Should you write a back-up offer?
By Kathy Schmidt, Broker/Owner, Schmidt Realty Group Inc.
Should you write a back-up offer on a pending property?
It can be feel pretty discouraging to find your ideal property is for sale, but someone else already has a Pending Offer on it. Quick refresher on real estate terms… A pending offer is an offer where all terms (price, possession, date, etc.) have been agreed to by the buyer and seller. Typically, a buyer will have conditions to satisfy, such as financing as well as having a property inspection and/or reviewing the condominium documents. While those conditions are in the process of being completed, the property is a pending sale. In other words, it’s sold… pending the removal of those conditions by the buyer. Properties are commonly pending for about 2 weeks, and during this time the seller can receive and accept other offers, but only in back-up position to the first offer. In other words, the first buyer with the accepted offer has first dibs.
There are many reasons why the first offer might not proceed. Financing, even for buyers who are pre-approved, isn’t 100% guaranteed until there is an offer on a specific property for the lender to approve. Secondly, if there’s a property inspection and some issues crop up, the first buyer might not be willing to accept those issues and could choose to not proceed. So, what if you have just started looking and your favourite property is already pending with an offer. Should you consider writing a back-up offer?
Here are 2 important questions buyers should ask before writing a back-up offer:
- How unique is the property you’re looking for?
If the property you’re looking for is a bit of a unicorn… perhaps you’re looking for a renovated home in a mature neighbourhood with a mobility-friendly floorplan and a legal suite… and you find that home, you might want to do everything you can to make it your own. With a very specific wish list like that it’s not likely that another property just like it will come up soon.* In that case, it might be worth it to put yourself in a back-up position in case the first offer doesn’t proceed. The closer to your ideal the property is in terms of its location, condition, special features and price, the smarter it is to put yourself in back-up position. * Your REALTOR® can help you find out how long you can expect to wait for another similar property by researching sold properties.
- Can you afford to wait?
A back-up offer is as binding as any other offer. If your back-up offer is accepted by the seller it means you’re essentially taking yourself out of the buying process of other homes until the this offer either completes or fails. You can’t just tell the seller you’ve changed your mind and withdraw your offer. It’s a binding contract that commits you to the process while the first buyer does their due diligence to satisfy their conditions. Also, if you’re on a tight timeline and need to be in a property quickly, adding 2 weeks of waiting to find out if the first offer goes through might not be a good idea. On the other hand, if you have time and were prepared to wait to find the right property anyway, tying yourself up for a couple of weeks to possibly get your ideal home might be worth it! Every year we see buyers with back-up offers be the ones to move in! It’s always a fun call to make to let a back-up buyer know that they got the house after all!
In the end, the decision to write a back-up offer depends very much on your specific situation. Talk to your REALTOR® and take their guidance. We deal with these kinds of situation s every day and can help you sort through all the scenarios to find the right solution for you.