In a seller’s market, there are few homes available and a large pool of buyers who are ready and willing to buy. It’s natural that some of those buyers will get left in the dust. If you’re one of those buyers, we know how frustrating that can be. You’ve fallen in love with a house only to learn that there are several other offers waiting for the seller. In this case, competition isn’t healthy.
But just because someone else got there first doesn’t mean it’s a done deal. Lots of pitfalls on the road to closing can cause a transaction to fall apart. If you make a backup offer, you might be in prime position to get the house if the original deal gets derailed.
What is a backup offer?
A backup offer is just what it sounds like: You make an offer on the home even though someone else is in the process of buying it. It puts you in line to buy the house should the primary offer fall apart. (We’ll talk about why this could happen in a moment.) The backup offer is a binding offer to purchase once everyone has signed it. Make sure you are approved for the amount you’re offering and be prepared to follow through on the purchase.
If the seller’s current buyer backs out for whatever reason, your offer has already been accepted. There’s no need to renegotiate. When you submit your backup offer, include all the contingencies that matter to you, like one for approval of a home inspection. Your Southern Maryland real estate agent, of course, can walk you through every step of this process.
What are some of the reasons a sale might fall through? These are some of the most common hazards.
Loan problems
Many Southern Maryland homebuyers don’t understand that lenders will pull their credit reports again just before closing. This is called a “soft pull,” and it is done to ensure the lender that none of the buyer’s financials have changed.
Any change – including a new job, loss of job, mounting credit card debt, for example – can result in the buyer’s mortgage being denied, even at the last minute. If this happens, your backup offer automatically steps into primary position.
Low appraisal
If the original buyer is getting a mortgage, the lender will want the home appraised to make sure that it isn’t lending more than the home is worth. If the appraiser determines that the home is worth less than the buyer offered, the lender will deny the mortgage.
The buyer has a few options in this case. They can dispute the appraisal, ask the seller to lower the price, pay the difference between the offering price and the appraised value, negotiate with the seller to pay half of the difference, or walk away from the deal.
If the buyer walks, you win. But know that your bank’s appraiser may also come in lower than asking price, so think about which of those options you would choose.
Home inspection problems
A home inspector will walk through the home with the buyer, pointing out visible problems in the home. He or she will not be able to tell a buyer what is lurking under the floors or behind the walls. Most inspectors take their jobs quite seriously and will tell you about even the smallest of details. Large problems turned up in a home inspection can cause the entire deal to fall apart.
Buyer’s home sale falls apart
Many homebuyers are also sellers, and they have a contingency in their purchase agreement that states that their purchase is based on the successful sale of their current home. It can be tricky to time the sale of one home with the purchase of another, and it can frequently lead to the demise of the purchase. Their loss, again, will be your gain as your offer moves into first position.
Making a backup offer isn’t a guarantee that you will get the home, but enough of these offers work out that it’s worth considering if you really love the home.
Waldorf MD Homes for Sale and Real Estate Services in Southern Maryland. You now have a search engine to help you with your Southern Maryland home search! And I’m ready to provide you with a custom home valuation if you’re considering selling your home. Let’s connect to discuss how I can help you. Contact Kimberly Bean at 301-440-1309
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