[Music]
Welcome everyone to another edition of
the Selling Greenville podcast I'm your
host Stan McCune realtor here in Greenville
South Carolina and it is June the 5th
I'm recording this on the heels of a
very busy week in which I was trying
to refinish my deck frantically before
yesterday's rain came in the finish
that I was putting down on the deck
needed 4 hours to dry prior to any rain
hitting it and we had to do all kinds
of masking and taping below our deck
and then a lot of cleaning of the deck a
lot of other things like that a lot of
prep work and then finally we were able
to refinish it and we we completed the
refinishing it took us 2 days now our
neighbor told us it would take us 2
weeks so we finished it in two
days really more like one and a half
days was what my wife and I spent
doing that and we finally got that
refinished at about noon yesterday
and then the rain came in about 6 6:30
last night so we we finished it with
with about two two and a half hours to
spare but I am really tired I've spent
like 20 hours this week working on
this thing and I am glad to be done
with that and I'm going to try to
overcome the achy legs and achy arms and
everything else in order to bring you
guys some energy for this podcast
because I've got a a a topic that I'm
really excited to talk to you guys about
and and I'm looking forward to that
but before we get into that just real
quick just a reminder as always you can
find all of my contact information in
the show notes if you need to reach me
if you need need a realtor if someone
else you know needs a realtor please
reach out to me however you want contact
info in the show notes and if you like
the show please rate and review us
please go ahead and subscribe to make
sure you don't miss any episodes if
you're going to be going somewhere where
you might lose cell phone reception or
something like that download all of
those things help get this show out to
more people now for our topic at hand
today we are going to be doing a bit of
a tips and tricks episode yes tips and
tricks in real estate specifically
focused on one specific tip or trick
depending on how you look at it that we
call the backup offer now some of you
may be very familiar with this some of
you may not be familiar with it at all
a lot of Realtors are not familiar
with it it's funny how often I will
mention this to other Realtors and
they'll be like what what is that
I've never heard of of that that is
because a lot of Realtors you know they
come they might be in smaller firms or
they might be on firms or teams that
don't discuss these types of things
because they're focused so much on sales
and on generating business on generating
new clients that they're not focused on
actually what are some of the things
that you can do to to add value to your
service so I try to have a lot of
different tricks my sleeve as a
realtor that's part of how I try to
differentiate myself and this is one of
those that I think people need to know
more about and I'm fine with sharing
this trick to the masses because I want
more Realtors to know about it because
it helps our industry when everyone
knows how to do things that are
useful it when people are more educated
that's a good thing we don't want all
these things to just be held by a hand
full of realtors in the marketplace I
want everyone to know about these
types of things so that we have a fully
educated well-run real estate machine
here in the upstate of South Carolina
now this is an Upstate specific episode
but I don't know in other markets how
this would work if there might be laws
that prevent some things here in in
the upstate we have done backup
offers multiple times and they can
work very very well we don't have any
issues that I'm aware of legally with
with anything related to those as long
as everything is in writing that's the
key so what is a backup offer okay well
it's pretty much what it sounds like
if there is already a contract on a
house someone can put a backup offer in
on that same house and that backup offer
offer has language in it that if the
primary contract falls through then the
backup contract assuming it was ratified
becomes the primary contract upon the
former primary falling through all right
so here's an example let's say that
there's a house that is under contract
and someone comes along and they say you
know what I really wanted that house and
I just I was a little bit late getting
to it I I missed it for some reason I
would really like to still have a shot
at that house they can submit an offer
just like a normal offer but the offer
has language that makes it the primary
contract should the current primary
contract fall through under one it one
of its
contingencies and then they are just
hoping that that contract that primary
contract falls through of course I need
to specify the seller has to agree to
this right there there is still a bit of
a back and forth a bit of a negotiation
that goes on from the time that the
backup offer is made until the time it
becomes a backup contract and that's
that's pretty normal but you get once
everything is fully ratified the backup
contract is in place and it becomes the
primary contract should the primary
contract fall through and this is a
very useful tool it can be a very useful
tool in a variety of situations for both
buyers and sellers now from the buyer
perspective I I just kind of mentioned a
scenario in which it could be useful
