The Real McCoy: Why work with a backup offer?

By: Kari McCoy, Special to Gold Country News Service
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Dear Kari,

My husband and I have been trying to buy a house for the last two months. We have 10 percent down payment and we have our loan ready to go. In our area, there are just too many buyers and not enough homes on the market. Our problem is we keep losing out to other buyers with better all-cash offers. Of course, we are kicking ourselves because we could have bought a home last November, but instead we waited and are now paying the price. My husband’s co-worker suggested we start making back-up offers on properties we like. To me, this sounds like a lot of wasted time. My husband and I are already mentally exhausted. Could you please let us know if this is something we should consider or toss the idea altogether?



Thank you for your creative and well thought-out question. As soon as a buyer has written an offer on a property, their Realtor will submit it to the seller’s Realtor. At that point, the seller has the choice to reject the offer or accept it or to submit a counter offer. In the event the seller elects to counter the offer with their own, the seller will sign the original offer and make any desired changes on a counter-offer form. Once the seller and the buyer come to a mutual agreement, both parties will sign all counter offers then the parties are in a binding contract. This contract is referred to as the primary contract on the property. There are time frames and dates to be met. The contract in general will have several buyer contingencies (or ways out of the contract). Here are some examples of common buyer contingencies:

• lender appraisal of property with the agreed to purchase price.

• home inspection report.

• roof inspection

• loan contingency

• preliminary title report

• wood destroying pest inspection

• seller statutory disclosures

• furnace inspection

• pool inspection

• homeowner association documents

• disclosure of specific environmental problems

• CC&Rs

• sewer inspection

• chimney inspection

These contingencies will need to be removed by the buyer or a mutual negotiation with the seller prior to the close of escrow. In the event the buyer does not remove all of the contingencies within the allotted time frame (and a meeting of the minds does not occur), then the seller may have their property back and typically the buyer is given back their deposit.

With the idea of the seller having an accepted offer on the property and another offer follows, the seller and buyer may elect to place this offer in a back-up position. This is a seller contingency and the backup offer will acknowledge the existence of an existing offer and state if the first buyer cancels, the backup offer automatically falls into primary position. A seller can accept multiple backup offers, so it would be wise to be in the No. 1 spot. A seller would be wise to use just as much time and effort to negotiate the backup offer as with the primary offer.

The benefit of having a backup offer for the buyer is they do not have to deal with multiple offers or a bidding war. During the backup period, the buyer is free to continue shopping for another home and they can cancel the backup offer if they change their mind or if they find a better home. The backup offer is in limbo and put on hold. Their clock does not start ticking until the primary offer is canceled. When working with a backup offer, the price does not have to meet any particular amount, it only requires the amount the buyer and seller find agreeable.

The benefit for the seller is if the primary offer falls through, the backup offer goes immediately into effect and the seller does not have to place their home back on the market. If the primary buyer starts to request too many repair items then the seller may elect not to agree to the repairs and elect the go with the backup offer.

It is good to know that sometimes when a home is offered for sale and receives multiple offers, the winner may reconsider due to being caught up in the bidding war. This is especially true if the buyer believes they paid too high of a dollar amount and buyer’s remorse leads to cancelation of their offer. When working with a backup offer always try to find out the reason for the primary offer fell apart as this could be valuable information when it is known upfront. It is wise to inquire if there were any inspections completed on the property and to request copies of the inspection reports. Remember backup offers do not cost any money, just time and creativity.

Call Kari McCoy of Lyon Real Estate at (916) 941-9540, e-mail her at or visit her website at