What does accepting a backup offer mean in real estate?

You’ve found your dream home, but there’s a major obstacle: The seller has already accepted another offer. 

Fortunately, you can still submit a backup offer, which could make you the next buyer in line. This means that once you and the seller sign, you enter into a contract that takes effect if the first deal falls through. 

The current sale could collapse for reasons such as financing or inspection issues, so submitting a backup offer could still secure your dream home.

This article highlights what accepting a backup offer means and how Better’s hand-picked Realtors guide you through the process.

...in as little as 3 minutes – no credit impact

What’s a backup offer in real estate?

Property sales can fail for many reasons, including financing issues, inspection problems, and low appraisals. A backup offer on a house is a signed contract that positions you as the next buyer if this happens. It only becomes legally binding once both parties sign, and its terms take effect as soon as the initial agreement ends. 

Like any home purchase, backup offers require buyers to deposit earnest money into escrow to show they’re serious — usually 1 to 3 percent of the sale price. What ultimately happens to your earnest money depends on how the deal plays out:

— If the deal goes through, your earnest money gets applied to your down payment.

— If the seller fails to meet a contingency in the purchase contract, you’ll get a refund.

— If you back out of the deal without a covered contingency, the seller keeps the money.

Should you make a backup offer?

It’s important to weigh the pros and cons before submitting a backup offer. Here are some to consider. 

Benefits of a backup offer

— Puts you next in line: This is the main advantage of backup offers for buyers. If something goes wrong with the first buyer, like title issues or cold feet, you automatically move into first position.

— Shows you’re serious: A backup offer confirms your intent to buy since the contract is legally binding and backed by your financial commitment.

— Locks in the price: The signed agreement reflects the current listing price and terms, ensuring a fixed rate. So, if home values increase or competing buyers drive up demand while you’re waiting, you won’t have to pay more than expected.

Drawbacks of a backup offer

— Seller leverage: When you submit a backup offer, the seller knows they already have your interest. With their priority still on the first buyer, they may be less willing to adjust the price, cover closing costs, or approve repair requests.

— Competition from backup offers: If the seller accepts several backup offers, you could find yourself in third or fourth place, or even further down the line. Rather than spending weeks waiting on an unlikely opening, you could use that time to explore other properties.

— Difficulty cancelling the contract: If you find a different house you want to pursue after submitting a backup offer, getting out of the agreement may be difficult. Without a contingency, such as financing or appraisal, you risk losing your earnest money deposit and may face penalties like contract termination and legal fees. 

...in as little as 3 minutes – no credit impact

How to submit a strong backup offer

Here’s how to put together a backup offer that sellers can’t turn down.

Set a competitive price

Making an attractive offer depends on whether you’re working with a buyer’s or seller’s market. If it’s a buyer’s market, you may be able to bid at the listing price or even slightly lower. Sellers are more likely to accept because relisting can be a hassle, and finding a new buyer often takes much longer when demand is low.

In a seller’s market, you might need to offer more because there will likely be no shortage of buyers. The key is finding the right balance: high enough to appeal to the seller, but not so high that you later feel you overpaid for the home.

Prove you’re prepared

Proving you can close quickly makes your offer stronger than other backups, since sellers can’t predict which deals might stall. You can do this by:

— Providing a mortgage approval letter: A strong letter from your lender assures the seller that financing won’t cause last-minute issues. This is especially effective if they’re worried the first buyer won’t complete the purchase for reasons such as financing issues or inspection problems.

— Limiting contingencies: Sellers are more likely to accept offers with fewer contingencies, like waiving a home inspection or financing clause, because they signal a smoother path to closing. The appeal is even stronger if a previous deal collapsed over unmet conditions.

— Paying with cash: If you have the resources, a cash offer gives the seller full confidence that you’ll cover all closing costs. To strengthen it, attach a proof of funds letter. This shows the money is readily available and makes your bid more credible.

Tips for submitting a great backup offer

These approaches will help strengthen your offer and increase your chances of approval.

Include an escalation clause

An escalation clause automatically raises your backup offer by a set amount if the seller gets a higher competing bid. As the buyer, you decide both the increment (for example, $5,000 above the competing bid) and the maximum price you’re willing to pay. In a hot market, this can help you secure a better spot ahead of others as long as your highest price is still competitive. 

Use an inspection contingency

Inspection contingencies protect you if the home review reveals serious problems, such as structural damage or mold. If the first buyer backed out because of those findings, you’re not legally obligated to complete the sale. Instead, you can request repairs, renegotiate the price, or walk away without losing your deposit. 

Rely on your Realtor

There’s no reason to go it alone when making an offer on a home. An experienced Realtor can guide you on price, contingencies, and local market conditions, including how to navigate backup offers. With Better, you’ll work with top real estate agents hand-picked from the most reputable brokerages across the country. We regularly review our partner agents using client feedback to ensure only the best remain in the program.

Offer extra earnest money

Earnest money is a deposit that demonstrates your commitment to buying a home. Offering more than the minimum required shows the seller you’re serious and financially ready to close. Even a small increase — just a few percentage points — can set your offer apart from others.

Adjust your timing

Sellers often have specific needs when it comes to closing. Some want to finalize the sale quickly, while others want extra time for arrangements such as finalizing the purchase of their new home, relocating for work, and handling family matters. Adjusting your timeline to meet those needs reduces stress for the seller, which is an advantage that can tip the decision in your favor.

How Better helps you compete with stronger offers 

Submitting a successful backup offer keeps you in the running when you find a home that’s already under contract with another buyer. To make your bid stand out, consider options such as requesting a proof of funds letter from your bank or offering more earnest money. Better’s partner agents can walk you through each step and help you decide which levers to pull in your situation.

Beyond backup offers, you can get preapproved using our fully online application in as little as three minutes. With competitive rates, 24/7 support, and resources like our free mortgage calculator, Better gives you everything you need for a hassle-free home buying experience.

...in as little as 3 minutes – no credit impact

FAQ

What’s the difference between “accepting backup offers” vs. “pending” status?

When a listing is under contract but marked as “accepting backup offers,” it means the window is still open for adding your own bid to the list. When a property is marked “pending,” it means the home is under contract, but the seller isn’t interested in considering backup offers.

Keep in mind that while these are common uses of the terms, some multiple listing services and real estate websites may use them slightly differently.

How often do backup offers get accepted?

Acceptance usually depends on the seller’s confidence in the first buyer and overall market conditions. In a seller’s market, backup offers are less common because strong demand means other prospects are ready if the first deal falls through.

Why might a buyer decide to withdraw from a contract?

There are a variety of reasons a buyer might back out of a deal, including:

— Financing issues

— Inspection problems

— Low appraisal values

— Title concerns

— Contingency failures (financing, inspection, or sale)