Not submitting back-up offers on properties you're interested in, is, in my opinion, saying you're 100% sure all those first offers submitted will close.
I would not want to make that bet.
Plus - sometimes your back-up offer causes a seller to get tougher with buyer # 1, resulting in faster cancellation of deal # 1.
Back up offers are what I call "low hanging fruit."
Not submitting back-up offers on properties you're interested in, is, in my opinion, saying you're 100% sure all those first offers submitted will close.
I would not want to make that bet.
Plus - sometimes your back-up offer causes a seller to get tougher with buyer # 1, resulting in faster cancellation of deal # 1.
Back up offers are what I call "low hanging fruit."
That's an interesting way to look at it. Basically you have nothing to lose other than the time it takes to do your due diligence and writing up the offer.
However, I got the feeling, at least down in South Florida, backup offers are not taken seriously. Most don't think of backup offers as a truly contractual thing.
Last time I submitted a backup offer, basically an AS-IS contract, plus a backup addendum, proof of fund and I asked them how they want to handle the 10% EMD. They said to check off the EMD is due when the lender approves. Okay, so basically they don't need any EMD until the first contract cancels and even then it's not needed until lender approves. So basically, it's not a true backup "CONTRACT", it's just another offer they have sitting around which they may decide to act on or not.
Another time I did a backup was a REO. The agent said to put in 10% EMD but "don't send it to an escrow, just write up a check, make a photocopy of it in the package" and send it in. The check stays in my folder for a while.
Both cases I never got back from them the "SIGNED" backup contract. In other words, there was a backup offer, but there wasn't any contract. They like to solicit backup offers and hold on to them and that's it.
The other concern is since the reasons I am contemplating doing backup offers is because some of these properties went into pending on day 1, or when I tried to schedule something they scheduled me 3 days away, and on day 2 they said there is a contract. When I inquire further, they say "you can always write up a backup offer".
But then, how do you do your due diligence on it if you can't even see the property? How do you come up with a price? Most of them will not show the property once the first contract is signed. Do you just put down some "worst case scenerio" numbers?
I agree with placing back ups. But only when your back up contract, is signed by seller, and becomes "next contract presented to the bank, immediately when and if current contract is rejected" and "buyer shall have sole discretion to raise price or pay additional fees in addition to purchase price". EM due once this contract beomes primary, and prior to submission to lender. Short sale contracts fall apart for a multitude of reasons.
Wayne, can you elaborate on the "buyer shall have sole discretion to raise price or pay additional fees in addition to purchase price" comment?
I am not following that. Are you saying your offer price in this situation would be substantially lower knowing that you may have to come up should the backup contract slide into first position?
In addition, does anyone has any suggestions as to how to get a backup offer contractually executed?
I have submitted a few backup offers when the listing agents suggested and each and every time they never get signed, they just sat on it. I have the feeling the agent solicited the offers just so they have them, perhaps as leverage to the buyer, but they don't execute it. That's just a waste of my time.
Sam Leon You're right, if the back up isn't signed by the seller, with some speciifc language, it's useless. As far as the "buyer shall have sole discretion to raise price...", if the pending short sale falls apart, and there is a hard price from the bank, you want the option of raising your offer, or not. Also, many short sales fall apart not particularly because of price, but many times because of junior liens/mtg.s. The shorted lender usually has a policy like"we only pay 6 mo.s of HOA, max" disregarding the possible Net. Sometimes a $90,000 offer, with buyer paying an extra $10,000 toward fees, is more successful than a straight offer of $110,000. While it's a popular belief that an investor has a better chance using the listing agent, so he can double end it, the agent is also looking out for the seller, more so than the buyer. When you've negotiated short sales yourself, you have a better insight into what can work. You also have to research the property to see what kinds of liens you're dealing with.
First of all .. if you didn't see the house, you really can't make a good offer.
Secondly, by the time the first deal falls through, it could be 6+ months away and since you dont have an executed contract, then you will probably want to change your mind about what you are willing to pay.
I would just email the agent and request they contact you if the deal falls through.