A backup offer is a secondary offer on a home that is already under contract. If the first buyer falls out of escrow then the second buyer with the accepted backup offer will immediately go into escrow. The property does not go back on to the market if you have an accepted backup offer. There are a host of different reasons why the first buyer can potentially fall out of escrow. Here are 3 common reasons why a property might fall out of escrow.
1) Inspections: The buyer will have an investigation/inspection period which typically lasts approximately 10-17 days. During this time period, the buyer has the opportunity to have a home inspection, roof inspection, sewer lateral inspection, termite inspection and more... The buyer could discover something in their inspections that may be a red flag for them. Maybe they discovered mold in a bathroom which may be a deal breaker for them. It's possible the home may need more work than what they had anticipated originally and do not have the budget to accomplish the remodel they wanted to do.
2) Financing: The loan process can be challenging to navigate. Typically you will have contingency period of approximately 21-days to get your loan approved. Often times there can be hiccups during this time period that could result in not being able to get the loan approved. Here are a few examples that could put a loan in jeopardy: shifting finances, large purchases such as a car, new job or loss of a job.
3) Cold Feet: Often times when a buyer is competing against multiple offers on a property it can cause the buyer to act quickly and make a fast decision to make an offer. Once they get into escrow they may realize it was not the right property for them. Maybe another property hits the market that they want to pursue so they back out. Maybe the husband loves the property but the wife is feeling underwhelmed by the property.
As you can tell there are an infinite amount reasons why a home can fall out of escrow. That is why writing a backup offer is so important! Their loss can be your gain and sometimes it's just meant to be.
Please feel free to contact our team with any questions regarding writing backup offers in the Santa Barbara Area!