NO one likes to play second fiddle. But in the current housing market, there is increasing pressure on buyers to make backup offers -- securing themselves the No. 2 position in case the original deal falls apart.
For their part, sellers like the bargaining leverage of having other buyers waiting in the wings and the safety net they provide should the house fall out of escrow.
Since escrows are confidential and not recorded until a sale closes, there are no numbers on how many fall through. Anecdotally, however, area real estate agents report that fallouts are on the rise -- all the more reason to have someone else ready to step in.
"I've seen more and more deals falling apart these days because of buyers promising the moon and making crazy offers," said Natalie Neith, an agent for the John Aaroe Division of Prudential California Realty in Larchmont Village.
Eager to make the sweetest offer they can in this competitive market, buyers sometimes promise more than they can deliver. The result: The bank says no, and the buyers find they cannot qualify for the financing they need.
Are backup offers something all buyers should consider?
The jury is out. Some real estate agents urge buyers to make them. Others advise against doing so, recommending that buyers rely on agents with strong contacts and an ear to the ground to find a house.
Michael Edlen, a real estate agent with Coldwell Banker in Pacific Palisades, sees no reason why a buyer shouldn't toss his hat into the ring even if a property is in escrow. Most backups come from people who have already submitted an offer but didn't get the house. Getting in line as the official backup isn't time-consuming -- it only takes a few minutes to fill out the two-page addendum -- and the risks to the buyer are nearly nonexistent.
"I can't think of a single buyer I represented who ever regretted being in the backup position," Edlen said.
He recently worked with a young couple who had their hearts set on a house in the Palisades that had just gone into escrow. The sellers accepted their written backup offer, but when the couple found out they were fourth in the backup line, they were crushed.
Edlen advised them to hold tight. Sure enough, the primary buyer backed out because of a problem that came up during inspection. A day later, the people in the first backup position withdrew their offer as well. The next couple had already found another home, and the person who had made the third backup offer was no longer interested.
