So, what does that MLS status PB really mean? This status indicates that the property is under
contract aka PENDING but that the
seller is open to receiving and considering BACKUPS. How does this process work?
If a property is under contract, the seller has the option
to review and accept a Back Up Offer with the use of an ADDENDUM FOR “BACKUP”
CONTRACT. There are two primary blanks to complete on the Back Up
Addendum. Section A will identify the First
contract by inserting the executed date of that contract in this blank. Section
B will identify the date the Back Up offer will terminate.
If a seller wishes to accept a Back Up Offer with this
Addendum in place the Back Up Offer will be executed and earnest and option
money shall be deposited. If the First offer terminates on or before the date
set out in Section B of the Back Up Addendum then the Back Up offer moves to
the primary position.
At the time that the Back Up Offer moves into the primary
position the executed date shall be amended to the date the back up buyer
receives notice that the first contract has terminated. I recommend the agents
execute an amendment reflecting the new effective date so no conflicts arise
later as to when the option or financing periods began and end.
The seller and listing agent should understand that by
accepting a BACK UP offer, that contract is binding and they may not later
change their mind about its acceptance.
Why would a seller want to accept a Back Up Offer? Leverage.
When negotiating repairs and concessions during an option period with the First
Contract the seller can feel more confident and perhaps negotiate more
aggressively knowing they have a Back Up Offer they can move on to if they are
unable to come to terms with the First Contract. If the Back Up Offer is better
than the First Contract the seller will be unlikely to make any further
concessions beyond what they already agreed.
Why would a buyer want to place a Back Up Offer? In a hot
seller’s market, this is a way to ensure that the buyer gets first dibs if the
First Contract falls through. The seller would never have the option to place
the property back to Active on the MLS.
It will require some patience by the buyer but they do have some control
over the timing with Section B of the Addendum indicating the date when the
Back Up Addendum & Contract expires.
I have found that Back Up Offers are not very common but
they can be a good tool for both buyer and seller if all parties understand how
to use them.
