Backup Offers: Seeing Property Already Under Contract
Sometimes buyers ask about performing showings on properties already under contract or making offers on properties already under contract. I typically don’t recommend it because it's typically a waste of everyone's time including the buyer's and the occupant's, but there are some exceptions.
Pending release
2. “1st right of refusal” or “kickout clause”
A property that has a “1st right of refusal” or “kickout clause” is one where there’s an option to make an offer that the seller can actually use, if the offer is strong enough, to “kick out” another buyer under contract, typically if the 1st buyer is unwilling to release some sort of contingency within a certain time frame, such as 24-72 hrs. If the 1st buyer has a home sale contingency, that’s a common reason for a “kickout clause”.
3. Unusually unique criteria
If the criteria of the buyer is such that the kinds of properties that they are looking for is extremely rare (not just because the property is their favorite) and the buyer has a higher than typical amount of cash on hand to make a very strong offer. For instance, a buyer might consider it if they cared more about a specific property they want than getting a "good deal" by offering an amount far above asking price (such as 10% over asking price via an escalation clause for properties >$100k, & higher than 10% for properties <$100k) with a large guarantee above appraisal (i.e. 10% of the offer amount) who has the cash to make that happen.
Other issues:
If you make a backup offer, you aren’t prohibited from making other offers and performing other showings, but I don’t recommend making other offers unless you first withdraw the backup offer. A second contract can occur in some cases with backup offers pending release of the 1st and if making a backup offer some buyers like to include a first right of refusal of their own, which again typically gives 24 to 72 hrs time frame where the seller would need to release the other contracts after you give them notice that you want to release unless they do. Prior to that time if you want to make any offers you would need to make that offer contingent upon the release of the other contract, which of course would weaken the strength of that offer.
Often, we won’t know what another contract amount is for.
Sometimes, if a home is under contract, the occupant or seller won't allow additional showings even if a contingency is present.
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