In the competitive real estate market of San Francisco sometimes the best strategy is to come in second place when your trying to buy a house!
A strategy that I have used with success in the past year has been to get my clients to submit a fair offer, one they are comfortable with and one that is at or just above market value. We try to make the offer as clean as possible; avoiding all possible contingencies.
We also have financing lined up so that the sellers are confident that we could and would close the transaction with as little headache to the seller as possible and on the sellers preferred timeline. This offer may not be the winning offer but it may be enticing enough to the seller (and the seller’s agent) to offer you a back-up position.
Sellers like to have a back-up offer because it keeps pressure on the primary offer to perform because the seller may offer the back-up position at a price less than that of the primary offer. Having the back-up position is a great place to be; it puts you in control of the situation if anything happens to the primary offer.
Think about this; in a market where buyers get sucked into an auction mentality and often offer more than they are comfortable offering; they often get cold feet or what agents call buyer’s remorse. Once buyer’s remorse sets in buyers often back out of the deal.
If you are in back-up position the seller is obligated to move you into primary position at terms that were agreed upon when you signed the back-up agreement (often more favorable terms than those of the primary offer). You, on the other hand, are not obligated to accept.
If you still think it’s the house for you and you haven’t found anything better then move forward. But if you have found something else or simply have changed your mind than you should decline the request.
Being in back-up position does not cost you anything, you can continue to shop and make offers on other homes. All the while you are in back-up position just in case the primary buyer catches a bad case of buyer’s remorse.