You can’t sell a house to more than one person, but you CAN and SHOULD have more than one Contract.
What is a Backup Contract to Buy?
The Backup Contract is just how it sounds. It is an agreed upon, binding Contract that includes all of the terms of the purchase from pricing to deadlines to Closing Costs. It also includes a provision that states something along the lines of ‘Buyer and Seller agree that this Contract is in ‘Backup’ status and secondary to the ‘Primary’ Contract. If Primary Contract fails, Backup becomes Primary within 24 hours of written notice and all terms are in effect.”
How does a Backup Contract Work?
Buyer A (primary) decides that they want to terminate the ‘Primary’ Contract. Seller says ‘no problem’, terminates, writes a notice to Buyer B in backup and says ‘Congratulations, you get to Buy my house!’. Price and terms are already agreed and everything moves forward.
Why would a Seller Want a Backup Contract?
In short, Backup Offers are the ultimate ‘cover your butt’ insurance policy against anything that could go wrong with your ‘primary’ Contract. A Backup Contract does the following:
- Prevents you from taking your house off the market right away only to have to relist a house that now has a ‘failed’ stigma later on.
- Provides negotiating leverage for a Buyer who asks for too much on an Inspection Objection (‘sorry, Buyer A, but we would rather go with our Backup offer than giving you a $12,000 discount because you don’t like the color of the house’).
- Negotiates the price and terms of your ‘Backup Plan’ when the house is hot rather than trying for a new Contract by relisting after the first one fails.
- Levels out the leverage in a Contract that heavily favors the Buyer, as our Colorado Contracts do in spades.
Why Would a Buyer Want to do a Backup Offer?
Unfortunately, Buyers often miss their opportunity to purchase the ‘perfect’ house. Sometimes they just can’t get in to see it quickly enough or they can’t compete with deeper pockets. A backup offer can provide the opportunity to keep their foot in the door just in case something happens with the first offer.
A well-written Backup provision will allow the Buyer opportunity to back out at any time if they find something else they like and will not force them to provide any Earnest Money up front until they move into Primary. Its a free ‘hold’ on the next shot at their dream home.
When you work with the NoCo Home Team, you can expect that our goal is to secure both the perfect Contract for your sale AND the best possible Backup. We think its the best way to ensure that you sleep well at night, confident that your home will sell smoothly.