What are Backup Offers?

A backup offer occurs when a seller concludes a sale agreement with a buyer (primary offer) which is subject to one or more suspensive conditions, and then the same seller signs a later sale agreement with a second buyer (the backup offer).

Dealing properly with backup offers is important for all parties involved in these transactions.

Some of the considerations for the different parties involved are set out below.

The Seller:

As a seller, a backup offer is comforting because it may mean that you will have a replacement sale ready and waiting to proceed should the primary sale agreement fall through. You also don’t have to wait for the primary offer sale agreement to fall through before concluding a sale agreement with a second buyer.

It is essential however that the second sale agreement include provisions making that sale agreement subject to and conditional upon the primary sale agreement falling through. We do not recommend that sellers sign more than one sale agreement with different buyers unless they have obtained advice from their conveyancers in respect of the necessary provisions to be included in the subsequent sale agreements.   

The first buyer/primary sale:

As the first buyer, you will be under pressure to comply with the suspensive conditions in your sale agreement by dates stipulated in that sale agreement. Should you not be able to comply timeously, your sale agreement will lapse and the backup offer will become the primary sale agreement.

We recommend that you ensure that your sale agreement provides a reasonable time period to meet the suspensive conditions, alternatively have an automatic extension of the time period for meeting the suspensive conditions as any subsequent or back up offers may restrict the seller’s right to grant you extensions of time to do so.

The second buyer:

As the second buyer, you need to be aware of the due dates in the primary agreement so that you will know when the primary agreement falls through. There should also be an obligation on the seller to advise you immediately if the primary sale agreement becomes conclusive. We recommend that your backup offer stipulates that the seller may not extend any time periods for the meeting of any suspensive conditions in the primary sale agreement. You do not want to have a situation where the seller has concluded a sale agreement with you as the backup buyer but then gives the primary buyer extensions of time for meeting the suspensive conditions.

Estate Agent:

Should there be multiple offers from different buyers in respect of immovable property, you will need to ensure that you understand how to best protect the parties to your sale agreement. We advise that you discuss the transactions and your particular sale agreement with a conveyancer prior to the signature of the sale agreement.

For advice regarding conveyancing, sale agreements and backup offers please contact us.