTOR®

Backup offers can be useful when trying to purchase your dream home, but every situation is unique. Be sure to discuss your ideas with your real estate agent and get their advice on keeping things in your best interest. 

Team Melton has over 50 combined years of real estate experience to assist you through every step of the process. Contact us today to get started on selling your home!

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