Back up offers: happy home buying results
What do you do when you find your "WOW" house -- that love-at-first-sight home you know immediately is The One -- and you find out you're in a bidding war? In today's hot market, it happens fairly often.
For me it was a charming bungalow built more than 75 years ago. It checked every box on my wish list and was even located on a street bearing my first name. It seemed like a sign from the universe.
The home was a petite gem, lovingly upgraded over the years with attention to preserving its architectural charm while accommodating the needs of modern occupants. You could see the care with which the owners treated the home.
As I sat at the kitchen table in what I hoped would be my new home and went through the contract with my agent -- signing here, initialing there -- I felt as if I was already living in it. Everything was just right. I left in a state of bliss.
Then, my agent called. There were multiple offers. Did I want to meet the seller's asking price? "Of course," I told her. I didn't want to take any chances for a couple of thousand dollars. It was still within my budget.
The next day, she called to say I'd been outbid. I thought the fairy tale was over, but my agent knew how much I wanted that house. She said she'd talk to the agent and see if they'd take my offer as a backup. However, I had little reason to hope anything would come of it. I thought whoever outbid me wanted the house badly enough that they would overcome whatever hurdles stood in their way to getting it.
Backup offers: a home buying strategy
My agent made a great case for me with the listing agent, who agreed to make me the first back up offer should the deal fall through. I had nothing to lose. I didn't even have to give them a deposit at that point. I already had a signed contract with my offer on it. All that was required were a couple more signatures.
It was agreed that I could continue looking for another home while the potential buyers who had outbid me proceeded with the inspection, appraisal and their financing plans. I would have an answer in two weeks whether their deal would go forward or fall through.
As the time passed, I saw little else that I could afford or that suited enough of my needs to be worth buying. I eventually put an offer on a very tiny house in the same neighborhood. It was nicely remodeled, but it was too small and way over-priced. We negotiated back and forth with the seller. I eventually decided I would meet their final counter offer though I thought it still too high. I was panicked I would not find anything better.
I was about to give them a deposit when I got the news that my "Wow" house was back on the market, which meant I automatically had it if I still wanted it. And, of course, I did.
If you're house-hunting in a hot market, be sure to ask your agent about backup offers. Most won't bother telling you about this option because they don't often pan out. But there are a couple of common scenarios when a deal falls through:
- If the home buyers don't like the inspection results and the sellers are not willing to make the necessary repairs
- When the home does not appraise as high as the agreed upon sale price and the buyers are seeking financing but neither seller nor buyer is willing to make up the difference between the appraised value and the sale price
You may be able to use the backup offer strategy for a home whether or not you made an original offer on the house. Sometimes it says on the listing that the sellers are accepting backup offers, but if not, have your agent ask.
Your chances of getting the home of your dreams are a lot better if you're waiting in the wings with a signed contract. If you want it badly enough, it's worth a shot.