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What Is A Back-Up Offer?


Dear Phyllis,
I have been a faithful reader of your column since you wrote for the Glendale News Press. I appreciate the valuable service you provide to our community. I think it will be beneficial for you to share our experience with a back-up offer. We recently closed escrow on a La Crescenta home where there were more than a dozen offers. The seller initially accepted a cash offer over all the others. Our Realtor® put our offer in back-up position which I thought was extremely clever. After a few days the cash buyer cancelled. We opened and just closed escrow. I think this tool may also be of benefit to other home buyers? Jill


Dear Jill,
A back-up offer is made when a home is currently in escrow. A back-up offer acknowledges the existence of an existing offer. It indicates that in the event the first buyer cancels, then the first back-up is automatically in contract with the seller.

Back-up status typically reflects that although the property is in escrow there are still contingencies to be removed, such as inspection, appraisal and loan approval. Until closing, there’s always the possibility that something can go wrong. There are numerous reasons why an escrow might not be consummated. Perhaps the buyer wants to renegotiate after the inspection. Other times, the buyer has trouble obtaining a loan. In other instances, the appraisal might come in low.

Sellers can sign more than one back-up providing they make the position of each additional back-up offer known. For example, you could be in the second or third back-up position if there are three back-up offers. Of course, you want to be the first back-up buyer. The farther down the line, the less your chances of success.

In your circumstance, there were more than twelve offers. By being the first back-up buyer, you were assured second place. Without your back-up offer, this home could have been sold to any of these buyers. Or even a new buyer could have come into play.
Congratulations on your new home!