How do I accept backup offers?

[Patrick Philip]

I've had several instances where a house I had went under contract, and it ended up falling through for whatever reasons. Some of these were my fault... such as an inspections. But some of them were not. In one case, the buyer just got cold feet and never went to get approved for financing, even though I know they could have because they were "pre-approved." 

Once, a realtor told me about a clause that could be added to a purchase contract that is called a "Kick Out Clause." The text reads...

"Seller will have the right to continue to show the Property and solicit and enter into bona fide back-up purchase contracts with third parties that are subject to the termination of this primary Contract. Upon entering into a back-up contract, Seller will give Buyer a copy of the back-up contract with the third parties' identification and purchase price information obliterated. To continue with this primary Contract, Buyer must make an additional deposit of $_______ ($500) _______ to Escrow Agent, within 3 days from receipt of the back-up contract. By giving the additional deposit to Escrow Agent within 3 days, Buyer waives all contingencies for financing and sale of Buyer's property and the parties will close on Closing Date. The additional deposit will be credited to Buyer at Closing. If Buyer fails to timely make the additional deposit, then this primary Contract shall terminate and Buyer shall be refunded the Deposit, thereby releasing Buyer and Seller from all further obligations under this Contract."

So how can I do this ad infinitum? Basically, every time I enter into a purchase contract, I want to keep the house on the market so I can get back-up offers. And ideally, I wouldn't want the back-up people to know that they are back-up because I've had realtors refuse to even show houses that they knew was already under contract, even though that contract ended up falling through.

[Christine Kankowski]

AS an agent, we have to list homes as Backup- if another contract is already in place.  Some will show the house under this condition, others will not.  Of course there is a risk of a house falling through and having to start over, so I understand you wanting to get backups.

A few things to do to minimize the risk:  verify funds needed to close, Verify the prequalification letter, repair anything (plumbing, electrical, roof) that leads people to back out. Give all disclosures within a day or two so they can back out if something doesn't suit them.  request inspection be done within 7 days. 

The requirement of making the original buyer add $$ to escrow upon getting a back up offer and requiring them to sign off all contingencies upon getting another offer will not go over smoothly, however.  It is not common practice.

Lets say you get a back up offer within 3 days of original contract- are you asking original buyer to remove contingencies right then?  If so I would recomment to original buyers (If I were their agent,) not to go forward with this.