which is particularly if you miss on
miss out on a house that you really
liked something that it was the the
perfect house your dream home maybe you
were waiting to get pre-approved or or
maybe you know you had a house that
you were trying to sell and it was under
contract so you weren't able to really
submit a a strong offer you know with
your home sale contingency whatever it
may
be the house that was your dream home
got locked up by someone else and now
you're like
ah I have been looking I have been
educating myself on the market for a
long time and I know that there is not
going to be another house for a very
long time that comes on the market like
that house I don't see anything else on
the market that I'm interested in I'm
willing to take myself off the market
potentially at risk of completely losing
out on that house or other homes that
come on the market in the meantime in
order to submit a backup offer and get a
backup contract on that house because
that's the thing right that is still a
ratified contract you you need to keep
that in mind as a buyer that you are
still on the hook potentially for that
house so you can't keep shopping you
can't submit a backup offer and then
keep shopping I mean you have to have
earnest money with that if you terminate
that contract you have to terminate
you have to to surrender your earnest
money as well so so there is a risk
there and maybe you you submit a low
enough earnest money that you're
willing to take that risk I don't ever
recommend to
anyone to submit a contract that
they're not serious about and that
that they're not willing to actually
take themselves out of the market in
order to commit to that property but
there's a lot to consider when you're
submitting a a backup offer you need to
be fully committed to that house and
realize that you might run into a
situation where another home comes on
the market that you really like and now
you're stuck in this weird situation do
I Surrender my earners money to go after
this house or or do I just stick with
this house and take the risk that I
never end up becoming the primary
contract on that one there is a lot to
consider on that but if it's a house
particularly that is unique in some ways
a property that has some unique features
that you are pretty sure you're not
going to see come on the market in the
upcoming months that's a great
opportunities to submit a backup
offer another one that is a a good
scenario here for a buyer is if you
already know and your realtor can help
you with this usually if you already
know that there are some issues with the
primary contract this helps to mitigate
your risk so maybe there's a home that's
been on the market for a while and or
I should say this it's it's been under
contract for a while and by a while I
mean
you know maybe like going on about two
months I mean maybe even you might even
check on it if it's less than that but
if something's been under contract for
like two months there's probably
something wrong there's probably
something going on there and if it's a
property that you're interested in have
your realtor reach out to the listing
agent be like hey what's the deal here
why have you been under contract for two
months what's going on and it may be the
kind of thing where maybe the buyer is
having trouble with financing and they
keep dragging it out and they keep
agreeing to extending their current
contract but it it doesn't look good or
maybe there's a lot of issues with
negotiating on repairs maybe the buyer
is being picky on repairs etc etc if the
seller had a backup contract in hand
that might completely change the
Dynamics they might decide you know what
forget this we're not going to take the
Bird in Hand we're going to go ahead and
and just kind of end things with this
buyer who can't get financing or
whatever it may be and we're going to go
ahead and move forward with a different
buyer in that case a backup offer can
really be a a powerful tool because you
already have a a good chance of of the
primary contract falling through because
you already have Insider information
that they're having
issues so there are several things
again there to consider if it's a
property that just went under contract
you're less likely for the backup offer
to work as you are if if it's a home
that has been under contract for a while
and is starting to you know the buyers
are starting to get to the point
where it might not close and the and the
sellers are starting to get worried that
it might not close or that they're
having issues or whatever the case may
be now one thing that I'm surprised
about because I work with a lot of
investor clients and maybe this is just
something I need to discuss more with my
investor clients a a lot of them don't
like to to contract with a property
unless they're very certain that they
can that they can acquire the
property but I think a lot of investor
clients should
consider submitting backup offers on
properties that have a chance of
falling through the contract on falling
through the primary contract that
that they have under them because there
are a lot of properties that are on the
market that are interesting that that
come on for a low price that an investor
would be interested in and someone
immediately gobbles it up and it might
be a multi offer situation whatever the
case may be someone comes in they gobble
it up but a lot of those end up falling
through because during the due diligence
period the the
