Back Up Offers Buyers and Sellers

Backup offers occur when two or more Buyers want the same property. Obviously, the Seller cannot sell the property to both Buyers. So the Seller accepts the offer that pleases them most, and accepts a second offer subject to the first offer collapsing, which is called a backup offer. A situation could also exist where there is a third offer accepted subject to the first two sales collapsing, and so on.

You may wonder why a Buyer would want to be in a backup position. The reason is that if anything happens that the first Buyer fails to remove their conditions of sale by the agreed upon date, then the backup Buyer’s contract automatically moves into first position. If the backup Buyer sincerely wants the property, they think it’s worth waiting in the backup position in the hopes that the first contract fails. Backup offers can be written so that the Buyer can withdraw at any time if they want to. Often Sellers won’t accept a backup offer with a “possible to withdraw” clause in it. They are more apt to accept a backup offer where a Buyer cannot withdraw, as this type of offer gives the most security to the Seller.

If you are a Buyer, in a competitive position with other Buyers for the backup position contract, then I don’t recommend you include the “possible to withdraw” clause as it greatly weakens your offer in the Sellers’ eyes. Of course this would prohibit you from buying another property until you find out for certain whether you were successful or not with your backup contract.

If you are a Seller and have an accepted offer on your property, and you also have accepted backup offer(s), you must be very cautious about granting any renegotiation of the terms, dates, or conditions on your first accepted offer. Renegotiation on the first contract could put you as a Seller into a position where both the original and backup Buyers have an enforceable contract. This would mean you have sold your property to two Buyers. Not good. The Seller should definitely seek careful legal advice before renegotiating that first contract in any way. Backup buyers in such a situation should also obtain legal advice.

Another interesting point about backup offers is that they can be for any price that the Seller agrees to. There is no rule that says they must be equal to the first position offer.