The more back ups - the better?

Good question here.....how many backup offers should sellers accept??  Questions are really common right now as many sellers in a down market are concerned with holding tight to any buyer and since there are problems in mortgage markets, there’s even more reason for sellers to take backups when they can. But in a market where buyers often have their choice of bargain properties, even primary contracts are hard to come by, let alone backups. When markets get hot, buyers clamor to put in backup offers on hot properties and the questions center on getting sellers to consider backup offers.

Linda Vogue wrote “How many backup contracts can you have?” As far as how many backups you can have, there are slightly different answers depending if you’re the buyer or the seller.

As the seller, there are some ethical considerations here but this is mostly a matter of practicality. How many backup contracts do you want to keep track of? Do you have a mechanism in place for notifying each of the backups properly if the primary offer falls through and making sure that each of them is properly aware of their new standing in the line, new deadlines, any new obligations? The more contracts in place, the more likelihood that you’re going to end up with two parties thinking they’ve moved to the head of the line and possibly being able to convince a court that the error was yours. Your best bet – disclose, disclose, disclose and do it all in writing. If you do have multiple backup offers in place, it’s in your best interest as a seller to let the buyer and the buyer’s mortgage lender know that you have multiple backups and there won’t be any extensions.

So, what if you’re the buyer, with a backup contract on a house you like and interested in another house that is also under contract. Should you enter a backup contract on the second property as well? The thing to remember is that depending on the exact terms of the backup offer you could end up on the hook to buy two properties, though it is not likely. The key here would be to make sure each primary contract expires on a different day and to be sure a provision is included to allow you to withdraw up until the time your backup offer becomes the primary offer. (The second part is pretty standard in backup contingencies in this area.) If you can afford the loss of earnest money, you may also consider a provision allowing you to withdraw and release the earnest money at your option rather than the sellers. Again, it would be in your best interest to disclose the fact that you are in a backup position on another property to both sellers as it does the
 double service of avoiding confusion and adding urgency for the other parties to close.
There are common concerns for buyers or sellers in multiple backup offer situations: disclosure, understanding the other party’s negotiating position and giving yourself a proper “out”.

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