buyers you know their financing might
fall through a lot of these investor
clients out there aren't even serious so
they're just trying to get something
under contract for a good price and then
they do their due diligence then they
they find a reason to break the contract
so if you're a serious investor buyer
it's an opportunity for you because so
many of those types of properties lose
out end up having their their their
first contract not working out you have
an opportunity to come in there and to
be able to submit that backup offer to
get it under contract as a backup and
then a large percentage of the time
those primary contracts will fall
through when it's a first contract on
on a property that is priced low and and
needs a lot of work and so there are
some good opportunities out there for
investor buyers as well now one cave out
here as I said before a lot of Realtors
are not familiar with this backup offer
process and as such some listing agents
might feel uncomfortable with that some
Brokers might feel uncomfortable with
that they might be like you know what I
I don't know what that is that seems
fishy to me and I don't want to I don't
even want to get involved with that
so it's not a guarantee
by any stretch that it will work out
that all the parties will agree to it
but it is a great tool to have in your
toolbox and if you're a realtor
listening to this or if if you're a
buyer client of a realtor that is not me
bring it up to whoever it is that
you need to bring it up to to learn more
about it and and to see if it's a viable
strategy for you to use for sellers it
is also a great strategy to
consider the one of the the things that
as a seller that you are most concerned
about when you're selling your home you
get it under contract the worst thing
that happens is when you get under
contract and then the contract Foster
and it has to go back on the market and
of course in the software that we
Realtors use which is called paragon
some of you might know it as the
MLS Paragon keeps a log of that you can
see exactly when it went under contract
exactly when it fell through and I can
assure you as a listing agent when I
have a a listing that is under contract
and then the contract falls through I'm
going to get questions from other buyers
from Buyer Agents why did that not work
out why did that fall
through and it is a lot better let me
tell you that having to put it back on
the market having to field All Those
Questions having people feel like they
have a lot of Leverage a lot of buyers
will feel like oh what you know this
seller is probably more motivated now
than they were a few weeks ago I let me
put an even lower offer than I would
have considered a few weeks ago it's
a lot better if you can just agree to a
backup offer a backup contract and then
if that primary contract does fall
through you don't even have to worry
about it going back on the market you
can just
continue keep it as it's under
contract it's and nobody needs to know
that there's no way to reflect in the
MLS that it went from one contract to
another because there isn't a status
for that so nobody will even know oh
this just changed from one contract to
another contract and then if the second
contract falls through it'll it'll look
like in the MLS like it was just one
contract the whole time and that's also
beneficial it's really bad if you have
multiple contracts fall through on a
property and that's reflected on the MLS
you don't want that to
happen as a
seller negotiating on a backup offer is
oftentimes a lot less stressful than
negotiating on a an offer that would
be a primary because the buyer bringing
the backup offer is probably
really serious they I mean for them to
be willing to submit a backup they have
to really like the property they have to
really be interested in it and you have
all the cards as a seller in this
situation because hey if if you don't
like the backup offer that you're
getting you can just reject it you have
nothing to lose you already have the
property under contract the backup offer
is just an added bonus so you can
hold out for the best possible backup
offer that you can get and and here's
the irony here okay so I had a listing
last
year that that was like this where we
did end up getting a backup offer the
backup offer ended up being better than
the contract that we had the property
under now you have to be careful
ethically you are still under contract
you can't try to and I would never
encourage someone to try to to find a
way to a alate the current buyer that
they have it's a risky strategy anyway
to try to alienate the current buyer
that you have in order to get the backup
contract to become the primary don't do
that that's not what I'm saying to do
but you could run into situations like
that and that's a really great
story as well because my next Point
that I was going to make is that having
the backup contract in hand really puts
the seller in the driver's seat and
and this story of this listing that I
had here's what happened we had it under
contract and the buyer came back I mean
this was a good house that had been
renovated had had a lot of things done
to it the buyer came back with an
inspection report with a list of like
six pages of repairs that they wanted to
be done and I mean it was absolutely
insane I've only seen something like
this a few times in my entire real
estate career it was ridiculous the
inspector with we had just had flash
