What is a back up offer? And does it make sense in this crazy Denver Real Estate Market? The answer is absolutely, yes! A back up offer is basically a second place offer. If the seller already accepted an offer, or didn't accept your offer but yours is close, then you could have the option for your offer to be a back up offer in case something happens to the offer that was accepted. Essentially, you are the second place offer that would move into the first position if the first place offer doesn't go through.
With the crazy Real Estate market we are experiencing in Denver right now, most buyers don't consider making a back up offer because they think that if someone is lucky enough to get a house under contract, they aren't going to risk it not going through. And while this can be true, we are starting to see more and more homes come back on the market. I believe this is because a lot of buyers get caught up in the competition of getting a home and offer more than they are comfortable with paying after the dust settles. Or when they get to inspection and realize they are paying a premium for a house that needs a ton of work, it just doesn't make sense to pay what they are paying.
That is when a person in the second position with the back up offer can come out ahead. If you have an accepted back up offer, then your offer automatically goes into first position without the home having to go back on the market. This could save you a lot of headache and money by not going into another bidding war and oftentimes the seller is stressed about losing the buyer so might be willing to be a little more flexible on the inspection.
The advantage for a buyer with a back up offer is that you don't have to put earnest money down in most situations and you can always cancel the back up offer if you find another home and your back up hasn't been accepted yet. While the success rate isn't going to be great, it can give you a good shot at getting the home you may have just missed out on. As an example, take a look at the picture above. This is from an email of new listings I got this morning for Highland and Wheat Ridge homes. Notice how many back on market homes there are. I've never seen so many homes come back on the market and this is what make me think back up offers should be taken seriously.
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