Back up offers – as a seller do you want them? as a buyer do you write one?
Here’s an email I recently sent to a client on the subject. Feel welcome to comment and let me know what you think.
HI J—-, as always, thanks for using one of my home search sites. I want to remind you to pay attention to the “Status” field so that you know which homes are for sale and which are in escrow. The problem with our industry is that homes that are escrowed can be categorized by agents in two ways, 1) as “back up”, technically meaning the agent is soliciting back up offers or 2) “pending” meaning the deal is as solid as any deal can possibly be.
The issue is that the “back up” status as been ABUSED by agents. We are fined if we do not report within 72 hours, a property that has an accepted purchase contract. We can choose either (B) Backup status or (P) Pending. The rules are that we are to report a property as (B) ONLY when the offer accepted has itself a formidable contingency such as the buyer having a property to sell before they can buy the one that is being reported.
As I mentioned, this is abused. We’ve learned, as agents, that when we report a property as (B), then the property stays on Zillow, Trulia, Realtor.com and all the other websites appearing as still ACTIVE. That allows us to “bait and switch”, in other words, cause buyers like you to click on the property, contact us, and we can then try to engage you as a client and sell you something else.
In my opinion, there’s a vested interest that companies like Zillow, Trulia have in NOT changing this policy as their ad revenue (how they make money since you’re not paying for access to the information) is based on the number of clicks they receive. Having inaccurate information out there, such as properties that are in escrow but appear as active, boost those click numbers and as a consequence these companies are able to charge higher ad revenue.
At least the service that I’m providing you and my main search site http://bestpalosverdeshomes.com/southern-california-home-search/ indicates that a property is in (B) status. So realize, because of the inherent interest an agent has to solicit new business, I believe nearly all of the properties you see with a status of (B) really are pretty solid sales and making a back up offer is a waste of time.
While there are certainly exceptions to the rule of it being tactically foolish to make a back up offer, let me share with you why making a back up offer works against your interest. Nearly always, an agent that solicits and receives a back up offer, is using that back up offer to leverage performance out of the current buyer. As human beings our minds are wired in a way in which, often, we want something more that we can’t have. I’m sure you’ve experienced this in yourself. So when the primary buyer is “threatened” by the existence of a back up offer, they tend to perform and close escrow. The listing agent as a consequence is paid faster than starting a new deal with the back up buyer that has to “start from scratch”. If one of my buying clients is really that interested in a home that is in escrow, I have a conversation with that listing agent (who more than likely already knows and trusts me based on my 35 years experience here in the South Bay) and I let them know that if their deal falls through, I have a client that can “save the day”. Why, using a poker analogy, “show your cards” or “tip your hand” by making a back up offer?!
Hope this information helps. I’m here to serve and do so at your pleasure J—-. Looking forward to meeting you!
I would add to the above that of course when I’m wearing a different hat, that of advocating for my Seller, it’s an entirely different matter. Think about this a minute, there is no “for sure” answer. It’s an always “it depends” answer. If you had a bunch of offers then maybe you don’t want to accept a back up offer as a seller. Maybe, you want buyers re-competing for the house all over again. When and if it comes time to have that discussion, make sure you discuss all options with your agent. It might not be the best idea to get locked in to a back up buyer that you have to accept if the first sale falls through. And everyone has different levels of risk/reward balances. So again, think hard on this before making a decision.
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