flooding this is a this was you know
again more flash flooding that we had
several months ago we had just had some
flash flooding they found a little bit
of sanding water in the crawl space I
mean they wanted all sorts of things
done in the crawl space because they had
a little puddle of water underneath you
know the stoop or something like that
in the crawl space area after a flash
flood and it's like you know okay people
let's have some common sense here there
has never been standing water down there
and there wasn't we knew that there
wasn't because we had had other
people go down there we had had a pest
control guy go down there to do some
stuff before and we had already had a
past CL 100 done anyway the long
story short is that we had this
unreasonable buyer and it was like I
don't know this is going to work out
very well and they had already been
difficult up to that point so I get a
call from a lady who is like hey my
daughter and and when a conversation
starts out like this it's always like oh
boy here we go we got a a mother calling
on behalf of of her children or a father
calling on behalf of his children but
okay here we go so this woman calls me
she's like my daughter saw your house on
you know 123 XYZ Street and she
really liked it this was several weeks
ago but you went under contract they
didn't they weren't yet
pre-approved but they are now we just
wanted to see you know is that contract
going to work out like what's the what's
the situation there first off I was a
little bit concerned I'm not going to
lie I was a little bit concerned that it
was the Mom calling for the daughter
rather than the daughter or as it turns
out they had a buyer's agent so really
the buyer agent should have been the one
calling me but you know the the mom
wanted to to take the rein on things
and and in the story as as you're about
to see it it does work out so I guess I
can't scold her too much for that
it's more just disappointing that the
buyer agent wasn't aware but regardless
she she was wanting to know how
firm our current contract was and I was
like well you know what it's actually
not very firm at all because these
buyers are really getting nitpicky with
this property and they're they've been
difficult to work with and I would say
that there is a decent chance that this
is all going to fall through so here's
my recommendation to you go back to your
agent or have your daughter go back to
her agent and submit a backup offer
because we'll know in the next week or
two if it's going to fall through anyway
and then we can just you know I if if it
ends up looking like it's going to work
out you know it's not going to be
very long before we know that for sure
sure so we won't be you know in a
situation where where you guys are going
to get strung out but I would say based
on my experience that there's a high
likelihood that this contract is going
to fall through and the mom was like
okay all right I'll talk to them about
that and sure enough I hear from the
buyer agent shortly thereafter and she
wants to talk about submitting a backup
offer and so we did and so when we had
to respond to so so we I should
mention we did get under contract and
and this was a situation where the
backup contract was was a little bit
better than the primary so it it was
good in a lot of ways and we me as a
listing agent my seller we felt very
confident these buyers really wanted the
house and then when when the the primary
contract when those buyers came back to
us with six pages of repairs you know
what that told us usually that is a very
good sign that these people don't really
want the house if you ask for six pages
of repairs you you know what when I
bought my house the house that I
currently live in I really wanted the
house all right so I could have gotten
nitpicky with the with the sellers and
and ask for things that you know were
kind of unnecessary and tried to make
them you know turn into a negotiation
back and forth and Andy try to get them
to do a bunch of stuff but I really just
wanted the house so I just submitted a
few core repairs that that we wanted
done and that was it and that's what
most buyers that really want a house are
going to do usually if they sub submit a
list of six pages of repairs that's not
a house they want they're already
concerned with a lot of things about
that house and they're like well if
they're willing to do all these repairs
and I guess I'm I'll feel okay you know
moving forward so when they submitted
those repairs we were in the driver's
seat right because we already had a
backup contract in hand and so we
could be like you know what we'll agree
to the core repairs again my seller was
not was not the type of seller that
was going to be unethical or or or
treat the the primary buyer differently
on the basis that he had a backup
contractor he still agreed to do all the
repairs that were necessary according to
the contract that we had signed the
contract here in South Carolina form 310
it specifies what it calls seller paid
repairs he agreed to all the seller
paid repairs and more way more than
that but it wasn't six pages worth of
repairs and long story short they
were not happy about that and and
they ended up we ended up going back and
forth and because we had a backup
contract in hand it was just like you
know what if you guys don't want the
house we'll just let you go you can go
ahead and take your earnest money we
don't care we are we have someone else
