Accepting Backup Offers Guide

By PropertyClub Team
Jul 17th 2024
When a real estate listing indicates that the seller is "accepting backups," it means that the seller has already accepted an offer on the property but is open to receiving and considering additional backup offers. These backup offers are contingent on the original deal falling through.

Backup offers are an excellent way to make sure you’ll be able to sell your home even if the first offer doesn’t go through. But you need to know how this process works if you want to be successful in accepting a backup offer on your home. 

hash-markTable of Contents

What Is a Backup Offer?
What Does Accepting Backup Offer Mean?
How Does a Buyer Make a Backup Offer On A House?
Things to Consider When Making a Backup Offer
Pending vs. Accepting Backup Offers
Accepting Backup Offers Bottom Line

hash-markWhat Is a Backup Offer? 

A backup offer is a chance for sellers to consider the offer from a second buyer and an opportunity for buyers who weren’t as quick or competitive as the first offer to have a chance at buying a house. 

When a home seller accepts a backup offer, they’re saying that this person will be considered to buy their home next if the person who made the first offer is unable to buy the home for any reason. 

It’s worth noting that sellers can ask for earnest money deposits if they choose to accept a backup offer to help prove that buyers are seriously interested in the property. 

hash-markWhat Does Accepting Backup Offers Mean? 

Accepting a backup offer means that the seller already has one offer that they are considering or have already accepted for the home but that you’re willing to guarantee that you’ll accept the offer from a second buyer if the first offer falls through. 

Essentially, this is an offer acceptance, just in case

Accepting a backup offer is also a good way to get leverage in negotiations with the person making the original offer. If they ask for too many repairs or changes after an inspection, for instance, the seller can choose to walk away knowing that they have a second offer in place. 

Understanding Backup Offers

Primary Offer: This is the first offer that has been accepted by the seller and is currently under contract. The property is in escrow, pending completion of contingencies such as financing, inspection, and appraisal.

Backup Offer: A backup offer is a secondary offer that the seller can fall back on if the primary offer fails to close. If the primary offer falls through for any reason (e.g., financing issues, inspection problems, buyer's change of mind), the backup offer automatically becomes the primary offer.

hash-markHow Does a Buyer Make a Backup Offer On A House? 

  1. Submit the Offer: Present a formal written offer to the seller or the seller’s agent, indicating that it is a backup offer.
  2. Negotiate Terms: Negotiate the terms of the backup offer, including price, contingencies, and timeline. The terms should be as favorable as possible, knowing that you are not the primary buyer.
  3. Earnest Money: Be prepared to submit an earnest money deposit, which might be held in escrow until the primary offer's status is resolved.
  4. Acceptance: If the seller accepts your backup offer, ensure that all terms are documented and that you understand the conditions under which your offer becomes primary.

hash-markThings to Consider When Making a Backup Offer 

  1. You Might be Asked For Earnest Money
  2. You May Miss Other Opportunities
  3. A Backup Offer Can Motivate the First Offer to Close

1. You Might be Asked For Earnest Money

The main consideration when making a backup offer is that the seller may ask for earnest money to guarantee that they will accept your offer if their current offer falls through. Paying out earnest money may hurt your position if you decide to make offers on a different home in the meantime. 

If you do decide to move forward and break the contract on a backup offer, you may have to give up part of your earnest money in payment. Thankfully, most sellers are willing to return most of the earnest money to buyers who have made a backup offer. 

2. You May Miss Other Opportunities

Of course, if you continue shopping for a home after making a backup offer on a different house, you may have difficulties. A backup offer is a binding contract, which you’ll have to formally withdraw before making an offer on a different home. 

3. A Backup Offer Can Motivate the First Offer to Close

The other thing to consider is that making a backup offer can sometimes rush the first offer and make it more likely that they’ll close on the house quickly and without asking for as much from the seller. 

That’s important because it means making a backup offer can reduce the odds that the first offer will fall through and that the house will go back on the market. 

hash-markPending vs. Accepting Backup Offers

There’s often some confusion when it comes to backup offers and the different phases of a home sale. 

A home sale that’s pending usually means that the seller is already working with a potential buyer but may accept backup offers if they are made. This sale status indicates that nothing seems to be wrong with the current offer but that the seller is covering their bases by accepting backup offers. 

However, if a sale is listed as accepting backup offers, that usually means that there have been hiccups in the process and that the seller is actively looking for alternatives since the previous offer looks likely to fall through. 

In both cases, potential buyers can submit backup offers, but you may have a better chance of getting a home that’s actively looking for backup offers than a home that’s simply pending sale. 

hash-markAccepting Backup Offers Bottom Line

Accepting backups means that while the property is under contract with a primary buyer, the seller is open to considering additional offers as backups. This strategy benefits both buyers and sellers by providing a secondary option if the primary deal does not close. Buyers should weigh the pros and cons of submitting a backup offer and ensure they are clear on the terms and conditions.

It makes a lot of sense for sellers to accept backup offers in case something happens with the pending deal they have in place. On the other hand, making a backup offer can also make sense for home buyers who want to try and purchase a home that is already under contract. After all, a decent percentage of deals don't end up closing, and if you've made a backup offer, you'll be first in line to purchase it if the original deal falls through.