Finding your dream home in a competitive real estate market can be challenging. Often, properties are snatched up quickly, leaving little room for those who miss out. However, there is a strategy that can increase your chances of acquiring your desired property even if someone else has a contract on it: making a back up offer. In this post, we will explore the concept of back up offers and highlight a few important considerations to keep in mind when pursuing this opportunity.
1. Protecting Your Interests with a Conditional Offer:
When making a back up offer, it is crucial to protect your interests until the previous contract is cancelled. Ensure that your offer explicitly states that your conditions will not take effect until the previous agreement has been terminated. This step will help you avoid unnecessary expenses, such as obtaining a LIM (Land Information Memorandum) or a builder's report, until you are certain that your offer is in play.
2. The Role of Roll Over Clauses:
When negotiating a back up offer, it is essential to inquire whether the previous agreement contains a roll over clause. A roll over clause requires the property owner to provide notice to their current purchaser requiring them to confirm their agreement within a specified timeframe; otherwise, the agreement is automatically cancelled. If such a clause exists, it can significantly speed up the process for you as a potential buyer, reducing the waiting time and increasing the likelihood of your contract taking effect.
3. Determining the Confirmation Period:
In cases where no roll over clause is present, it is important to determine when the previous agreement is due for confirmation. By asking the real estate agent about this timeline, you can gauge how long you will need to wait. Understanding the confirmation period allows you to plan accordingly, ensuring you do not miss out on other potential properties while waiting for the outcome.
Back up offers present an excellent opportunity for homebuyers to secure their dream home, even when another buyer has a contract in place. By including a clause that starts your timeframe when the previous contract is cancelled, asking about roll over clauses, and understanding the confirmation period, you can navigate the process more effectively.
If in doubt feel free to always reach out to the team at Absolut Legal so we can help. Absolut Legal are Property Lawyers who can navigate you through the conveyancing process and help you buy a home.
Frequently Asked Questions
What is a backup offer on a property?
A back-up offer is a strategy that lets you secure a property even if the seller has already accepted another offer. It effectively places you in line behind the first purchaser, ensuring your contract becomes the primary agreement if the first purchaser's deal falls through.
How does a back-up offer work in NZ property transactions?
In New Zealand, a back-up offer involves signing a conditional agreement that sits behind the primary contract until the previous buyer’s deal is cancelled. To protect your interests, these offers should include a clause stating that your timeframes for conditions, such as a LIM or builder’s report, begin only after the first contract is officially terminated.
Are backup offers legally binding?
Yes, a back-up offer is a legally binding contract once it has been signed and accepted by both the buyer and the seller. While it is secondary to the first agreement, you are committed to the purchase under the agreed terms as soon as the primary contract is finalised.
Should I seek legal advice before making a backup offer?
It is highly recommended that you seek legal advice so that your interests are protected and that the correct clauses are included in the agreement. Our team at Absolut Legal can help you navigate this process, particularly in ensuring you don't spend money on reports until you are certain your offer is in play.
What happens if the first offer falls through?
If the first offer is terminated because the buyer cannot meet their conditions, your back-up offer immediately moves into the primary position. At this point, the clock starts on your own conditional period, and you can proceed with your due diligence as per the terms of your contract.
