When you lose a bidding war on your dream home, all might not be lost. There is a slight possibility that you could still get the home for a reasonable offer. If your real estate agent has recommended that you submit a backup offer, here is what you need to know.
Why Submit a Backup Offer?
A backup offer is just as it sounds. It is your offer to the seller to buy the home in case something happens to the buyer who is under contract. For instance, if the buyer backs out of the home due to a lack of financing, the seller could accept your backup offer and enter contract with you.
Although a backup offer seems like a long shot, it is still worth considering. There are several reasons you should consider it. For instance, you can continue your search for a home and make offers, if you want.
A backup offer can come with built-in protection with the right contingency. You have the right to withdraw your offer at anytime, so you will not be forced into a position that you have to buy the home. If you find another home or simply change your mind, you only have to notify the seller that you are no longer interested.
What Contingencies Do You Need in the Offer?
You should view the backup offer in the same light as a purchase agreement. It basically is. If the seller decides to accept your offer, the backup offer automatically converts to a purchase agreement. In other words, you are now legally obligated to buy this home. However, with the right contingencies, you will still have the option of waiving on the home.
Therefore, it is important that you and your agent or attorney include contingencies that work for you. One of the most important is your right to review the offer if the home becomes available again. If you want to pass on the home, you should be allowed to.
In addition to this contingency, you also need to include the standard ones, such as you can back out if your funding falls through or if the home fails inspection. Your agent can help you decide which other contingencies are needed.
If you are reluctant to submit a backup offer, talk to your real estate agent. He or she can help you assess the value of using one and craft one if you decide that you want to use it. Keep these tips in mind when you're looking for homes for sale.
Welcome to my website. My name is Larry Silva, and I want to talk a bit about private mortgage insurance. You may have heard the term PMI mentioned when you were in the process of purchasing real estate. When I first heard my lender talking about PMI, I was very confused. It was my realtor who sat me down and explained what private mortgage insurance was and when someone is required to purchase it. He told me that PMI is not lifelong insurance; it can be cancelled when the mortgage principal balance reaches a certain point. Once it was explained to me, private mortgage insurance was no longer a mystery or a confusing concept. I would like to pass on what I learned and hope that you find it to be of value.