Questions on Backup Offer
Listed below are a few questions answered by lawyers on backup offers.
I am planning to buy a house and had a verbal agreement of sale with the homeowner yesterday. Today, I was suddenly told that there was another agreement so I pushed up my offer. Despite this, is the homeowner obliged to honor our verbal agreement?Unfortunately, based on the Statute of Frauds, all real property sale contracts need to be in writing and both parties have to sign it. Therefore, a verbal agreement cannot be enforced. You could offer more than the newest bidder, but that’s all you can do. Your offer may be considered as a backup offer in the event the second contract falls through.
I bought a HUD home in Colorado and signed an agreement saying that it would be my primary residence. I am now planning to make it a rental property due to changed circumstances. However, if I change status, I will lose the property to a backup offer. Once a deal is closed, can HUD check into how the home is being used?HUD does make random checks every now and then on these loans. They have even caught several innocent people whose situations changed after they received loans on what they thought would be their primary residence. The best thing would be to legally notify HUD of your changed circumstances and avoid the risk of them discovering the situation. If they discover it, you would be charged with a felony for fraud for not having reported the change of residence status. Also, your insurer will not pay on any claims if they find out the property is not your primary residence despite having stated it was.
Does a first offer get first right of refusal over a larger backup offer in a short sale in Kentucky?In a short sale, if your offer is not accepted, and a backup offer is presented, you don’t have a right of first refusal unless such a condition is specifically mentioned in the contract for sale.
After I made an offer on a foreclosure property, I was told there was already an accepted offer on it. I asked my agent if I could present my offer as a "backup" offer. She told me today that the bank was not planning to take any backup offers. Can I ask for proof that my offer has been refused to even be considered by the bank?You could try and ask for proof, but the bank may not give it to you. If you feel your agent had something to do with this, insist on the proof. If you still don’t get it, get in touch with the agent's managing broker and state your concerns and request for it again.
A backup offer can be used cleverly by a seller. For example, in the event an inspection of a property discloses problems that were not known to the seller and he/she has a backup offer, this can then be used to present a "take it as is or the secondary offer wins" case to push the original buyer to complete the sale. In general, backup offers pose no risk to a primary buyer if he/she carries out all his obligations in the right way. The property sale can be closed despite the existence of a backup offer.