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Back up Offer Addendum - House Buying

752 Views | 9 Replies | Last: 4 mo ago by Diggity
TexAg*
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AG
I'd like to get some expert opinions on something my wife and I are currently experiencing during our home search. We put an offer on a house this past weekend and the seller has come back to us asking us to enter into a backup agreement, whereby we would be guaranteed the house a specified price in the event the person they signed a contract with today did not get their financing worked out. Supposedly, it's a family friend or family member that they don't have the most confidence in. Does anyone have an opinion on this or has gone through a similar situation? For context, this is a competitive neighbor for houses in houston right now.
CS78
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Can't hurt, as long as you don't mind putting things on hold for something that has a good chance of not working out.
Old Tom Morris
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When we sold our last house, we actually ended up selling to a couple that had put in a backup offer. The initial buyer was planning to relocate from Atlanta, and I think their initial trip was supposed to be more of a scouting mission than one to actually buy. But they saw hour house, loved it, and put in an offer that we accepted. A day or two later we accepted a backup offer for slightly higher. During the option period, the Atlanta couple seemed to get "maybe we are rushing into this" cold feet and backed out on the last day of the option period.

So personal experience would tell me that it can pay off.


TexAg*
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AG
Thanks OTM. I've never heard of people actually doing this so your experience is helpful.
Diggity
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AG
The only thing you're really risking is the option fee while in the backup position. You can terminate at any time, if you find another property, but you'll lose your option fee.

For that reason, I wouldn't give more than you're willing to let go for the option fee.
SteveBott
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AG
Option fee is usually around 150. Small potatoes in the transaction
Diggity
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AG
Correct. It's not likely going to be a huge amount but just know that you're likely kissing it goodbye.

Sellers love backup offers because they make great leverage against the main offer, if they start to get demanding for whatever reason.
SteveBott
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AG
If mommy loves the home it wont matter
Shooter McGavin
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AG
You basically have to proceed as though you are the main offer, option period, inspection, appraisal, etc.

You better really like this house.
Diggity
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AG
Shooter McGavin said:

option period, inspection, appraisal, etc.
You'll pay an option fee, but none of these things should happen until the main offer terminates.
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