Or you're selling, you've accepted an offer, and another buyer is still interested. In both cases, a backup offer may be an option, but it comes with some legal fine print that's worth understanding before you sign one.
What a backup offer is
A backup offer is an offer the seller accepts in second position. The first accepted offer stays in place, usually with conditions such as financing or inspection still outstanding. If that first deal falls through, and the seller is properly released from it, the backup offer moves up. If the first buyer removes their conditions, the backup offer never takes effect.
The clause that matters most
A backup offer should state clearly that it's in backup position and should include a condition that the seller must cease to be obligated in any way under the earlier contract by a set date. That condition is for the seller's benefit, and the seller may need a full release from the first buyer. Without it, a seller can end up legally bound to two buyers for the same home, which can lead to a lawsuit and damages.
The date in that condition should fall after the first buyer's subject removal date, so there's time to get the release signed.
Why changing the first deal is risky
Once a backup offer is accepted, the seller's freedom to amend the first contract is often limited. Some changes, such as a new price or different buyers, may be treated as ending the original deal, which could activate the backup. Others, such as moving a date, have been found in some BC cases to keep the original deal alive. Each situation turns on its own facts. Some backup offers also include an optional clause in which the seller agrees not to amend the first contract at all.
The practical takeaway: if the first buyer asks for an extension or a price change while a backup offer is in place, the seller and both buyers should get independent legal advice before anyone signs anything.
For buyers: pros and cons of making a backup offer
Pros
- You stay in line for a home you want without starting from scratch.
- If the first deal collapses, you're already in place with agreed terms.
Cons
- The first deal may still complete, so you may wait and miss out.
- While you wait, it can be hard to commit to another home. If you want to write an offer elsewhere, talk to your real estate professional and a lawyer about how to do that without ending up obligated on two homes.
- Where the home buyer rescission period applies, your three business days start when the backup offer is accepted, not when it becomes active, so do your homework early.
For sellers: pros and cons of accepting a backup offer
Pros
- If the first buyer walks away, you have another buyer ready.
Cons
- Your flexibility to agree to changes with the first buyer may be reduced.
- If the paperwork isn't right, you could be bound to two contracts.
Questions to ask before you sign
- Does the backup offer include a clear "seller ceasing to be obligated" condition with a realistic date?
- Does it say which changes to the first contract, if any, are allowed?
- What deposit is required, and when? (See the FAQ on deposits.)
- When does the rescission period start, and what's the fee if I rescind?
- Have both sides had a chance to get legal advice?
The bottom line
A backup offer can work well for both buyers and sellers, but the wording matters. Get the clauses right, keep everything in writing, and bring in a lawyer before any changes are made to the first deal.
Buying or selling in Vernon or the North Okanagan and wondering whether a backup offer makes sense? Call or text Sean Phillips, REALTOR® with Coldwell Banker Executives Realty, at 236-599-5898. The offers FAQ covers multiple offers and escalation clauses too.
This article is general information, not legal advice. Talk to a lawyer about your situation.