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Back Up Offer

Why put a back offer/invoke an escape clause in place to buy a property?

Currently you are looking and may have found the perfect property however your only option at this stage is to submit a cash out offer or backup offer. How can you make a backup offer that gives you the best chance of securing the property, is it worth the time & energy many ask?
Should you write a backup offer to buy a property?”

The vendor more often than not would NOT look for a backup offer unless they felt there was a good chance the first offer in place might fall. Generally speaking, if you’re the second person in line, and your backup offer has been accepted, you may just end up buying that home, so do not be put off by being a backup offer.

What Is a Backup Offer?

First, the seller/Vendor has already accepted another offer. Offers can be unconditional or conditional. If an unconditional offer is accepted by a vendor, the property is sold and the deposit is paid immediately. The majority of offers, however, are conditional which means the buyer is offering to buy the property subject to certain conditions being met such as:

  • Subject to the sale of an existing home
  • Subject to a Builders or other technical Reports
  • LIM (Land Information Memorandum) if not supplied by Vendor.
  • Due Diligence on the property.
If any one of those situations is not satisfactory to the first purchaser, the transaction may cancel. A common timeframe for these is within 10 -15 working days, sometimes less. Until all conditions have been satisfied, a property is said to be “under contract”.

Standard timeframe on agreements is currently 15 working days for build & LIM to be ordered and reviewed.

If the first transaction is cancelled, then the backup offer is automatically in contract with the seller. A backup offer stops the seller from entertaining offers from other buyers. If prices have gone up because you’re buying a rising market, you’ve locked in the original price in your backup offer. Importantly, if a vendor accepts a back-up offer, the date for confirmation of the first contract, or prior agreement, cannot be extended. It is not compulsory for the first buyer to be notified there is a back-up agreement.

If the time for contract conditions to be met is lengthy, say 15+ working days, a sales consultant will often recommend the inclusion of a “cash-out” or “escape” clause for the Vendors benefit. If a subsequent offer is accepted within the conditional period, the escape clause comes into play, that is, it is invoked and the buyer with the prior agreement is given a specified number of days, usually around three, to confirm their contract, whether or not all of their conditions have been satisfied. This notice is served by the vendor’s lawyer to the purchaser’s lawyer.

A backup offer needs to be signed by all parties to the contract to be effective. Sellers can sign more than one backup offer providing the seller makes the position of each party known. In our market at present, it is usually just the one back up offer.

A backup offer needs to be equal or as appealing as the first offer, both in conditions and offer level. This will be worked through with me, I can’t disclose what is in the first offer.

Talk to me about acceptable strategies. Use your agent’s knowledge about the marketplace.
Seek legal and technical advice before entering into any agreement – as it is legally binding.

A great resource is


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