For more than a year, would-be homebuyers have needed to be more creative than ever to make their offers more attractive to sellers. The market dynamic is changing with interest rates going up, but buyers still need to look for every possible advantage.
The stock of available homes out there is still far lower than their demand, especially in the Pioneer Valley. With that in mind, you may find yourself making an offer on a home that already has qualified buyers bidding on it. This can be troublesome, but a backup offer will help you move toward your goal.
You've found the perfect property; however, the seller has accepted an offer. That would seem to be an open and shut case, and in some situations, it is. But in others, a backup offer can help you stay in the game.
As you make a backup offer, you acknowledge that another offer has already been made and accepted. However, you can have your offer considered first if anything happens to cancel the offer ahead of you.
When Is a Backup Offer Helpful?
Backup offers are usually not very helpful when your competitors are "cash in hand" buyers, such as real estate investors. But a backup offer can come through and make a difference in various other situations. They are especially useful in cases where the other buyer pulls out for their own reasons.
A backup offer takes the form of a formal written contract that should be overseen by your real estate agent. It is vital to protect your interests by designing your offer so you can withdraw without penalty if needed — for example if a home inspection turns up issues.
What Happens If the Original Offer Goes Through?
If the original offer on the property goes through, you'll get back any earnest money you placed into escrow as a potential buyer. You are released from any other obligations and can continue your home search as normal.
Can a Backup Offer Result in a Better Price?
In today's competitive market, a backup offer needs to be strong and offer incentive for the seller. In a slower market, it may be possible to save a few thousand dollars by making a backup offer below the asking price. This can also be appropriate if the home has been on the market for a long time and seems difficult to sell.
In most cases, a backup offer delivers very little risk and high potential rewards. Work with your real estate agent to develop a backup offer that meets your needs. It may just win the day, even if you weren't first in line to buy the home.
If you would like to begin your home search journey - feel free to reach out to our experienced Team of experts here at Jones Group Realtors.
By Henry Higgins
The idea of buying a home can be one of the most exciting yet daunting decisions to be made in one's life. Although it is of course recommended to reach out to a qualified Jones Group REALTOR® to assist you in the process, there are a few pieces of wisdom that are customary in the industry to help you begin. These steps will ensure a seamless transition to buying once you are ready.
For many, the purchase of a home is contingent on a mortgage from a bank, and a mortgage from a bank is contingent upon the banks' approval. Up to a year before you begin the home buying process, it's a good idea to pull your credit report to get a sense of where you stand and check for any errors. If there are errors, it could take a few months to have your report fixed.
Saving up for a down payment can be even more challenging if you are making payments on other debts. It can be helpful to either consolidate your debts, or to pay down your small debts first to create a snowball effect, leaving you with more money to pay on your bigger debts since the smaller ones have been paid. Do NOT make any large purchases before you apply for a mortgage loan.
When you begin the home buying process, it is extremely critical to assess your budget and finances as a whole. A spreadsheet program is a fantastic tool to track your finances. Keep track of your income, assets and liabilities, and see what is left over to begin to save for a down payment. Also, take stock of what you do on a daily routine - those coffees and meals out add up quickly!
DETERMINE HOME PURCHASE BUDGET
One of the traps that homebuyers fall into is they purchase the maximum amount of house they can afford. This is not always the best idea. Don't stretch yourself too thin financially, or become "house poor" as people say. You do not want a monthly payment eating up all of your income that could be used for other things such as saving for emergencies, home maintenance, retirement, or traveling. Use an online loan calculator to determine a monthly payment you will be comfortable with. Also, just because a bank determines that you are qualified for a specific loan amount doesn't mean that is the amount you should take; nobody wants to be barely staying afloat financially due to a burdensome mortgage.
After you have properly gauged your financial health, contact your bank to get preapproved for a loan – this preapproval letter (preferred over prequalification) is important to have in hand when making an offer. Begin your search taking into account towns, neighborhoods, schools, parks, tax rates, proximity to emergency services and any other amenities that are important to you. When you are ready and have a location as well as a price in mind, reach out to an agent at Jones Group REALTORS® who will be more than happy to assist you in your search.