Massachusetts Backup Offers in Real Estate
Author Bill Gassett owns Maximum Real Estate Exposure.
Whether you buy or sell a home, it is not over until the fat lady sings and money is exchanged at the closings. Real Estate transactions can and do fall through from time to time in Massachusetts.
As a potential home buyer, you may sometimes lose out on your dream home in a bidding war with other buyers. Does that mean there is no chance you will be able to buy the home? No, it does not.
For sellers, you should also know that your Massachusetts home sale is never a done deal until the deed is recorded.
One never knows if the buyer will fulfill their end of the bargain. Let's examine everything Massachusetts buyers and sellers should know about a backup offer.
What is a Backup Offer in a Massachusetts Home Sale?
A backup offer in real estate is an offer to purchase a property contingent upon the initial offer falling through. In other words, a backup offer will only be considered if the initial offer fails to close.
This type of offer is typically used by buyers who have lost out on a house they were interested in or sellers who are waiting to see if the initial buyer's contingencies will be satisfied.
The backup offer can provide both parties an additional, secure option should the initial transaction not work out.
How Does a Backup Offer in Massachusetts Work?
Regarding how a backup offer works, it is crucial to understand that it is not an insurance policy. The backup offer will only be considered if the initial offer does not close.
Usually, the backup offer will only be considered after the initial offer has failed.
In addition, it is crucial to remember that the backup offer is not binding. If the initial offer continues to close without issue, the backup offer will become null and void.
Lastly, it is essential to understand that if the initial offer fails to close, the seller is still not obligated to accept the backup offer. They have the right to accept or reject any offer they receive.
Is a Backup Offer Binding in Massachusetts?
A backup offer in Massachusetts is legally binding if the first offer falls through and the buyers and sellers have executed a backup offer. This means that both parties have agreed in writing to the terms of the backup offer, and the seller is obligated to accept it in place of the initial offer should it fail to close.
The backup offer is binding in the same way that the initial offer was binding. The buyer and seller must follow all the terms and conditions legally. For example, the offer includes the purchase price, the time frame for closing, and any other real estate contingencies.
What Are The Benefits of Backup Offers For Buyers and Sellers in Massachusetts?
Benefits of Backup Offers For Buyers
For buyers, the main benefit of a backup offer is the assurance that they are first in line to buy a home they love should the transaction with the first buyer fall apart. It allows them to remain in competition for their dream home, even if they initially lose out on it.
It also provides some peace of mind, they may still be in contention to get a property they want.
Benefits of Backup Offers For Sellers
For sellers, the benefit of a backup offer is that it provides another potential buyer should the initial buyer not be able to close. It is like having a security blanket.
A seller never wants to re-list their property and explain to all future buyers why it fell through.
A backup offer also allows sellers to get a better offer if the initial offer fails to close. Sometimes the seller is fortunate to get a better deal when the first sale doesn't happen.
Can a Buyer Terminate a Backup Offer?
Yes, a buyer can terminate a backup offer. However, they must adhere to the contract terms when canceling a backup offer. Depending on the contract term, the buyer might forfeit their earnest money deposit if the contract is canceled.
The primary reason earnest money is provided to the seller is an assurance that the buyer will carry through with the purchase. If the buyer terminates the offer, could lose their deposit depending on how the contract reads.
It is wise for buyers to consult their real estate attorney to discuss any consequences of terminating a real estate contract.
Final Thoughts on Backup Offers
Backup offers can be beneficial to both buyers and sellers. They become more beneficial when the probability of the first transaction closing is higher.
When there is almost a sure bet the first buyer closes, it may be less appealing. For example, the sale will likely close if the first buyer pays cash and has no real estate contingencies.
Owners selling as-is with cash buyers don't usually have to worry about closing the sale.
On the other hand, if the initial buyer has several contingencies to clear the odds to go up, the sale could fall through.
Did you enjoy this advice on what buyers and sellers need to know about backup offers in Massachusetts? See other real estate articles on NewsBreak for more timely tips and advice. Bill often writes about general real estate, mortgages, finance, moving, and home improvement.