that wants a house and that's exactly
what happened we let them go the people
that really wanted the house their
contract which is the backup contract
became the primary
and it we in the meantime we went ahead
and did the repairs that we already knew
needed to be done my seller went ahead
and did those repairs the inspection
process for the new buyer went much more
smoothly they submitted a much more
reasonable list of just a handful of
repairs that they needed to to have done
after we had already done some from
the from the previous
buyer and that was it we got to closing
everything was smooth it was not a
difficult process and so having that
backup contract in hand really put the
the seller in the driver's seat there
really gave the seller options and a lot
more confidence to be willing to to
to not go crazy trying to hold the
contract in place with these
unreasonable buyers that we had now
again the backup contracts they they
aren't particularly common but I will
what will happen is when I'm in a
situation like this where I think that
an offer might be falling through or
when I get a someone calling me
about a house that's already under
contract I will start sewing the seeds
in in their mind of hey you know we're
willing to consider backup offers here
this is a situation where a backup offer
could be really strong you could really
have a chance and and then if this falls
through it won't hit the open market you
won't be in a bidding war type of
situation why don't you go ahead and and
just bring us a backup offer we can work
out all the details now and then if in a
couple of weeks we end up getting to
closing with the primary contract that
we have you're released you'll get
your earnest money back and all of that
and and we you know you won't have lost
anything besides just a couple of weeks
of of the of what comes on the
market that for a very for some very
specific buyers can be a compelling
sales pitch and so I bring that up as
often as I can when I'm talking to
buyers agents or or When Buyers call me
directly about a home that's already
under contract and so as a seller
it's it's both a contingency plan for
for your house or for your property that
you're trying to sell it's a contingency
plan and it's a bit of a leverage tool
you don't
want to be in that situation where you
feel like you need to do things to a
house that you shouldn't need to
do contractually or otherwise because
you just have an unreasonable buyer if
you have a backup contract in hand it
helps you to have a lot more confidence
to stick to your guns and to be like you
know
what I know what reasonable repair
requests are I know what the contract
says I'm obligated to do and you're
asking for a lot more than that or or
maybe it's a situation where where their
financing appears to keep falling
through and they keep asking to
extend the contract out and we're not
confident that they're going to ever get
financing you know what we're not going
to extend this contract anymore you have
not been able to get
financing once the the contract runs out
if you're not able to get financing and
we're not able to close by then we're
moving on we have a backup offer in hand
that is a great position to be in as
a seller and it's something that I
wish I could do on every single contract
I have that I'm a listing agent for
because it's a really powerful tool and
it's something something to consider
again it's it's not used very widely
in the marketplace and that's a shame
it's a shame because because it
really it helps both parties it helps
the buyer that really wants the property
and helps the seller that isn't sure
that that you know the current contract
is going to work out now I'll say as a
listing agent it's a lot of work right
because guess what happens that buyer or
the buyer agent they are calling me and
texting me like every couple of days is
there an update is there an update do do
you know if if if it's going to fall
through or not CU they are on pins and
needles right and as a buyer
particularly if it's a primary residence
that you're that you're trying to get
and that you have a backup contract on
you're going to be on pins and needles
that's that's understandable but it
is worth it because there are so many
benefits gained from it and and
hopefully this will put some ideas in
your mind maybe there are some
properties that now you're thinking of
in the past it's like man I should have
us I should have put in a a backup offer
on that property that would have had a
great chance to to for me to get if it
had fallen through there's a lot of very
interesting opportunities that it opens
up once you start applying this this tip
or this trick to the marketplace and so
think about it let me know if you have
any questions let me know what your
thoughts are this is something that
that I try to use in my Tac itics for
my buyers and for my sellers when it's
appropriate and maybe it's something
that could be appropriate for you I'd be
happy to discuss that with you again all
my contact information is in the show
notes I hope you guys have a wonderful
weekend maybe if we get some nice
weather you can spend some time in the
pool if you if the pools are opened up
my community pool it opened up on Monday
I think I'm going to float in there for
a few minutes at some point this weekend
so enjoy the warm weather stay safe and
we'll catch you next time
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