How Does a Backup Offer Work on a Short Sale?

The seller still markets his property in a short sale.

The seller still markets his property in a short sale.

A short sale can save a borrower from foreclosure. In a short sale, the borrower sells his property at price that won't cover the money left on his mortgage. Although the seller won't make money off the sale, he's still responsible for getting a real estate agent, showing the home and finding a buyer. The first offer he accepts becomes the primary offer. If he accepts other offers while waiting for the first deal to close, those offers become backups.


Short sales involve two contracts and at least one contingency, an event that can make or break the deal. One contract is the sale agreement between the seller and buyer, and the other is the seller and lender's loan satisfaction agreement. The contingency that is always present in a short sale is the seller getting the lender to agree to lower the loan balance so the short sale can go through. While the lender has to agree to reduce the balance, the lender doesn't approve the buyer and is not a part of that contact.

Backup Offer

In a traditional sale with multiple offers, the offer in the first position is the one the seller accepted and signed a sales agreement for. Any offer the seller accepts after that becomes a backup offer and becomes an active contract only if the first deal falls through. Since an offer in a short sale is contingent on the seller getting consent from the lender, the seller might accept backup offers from other interested buyers to cover himself in case the first deal falls through. Short sales can take months, as the lender must agree to the loan balance reduction, and the first buyer might not want to wait.

Multiple Offers

In a normal sale, the seller will weigh all offers himself and accept the best one. But with short sales, the seller has to deal with the lender and won't make any money. A seller should consider multiple offers to minimize damage to his credit rating and avoid other potential short sale consequences, such as taxes on forgiven debt. However, a seller is not obligated to accept backup offers or any offers in a short sale. He does not have to continue to show or market the property once he's received an offer that will satisfy the lender.


The real estate agent and seller must decide whether to accept backup offers and how to handle the marketing for offers. They can, for example, market the property and accept offers only during a set period of time, such as 30 days, and then forward the best offer to the lender. Or they might choose to take the first offer only and stop showing the property. Each offer represents a new set of short sale paperwork for the real estate agent and seller in most cases. Some lenders have streamlined short-sale procedures for backup offers. Bank of America, for example, allows real estate agents to switch to a backup buyer if the first deal falls through without restarting the whole short-sale process.


About the Author

Anna Assad began writing professionally in 1999 and has published several legal articles for various websites. She has an extensive real estate and criminal legal background. She also tutored in English for nearly eight years, attended Buffalo State College for paralegal studies and accounting, and minored in English literature, receiving a Bachelor of Arts.

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