Back-Up is the New Black
Before this year, we rarely encouraged buyers to submit back-up offers. It seemed unnecessary given how rarely contracts fell through. There were plenty of fish in the sea, so no need to get hung up on the one that got away. And then 2021 happened.... with its lack of inventory, frantic pace, bidding wars, buyer remorse, and seller greed. In a matter of months, fall-through rates escalated and the back-up offer became a viable tactic for getting buyers under contract.
A back-up offer is just what it sounds like: a second place offer in case the first place contract falls through. Most often, it results from a multiple-offer situation. The buyer who doesn't win the bid can leave their offer on the table to secure priority should the first buyer walk.
In a normal market, we see about 15% of contracts fall through. Last spring brought elevated fall-through rates for various reasons: health fears, employment insecurities, unstable futures, and financial uncertainty. It improved for a time, but is now creeping back up again. We now encourage our buyers to submit back-up offers on the homes they missed. Our team has worked closely with Carolina One's in-house legal counsel to perfect our back-up strategy. When written correctly, the back-up offer grabs the seller's attention, minimizes upfront expense until you're in first place, and also allows for an exit should something better pop up while you wait. We also urge our sellers to accept back-up offers to improve their negotiating position on their first buyer's repair requests.
It's a big twist on the way we used to do things. We would log our buyer's interest with the listing agent and if the first contract looked shaky, the agent would call us back in for a second showing, after which we would submit a contract. The pace of today's market prevents that relaxed, reactive timeline. In the era of 10+ offers at a time, you must be much more aggressive to secure first runner-up status. The sooner you can get the seller to sign your back-up, the better your chances are of actually getting the house. You'll have the peace of mind that comes with knowing you'll get first dibs if the first offer falls through for any reason. Plus, you'll avoid the alternative of frantically competing with multiple offers again if it goes back active on MLS.
