RETURN OF THE "BACK-UP" CONTRACT

After a week full of showings, emails, telephone conversations and meetings on my luxury inventory I found a whole new attitude surfacing. The re-emergence of a back-up contract is an activity I am actively encouraging among the sellers and buyers with whom I work on a daily basis!

Oh, no. Already, I hear the chorus of, “What a waste of time….” Let’s stop and think about whose time is being wasted. First of all, if you represent the seller and you are disclosing to the co-operating broker that there is a contract in place, then this is a good practice to ensure that your listing proceeds to closing. This is especially the case with declining buyer confidence and strict, somewhat volatile mortgage underwriting. That is assuming, of course, that the property has passed the inspection period without total re-negotiation of contract. So a back-up at this stage makes total sense.

Then, I think of the buyers within my care who also elected to write a back-up offer. After months of reviewing deepwater properties, they were in a position to move forward with their purchase and yes, you guessed it, the house of their dreams went under contract that very weekend! By writing a carefully structured back-up contract they felt that I was looking after their interests as buyers. They know that if the first place contract falls apart they have the potential to purchase the property. Why would anyone want to spend months working to identify the perfect purchase and then not complete the circle by at least attempting a back-up contract? If the back-up is not successful then you at least tried and the buyer can move forward knowing everything possible has been done. Plus, a kick-out clause enables them to continue searching in the meantime.

Realtor magazine produced by the National Association of Realtors dedicated an article to “The 11th Hour Back-Out”. This sites some of the reasons why offers made on a property and can fade away equally as quickly because of a change of heart, or a financing issue on the part of the buyer. This is especially the case with the short sale market when the buyers become disillusioned in the bank approval process.

Last minute snags with transactions as they approach the closing table are becoming common. I describe this as the critical “air traffic control” element of our business. Delayed closings just like flights are not unusual, especially if the financing requirements change in terms of FICO scores or debt-to-income ratios. Careful analysis of pre-qualification letters and overall qualifying of buyers is becoming even more paramount. Sometimes the flights are bumpy but the aircraft can still land with careful guidance, patience and skilled negotiation.

So, I am going to go the extra mile and provide a proactive, go-to attitude – it really doesn’t take long to write up a back-up offer and the potential to increase your business and certainly improve your customer service is worth the effort!

Happy Selling!

Julie