Backup Offers: An Adaptive Strategy in Today’s Real Estate Market

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Submitting backup offers could be a smart strategy these days.

Generally, agents avoid setting showings on properties that are under contract and would only submit a backup offer if they were aware the current offer was in jeopardy or their client really, really wanted the house. In a market like we’re currently experiencing with inventory levels at all time lows, backup offers could prove to be a successful strategy.

Properties are going under contract within days, sometimes within hours of being submitted to the Multiple Listing Service (MLS: property database used by agents) or putting a “for sale” sign in the yard. In combination with a depleted inventory, intense competition created by somewhat low, lingering prices and mortgage rates still hovering around historic lows further complicates things. As a result, people are presenting offers to sellers without even touring the property. They know the risk is minimal because the Colorado Contract to Buy or Sell Real Estate very clearly provides the buyer with right to terminate as long as the seller is notified in writing by a previously agreed upon date. The reason to terminate could be something as simple as a perceived problem, regardless how small, because the language in the contract reads that the issue only has to be “unsatisfactory, at the buyer’s sole subjective discretion.” If buyer and seller have a mutually executed contract which was submitted site-unseen, they could terminate if, upon actually touring the property, they didn’t think the neighborhood was a good fit, felt threatened by the neighbor’s barking dogs or something as simple as an unfavorable odor.

As a real estate agent, I’m definitely not suggesting this is an acceptable way to conduct business. In fact, I strongly encourage all buyers to tour a property before submitting an offer, regardless of the situation. My point is that it’s bound to happen, especially given the variables detailed above converging behind the scenes of our current market. Additionally, those variables are also compelling buyers to make spontaneous decisions resulting in “cold feet”, which is, much to the disdain of sellers, technically a valid reason to terminate a contract (if notified properly).  So, until market trends head back towards a more familiar place, backup offers will have an increased likelihood of ultimately procuring the sale of a property. If you have strong feelings about a home, don’t let an “under contract” status keep you from at least throwing your hat in the ring. Sometimes in this business, homes actually seek out you.

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