In our Austin Home Search tool, you’ll sometimes come across “Backup or Contingent Listing” written in blue underneath the address of a home for sale. Just what does that mean?
Backup or Contingent Listing Status
When a property is in “Backup or Contingent Listing Status”, it could be either in Backup Status or Contingent Status. Both mean the owner of the property has accepted a contract, however, each is slightly different.
Backup Status
A listing in Backup Status is what Austin Realtors call “Pending Taking Backups”. The owner of the property has accepted a contract to sell and is waiting for the buyer to get through their option period.
An option period is an agreed upon amount of time (usually 7-14 days) that a buyer purchases from a seller for the right to cancel the contract. During the option period, the buyer can cancel the contract and only lose their option money (usually a few hundred dollars). Because the buyer is not locked into the contract, the seller usually wants to line up some backup offers should this buyer decide to cancel.
Contingent Status
A listing in Contingent Status is what Austin Realtors call “Active Contingent.” Active Contingent means the owner of the property has accepted a contract to sell from a buyer who needs to sell their home first. The sale of the property is contingent (dependent upon) the buyer’s house selling first. When the buyer’s home sells, they will go forward with the purchase of the property.
If a second buyer writes an offer on a listing in Active Contingent status, this will usually trigger a clause in the first contract for that buyer to either go forward with the purchase (even if their house didn’t yet sell) or cancel the contract. If the buyer cancels, this puts the second buyer in first position.
Backup Offers
In both cases, you can submit a backup offer, but realize it’s likely a long shot you will get a chance at purchasing the house. More often than not, the buyer who is currently under contract will go through with the purchase.
Our personal opinion towards backup offers if we’re representing a buyer is to not write them. When the seller is already under contract, they feel they are in a position of power and are not as willing to negotiate. Waiting until their deal falls apart puts the buyer in a better position because the seller went from a contract they were pretty confident would go through to having nothing. Usually, sellers in this position are more willing to negotiate with a buyer, thus giving you a better deal.
If you’re a seller, get as many backup offers as you can. The more backup offers you can accumulate, the higher the likelihood of your property getting sold. Negotiating all the terms of a second contract can be tedious and time consuming, but it saves a lot of time when the first buyer backs out. The second buyer can move right into primary position and continue to move the process forward.
Is It Worth My Time to See a Backup or Contingent Home?
In most cases, the answer is no, especially if you’re at the beginning of your Austin home search. In order to make an offer on a home, you’ll need to be pre-approved by a mortgage lender. This process usually takes about a week or so. In most cases, homes that are in the Backup or Contingent Status have moved to Pending in this amount of time. If you’re serious about buying a home, your first stop should be a reputable mortgage broker or mortgage lender. Get all your financial house in order before you fall in love with a house that you’re not going to be able to buy.
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