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Have you come across home listings flagged as "accepting backups" while scanning Zillow? Turns outConnecticut home buyers aren't the only ones getting strategicto win houses in this competitive market — sellers are doing the same.
Here are three things you might come across when browsing home listings.
According to real estate agent Kate Cacciatore with William Raveis in Southport, if a home is “accepting backups,” it means that the best offer is selected in a situation involving multiple bids, but other strong offers are not discounted.
“Usually, an agent calls two other agents out of the bids — sometimes more — with other strong offers and ask if they’d like to be backup,” she said. “If anything goes wrong during the trajectory of the deal, you can circle back to those other agents and see if their clients are still interested.”
Cacciatore said backup offers are typically brought back into consideration if a tentative deal hits a snag in the inspection process.
“A lot of times, buyers these days are getting so excited when they get into a house and they're going over asking price,” she said. “And then they’re settling down and going back in for the inspection and realizing, ‘OK, well you know there might be some things to address here, and boy did I pay a lot.’ So in the inspection negotiation process…there are more potential pitfalls these days than ever.”
For Susan Isaak, a real estate agent inHoulihan Lawrence's Riverside office, the way home listing sites, such as the MLS (multiple listings service), publicize that backup offers are in consideration can be confusing.
“The confusion about accepting backups lies in the term 'Under Contract – Continue to Show,' which essentially means there is an executed sales contract or purchase agreement, usually with contingencies,” she said in an email. “It’s not a done deal, and the seller is still willing to show the property and consider a back-up offer if the deal doesn’t stick.”
This kind of listing status has been picked up by sites like Zillow, Isaak said, and “reinterpreted” to mean “accepting backup offers,” which in her opinion is “very misleading to the public.”
“A seller may be willing to continue showing their property and collect backup offers, but there is no standard for what an ‘accepted backup’ looks like,” she said.
According to Greg Broadbent, a RE/MAX real estate agent based in Mystic, there is a “real” type of backup offer that goes beyond real estate agents conversing behind the scenes.
“A 'real' backup offer is a fully-executed contract that will automatically become the current contract if the first offer is canceled or released,” he said in an email. “A lot of people think that if they are in a multiple offer situation, and they come in second, that they are the ‘backup offer’ and will be contacted first if the first offer falls through. That might be the case, but there is no contractual requirement for the sellers to contact you at all.”
This type of backup offer does not happen often, Broadbent said, mostly because buyers quickly continue their house hunt after losing a bid.
“Most buyers don't want to wait for the first offer to fall through,” he said. “They move on to the next house. Depending on the terms of the first contract, it might not even be worth it to be a backup offer if the first offer does not have any contingencies.”
Sellers paying rent to their new buyers
According to Chris Sinatra, a real estate agent with The Vanderblue Team’s Stamford office, several of his current listings are marked as “sale subject to seller finding suitable housing,” which is is something he said can alleviate some pressure on the sellers’ side.
“One of the sellers' biggest concerns in this market is, ‘Where do we go once we’ve sold?’” he said in an email. “Having a plan in place prior to going on the market is critical. Buyers who are open to a delayed closing or who accept the seller’s timetable stand a greater chance of securing the property. Closing terms can far outweigh dollars to a seller who needs time to relocate.”
For Cacciatore, though, this sales tactic might be discouraging to prospective buyers.
“I personally, as a real estate agent, wouldn't recommend for my clients to do that because I think it really deters buyers — it takes away some of the value of your home,” she said. “If you just might get the house, it's not as appealing as if you are. Once you actually go through the bidding process and get the house, then you still only have not even a 50-50 chance of getting the house. What are the chances in this market when it's so hard to buy that the sellers are going to find something suitable?”
Isaak said she “rarely” sees homes listed with statements of the homeowners’ future plans — whether they plan to move out at a later date or remain in a home and pay rent to the new buyers while they house hunt. Instead, it’s something discussed between real estate agents.
“It’s more likely to be discussed over the phone or in person, sometimes hinted at in the agent-to-agent notes which are not visible to the public,” she said. “It may not even be on the table to start, but evolves over the course of negotiation. It’s also not a simple as it sounds.”
However, if a homeowner does intend to pay rent to the future homeowners while they search for a house of their own, Isaak there are many factors to weigh in the negotiation process.
“There are a lot of things to consider like who would be responsible for maintenance of different systems, who repairs something if it breaks, how much money will go into escrow for the security deposit, what is the monthly rent, who carries what insurance, what are the penalties if the seller doesn’t vacate, things like that,” she said. “Quite literally, a lease or rental agreement will be attached to the sales contract and signed at the closing. It’s a lot to negotiate.”
Listing homes as ‘coming soon’
Another strategy Cacciatore said is a surefire method to generate interest on a home listing is to publicize it before it’s even officially on the market. This “coming soon” tag on the MLS (or multiple listings service) is now being used on Zillow and Realtor.com so buyers can start looking at a house before it’s on the market, Cacciatore noted, and build “pent-up demand” to tour the home in person.
“What a lot of agents will do sometimes is put the house on for say, two days to a week (sometimes more) of ‘coming soon,’ and then they'll start showing on a Thursday or Friday,” she said. “Then Sunday, they will do a lot of times a public open house and take best and final offers until Sunday at 5 p.m.”
While these strategies can be employed in the current market, Isaak noted that sellers are having much trouble generating interest in their homes.
“Sellers in this market really don’t need to do much to entice buyers to buy houses,” she said. “It’s more the opposite where buyers need to entice sellers to choose their offer by going over ask, being all cash, or agreeing to let the sellers stay if that’s what it takes.”
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