With the majority of markets across the Fraser Valley returning to fairly normal balanced markets or low sellers markets we’ve seen the return of back-up offers being submitted, and successfully leveraged!
Prior to the last few months there wasn’t too much point in submitting a back-up, if a buyer had gone to all the effort of winning in multiple offers they were very, very likely to remove their subjects – if there even were any subjects.
We’ve recently seen an increase though in buyers writing offers without being pre-approved for their financing (not our buyers, but that’s another topic for another day!), and even if they are pre-approved sometimes they’re not liking the rates they’re being quoted.
Buyers are also feeling pickier in a higher inventory environment. Sometimes home inspections bring up issues and the sellers aren’t willing to have them taken care of and/or won’t re-open the negotiation.
Other times it’s the document review that can cause a buyer to walk away, sometimes they don’t like something on the title, in the property disclosure statement, or in the strata documents. Sometimes it can be super minor, but that doesn’t matter, they still have the right to walk away.
SO! This has led to an increasing number of ‘collapsed deals’, accepted offers failing to ‘firm up’ by removing their subjects. Because of this we’ve been encouraging our clients that if they fall in love with a property, and even if it’s got an accepted offer, to still write a back-up.
So far this year we’ve had three back-up offers accepted. I love making those phone calls, ‘we’re in the drivers seat!’
So, Why Write A Back-Up?
– The Bump Clause: Almost all ‘subject to sale’ offers have a ‘bump clause’, and this week I even inserted one into a contract that wasn’t subject to sale because quite frankly I didn’t trust the buyer’s ability to remove subjects on one of our listings.
What does a ‘bump clause’ look like? Something along these lines:
“The Seller may, upon acceptance of another acceptable offer deliver a written notice to the Buyer requiring the Buyer to remove all conditions from the contract within 48 hours of the delivery of the notice, not to include Sundays and Statutory Holidays. Should the Buyer fail to remove all conditions before the expiry of the notice period, the contract will terminate.”
If there’s a bump clause on the original accepted offer, and those buyers fail to remove their subjects within the notice period, then our back-up falls into play!
– Sellers Want Something!: Obviously all contracts should be appropriately reviewed, and we certainly review all our outgoing and incoming contracts, but it’s basic psychology that if a Seller’s already got an offer they like and are just looking for something as a back-up then they can settle for less than they usually would, not expecting it to actually be the offer that they end up dealing with.
Because of this, we’ve been able to get back-up offers accepted with particularly favourable terms for our Buyers. Whether it be a lower price, preferable dates, included items, or any number of other benefits.
– Nothing To Lose: Unless you’re looking for something super generic, like an investment condo, and need to buy it immediately then what do you have to lose? The back-up offer can be revoked before it’s accepted, or following the acceptance we usually have the standard subjects providing us with ample opportunity not to firm up ourselves.
Clearly, if we’re writing an offer, then our expectation is to remove those subjects – why would we waste our energy otherwise? But if there is legitimate reason not to remove our own subjects, then we don’t have to.
If you’ve fallen in love with a property that has an accepted offer, why not write a back-up offer? Maybe it’ll be accepted with terms you couldn’t have got originally. Maybe you’ll fall into place when the original offer fails to remove subjects. Maybe you’ll get your dream house when it looked like you’d just missed out!
If you know someone looking to buy a home in the coming months, make sure to send them our details, this is just one of a number of strategies we have to help our buyers secure the homes they’re looking for!