Dear Forms Committee: A buyer I am working with recently decided to make an offer on a property I showed them. Unfortunately, the property went pending in the MLS before we could make the offer. I called the listing agent, who said the seller would consider “backup offers.” What does this mean, and how would I proceed if my buyer is interested in this? Is this a good idea?

Question: A buyer I am working with recently decided to make an offer on a property I showed them. Unfortunately, the property went pending in the MLS before we could make the offer. I called the listing agent, who said the seller would consider “backup offers.” What does this mean, and how would I proceed if my buyer is interested in this? Is this a good idea?

Answer: A back-up offer is an offer that is accepted by the seller subject to the failure of a previously accepted offer, the “first-position offer.” This means that the seller has accepted an offer but has decided to “conditionally” accept one or more additional offers.  The condition is that they “line up” behind the first-position offer, and only move up in the line if the first-position offer doesn’t close. This gives the second buyer the first option to purchase the property if the first-position offer does not close, and gives the third buyer the option to purchase the property if the first two offers do not close, etc.

OREF 009 – Back-Up Offer Addendum is a form intended to create and define the legally binding rights and duties between a back-up buyer and a seller.

Lines 9-12 explain that the seller has accepted another offer and that the back-up buyer will only become the first-position buyer if the sale to the current first-position buyer fails. Section 1 emphasizes this again.

The balance of the form identifies the rights and obligations of the back-up buyer and the seller, including required notices and the start of timelines for the offer if the back-up buyer is moved to first position. It also provides that the back-up buyer may unilaterally terminate their offer any time prior to receiving written notice that they’ve been moved into first position.

If a buyer is considering a back-up position offer, their agent should review the terms of the Back-up Offer Addendum with them before proceeding.

All comments and responses from OREF or its staff, managers, and volunteers are non-legal opinions made for general purposes. Each Forms subscriber must rely solely upon their Principal broker or personal legal counsel for specific advice and instruction. You and your client should independently confirm that the Form(s) you use are legally suitable for the purposes intended and that they are current with respect to all laws and regulations.