The Back-Up Purchase Agreement
The presentation of a back-up Purchase Offer is becoming more common in recent years, perhaps owing to the increased time it takes to close a deal, and the increased difficulty with obtaining credit for proposed real estate purchases. The back-up purchase offer is a contingent deal to buy and sell the identified real estate. The buyer essentially says to the seller: “I will buy your real estate under the stated price and terms if your current deal fails or falls through,” and the seller agrees.
To be enforceable, the back-up Purchase Agreement must sufficiently state the transaction terms and be signed by the contingent buyer and seller. There should be a written clause that acknowledges that it is a backup offer, and which specifies the terms under which the contingent deal is triggered after failure of the primary deal. The clause should be drafted carefully to accurately reflect the expectations of the parties and avoid disputes in the event the first deal is terminated or significantly delayed.
Many buyers and real estate agents labor under the misconception that all offers and showings must stop when a Purchase Offer is presented and accepted. This belief is not wholly unfounded; the Purchase Agreement or real estate agency agreement may indeed contain a clause prohibiting such offers.
Buyers and sellers of real estate should nonetheless be aware that the property for sale could be the subject of a back-up purchase agreement. If you are the primary purchaser and do not wish to have the property you want to buy subject to such contingencies, you should consult counsel to include binding contract provisions to that effect. If you are a seller or buyer who is interested in a back-up offer, you should also consult with counsel about whether and how that goal can be accomplished. In each case, our attorneys can assist you in making the necessary determination and drafting the pertinent clauses.
Caution: This article provides general information and is not intended to be legal advice. Your personal circumstances likely vary from those discussed in this article. You should contact Lambert & Lambert PLC if you are seeking specific legal advice as to your contract or circumstances.
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