While the market is beginning to show signs of stabilizing, the overheated sellers market of last spring is still a stinging memory to many homebuyers in Billings. In October, for instance, homes remained on the market for a quick six days. If a buyer didn’t act quickly, he or she was beat to the best houses that came on the market.
It’s frustrating to fall in love with a home only to find out that someone else has already submitted an offer, but there may just be a solution. While they don’t always win the home, backup offers are often a good idea when you have found the perfect home.
Make a backup offer
Basically a backup offer is second in line to the seller’s current offer. If anything happens to end that transaction (and we’ll get into those possibilities in a moment), your Buy-Sell Agreement and backup offer addendum moves into primary position.
While in backup position you can still look at other homes and if you find one you like more you can even make an offer on it and be released from your backup position without financial or legal ramifications.
Let’s look at some of the causes of a buyer’s transaction falling apart.
Problems with the loan
Many buyers don’t understand that a mortgage pre-approval isn’t a loan commitment so when their offer to purchase is accepted and the deal seems to be smoothly sailing along, they’ll splurge on new items for the home. If the shopping trip is an expensive one, say for appliances or furniture, purchased on credit, the lender may not finalize the loan and the buyer will lose the home.
Bad luck for the buyer but excellent news for the one in backup position. There’s a caution in this tale: Don’t change your financial picture at all until after you close on a home. This includes changing your employment, purchasing on credit and taking money from one account and putting it in another.
The lender can also derail a deal, indirectly, if its appraiser finds that the home isn’t worth what the buyer agreed to pay for it. Sure, there are options for the buyer, but many deals fall apart because of a low appraisal.
The home inspection
One of the most common reasons that a real estate transaction falls apart is when the home inspection turns up problems that the buyer doesn’t want to deal with and the seller won’t rectify. If the buyer walks, however, you’ll need to do some serious reconsideration of whether or not you want a home with those problems.
I would suggest obtaining your own home inspection and then we will negotiate with the seller over any problems that we find.
The home sale contingency
Many home sellers are cautioned to not accept offers from buyers who need to sell their current homes before the purchase can be finalized. Yet, many sellers still accept these offers. Again, should the buyer not be able to sell the home, his or her misfortune is your key to the home of your dreams.
No, buyers in backup position don’t always win the home, but it does happen and it’s worth making a backup offer if you really want the home.