It is a fair question and I thought y’all could benefit from a little discussion about homes for sale.
When Is a Home Sold?
When the fat lady sings and the check clears, baby.
Ok, in all seriousness, there are two phases to a home sale once a buyer and seller sign a purchase contract. Understanding these phases can lead to great opportunity for the savvy buyer.
The “In Escrow” sign is a common addition to the For Sale sign in front of the house. It might also say, “Under Contract”. This usually means that the home has an accepted offer but the buyer must inspect the home and obtain their loan. This occupies the first 17-21 days of the escrow period and it is a time when the transaction is at it’s most fragile.
n fact, more than 36%of all homes that enter escrow will come back on the market, looking for a new buyer. There are endless reasons for this and a smart Realtor works hard to get another buyer who is willing to “wait in the wings”
This is why a home can be held open, even if there is a contract in place. This is also why there may be no indication sale or contract on the “For Sale” sign in front.
Here is the opportunity for a savvy buyer. It is a fact that the only homes selling, today, represent a huge value. Therefore, if it is in escrow, it is probably a great home. 36% of all the homes in escrow are going to come back on the market, and much of the time it is because of a buyer problem, not a defect of the house.
If a home in escrow suits your needs you can negotiate a contract with the seller that commits the seller to you, should the current deal fall. However, you are NOT committed to the seller! You are free to continue shopping and if you find a house to buy, you notify the first seller that you are canceling the contract. From a business perspective you have nothing to lose.
At this point the current buyer has removed all their contingencies; they have inspected the home and obtained loan approval. Most Realtors will place a “Sold” sign out front and they will stop marketing the home for sale.
This period, which lasts for about 2 weeks, is all about processing paper and geting ready to move. All the questions have been asked and answered. However, money and title have not yet transfered and the buyer’s can not move in.
The waiting buyer still has a chance, but this is now a much smaller one. Transactions can fall apart at this stage for a catastrophic life change for the buyer or the seller, natural disaster or, frankly, bank stupidity- but that is a post for another day.
NOW the fat lady can sing. (Have you ever seen Brunhilda in Wagner’s The Ring? All I’ve seen is the costume and, honey, she is seriously fat). Title transfers to the new buyer, everyone moves and everyone gets paid (or pays, as the case may be).
Should You Write A Back Up Offer?
The answer to this question is not always clear. I firmly believe it is a good business move.
But most of you are buying for reasons that are more than business.
If you write a back up offer will you be able to consider another home while there is a chance you could get this first one? Most people can not.
Also, there is the theory that your back offer will simply motivate the first buyer to close escrow rather than walk away. That can certainly happen, but most people do not make huge financial decisions based purely on game theory. It is my fairly deep experience that if a buyer wants to walk, they will, back up offer or not.
There you have it- the anatomy of a home sale and the opportunity therein. So, here’s my question. Based on this information,
Have you ever declined to write a back up offer on a house that later came back on the market? How did that feel?