If homes have been selling fast in your area, you might feel stressed by the idea that another buyer could beat you to the punch. You may even come across an ideal home, only to find that the seller is already under contract with a buyer.
While that means the seller has a purchase and sale agreement with another buyer, it doesn’t mean all hope is lost. It’s possible that the deal could still fall through, and the seller might like a backup offer as a fallback.
Here’s how to buy a house that’s already under contract.
When To Make an Offer on a Home That’s Under Contract
If you’ve found a home you want to buy, but the seller is already under contract with a buyer, you can put in a backup offer in case that deal falls through.
“You can make an offer on a house under contract,” says Desiree Avila, a Realtor at Charles Rutenberg Realty in Fort Lauderdale, Florida. “As a Realtor that mostly works with listings, I always keep a list of people that are interested in the house as backups. Some send in bona fide offers, others just ask to be notified if the current offer falls through.”
It can make sense to put in a backup offer if you’re looking in a market with low inventory, you’ve already gotten mortgage preapproval, and you can make a competitive offer.
“If a buyer is really, really interested in the house, they should make the backup offer,” Avila says. “It is just a little extra paperwork, and if the previous offer falls through the buyer is in a position to buy the house.”
However, be warned that if the seller accepts your offer, you’ll be obligated to proceed with the purchase. So, if you do make a backup offer, you’ll want to hold off on making offers on other homes in the meantime.
How Often Do Homes Under Contract Return To Market?
While it’s possible for homes under contract to return to the market, it’s rare. A May 2023 study from the National Association of Realtors found that only 5% of purchase agreements fell through before closing in the prior three months for various reasons.
If a home sale falls through, it’s typically because the buyer has backed out. Often, one side or the other can get out of a real estate contract if one of the contingencies listed in the purchase and sale agreement hasn’t been met. For example, the home inspection may have revealed a serious flaw in the house, or the home appraisal came back lower than expected.
If it’s a buyer’s market — where supply exceeds demand and buyers have more leverage — it’s possible that more homes under contract will be relisted. If it’s a seller’s market — where demand exceeds supply and sellers have more leverage — it’s less likely.
“The reasons a deal falls through are manifold,” Avila says. “Some reasons are mundane, and some are just crazy. It could be that the buyers and sellers could not negotiate past the inspection, it could be that the house didn’t appraise, or the buyer lost their job, or the buyer decided to buy a new car or furniture right before the closing and they can’t get a clear to close, or a whole host of other things.”
Preparing an Offer on a Home That’s Under Contract
Making an official backup offer is a lot like making a normal offer, except you know you’ve got competition.
“The way you go about it is the same way you would send in a regular offer,” Avila says. “Here in Florida, there is actually a backup contract addendum.”
A backup addendum establishes you as the next in line should the initial deal fall through. Avila says it’s used rarely, but can be useful.
“If a person really, really likes a house, I would recommend using the backup addendum,” she says. “It puts the buyer in an official backup position should the existing contract fall through.”
Here’s how to prepare for making a backup offer.
Do your homework
Make sure to get preapproved for a mortgage, and find out the listing price and how long the home has been on the market.
If it’s a seller’s market, you’re going to want to offer more than the asking price. However, be sure you stay within what you can afford. If it’s a buyer’s market, you may be able to offer the asking price or perhaps even a bit less. The seller might be willing to accept a lower offer so they don’t have to relist the home.
Talk to the seller
It can help to talk to the seller and form a personal connection over what the home means to you. If the seller has lived in the home with their family for a long time, then the home can hold sentimental value, and they may want to find a buyer who will appreciate living there.
Work with your agent
Your real estate agent will be a helpful resource when it’s time to put together the offer. You’ll be able to lean on their knowledge and experience to set an offer price and negotiate.
Your agent also will be able to help you draw up a purchase agreement for you and the seller to sign that would go into effect if the original purchase agreement is canceled or expires. When creating the terms of the contract, try to avoid asking for too many contingencies so your offer stays competitive.
What To Do If Your Offer Is Successful
If the deal with the first buyer falls through and the seller accepts your offer, that means you’ll be automatically under contract. At this time, the purchase and sale agreement that you signed with the seller officially will go into effect. This saves the seller the trouble of relisting the property, and you won’t have to fend off any additional competitors.
FAQ
Here are answers to some frequently asked questions about making an offer on a home that’s already under contract.
If you’re under contract with a seller, then you’ll only be able to get out of it without penalty for reasons that are listed as contingencies in your purchase and sale agreement. It’s not advisable to make other offers while you’re under contract.
Under contract means the seller has accepted an offer from a buyer. However, the deal isn’t final until closing day.
Some sellers choose to continue to show the home even after they’re under contract with a buyer. If the seller has reason to doubt that the buyer will be able to secure financing or the purchase agreement has a lot of contingencies, then the seller may still show the home to cover their bases.
