We have a saying, “What you saw today and want to think about tonight, someone saw yesterday and thought about last night.” Murphy’s Law says that a property that has been on the market for months will have two parties suddenly interested in the property the same day.
The seller can only accept one offer so the other offer is often countered into back-up position. That means if the first sale fails, the other offer moves into first position and the property never goes back on the open market. The buyer can back out at any point prior to being notified that they are in first position. Once in first position, the normal terms of the earnest money agreement would apply.
On the buyer side of a transaction, I am not a fan of back up offers. Mainly because I think it strengthens the seller’s position with both potential buyers.
Back up offers are generally great for a seller. With a backup offer, the seller is usually less negotiable on repairs or concessions: “You don’t take it, I have someone else that will.” This means that the buyer in first position, knowing there is a back up offer, has less clout and is likely to accept less than they might have been able to get out of the seller as they are essentially still competing for the property. In MY opinion, the back up offer makes the first deal less likely to fail. If the first deal falls apart, the property will come back on the market and the buyer can make an offer at that time.
The advantage to the buyer in back up position is that if the deal does fail, they know exactly what terms they are going in with and it is an accepted offer then and there.