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Understanding the Back-Up Offer

“When can I consider my home sold? This is one of the most common questions real estate agents are asked. While the laws vary in different states, generally the contract is binding once both parties sign the offer. At that time the closing process begins. This is also the time when sellers must stop considering other offers, but they can accept back-up offers.

What is a back-up offer? This is when the seller accepts an offer contingent upon the first one falling through. There are many reasons why the home purchase might not close—the buyer may fail to secure the loan, the home inspection may find issues the two parties can’t resolve, or it could even be that the Homeowner’s Association has rules that the buyer is unprepared to accept. Whatever the reason, real estate agents know that the deal isn’t done until it closes.

A back-up offer should be carefully executed. Both buyer and seller must be able to pursue other options. Unless the buyer is willing to wait without seeking an alternative property, the back-up offer should be written to allow for the possibility that they find an alternative home in the meantime. The seller, on the other hand, must make clear they are currently obligated to another buyer and will consider the back-up offer only if the current one cancels.

Back-up offers can be a great tool in a fast-moving real estate market. Writing the offer virtually guarantees the listing agent will notify you if the home becomes available again. This gives the buyer an advantage in a seller’s market, increasing the opportunity to capitalize on a home that fell out of contract.

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Real Estate Investment 101

Real estate offers a solid investment opportunity that can provide not only an income stream, but long-term value appreciation as well. It’s never too late to begin investing in real estate. Regardless of the ups and downs of the market, people will always need housing, so real estate will remain a good way to create wealth.

By understanding some of the basics of real estate investing, you can begin to create a successful investment plan.

  • Start Now – Every market offers opportunities for buyers; there is no perfect time to get started.
  • Understand the Risks – Before investing, you should be certain that you can hold the property until conditions are right to sell.
  •  Do Your Homework – Know the market and understand the trends which can affect your purchase and ownership.
  •  Invest for the Long-Term – Real estate investing should not be viewed as a “get rich quick” scheme. While you might find an opportunity to have a quick flip, most real estate equity is realized over years, not months.
  •  Understand your Expected Cash Flow – In simple terms, cash flow is what is left over after all expenses are paid. For a rental property, expenses could include mortgage, interest, maintenance, insurance, utilities, rental agents, and more.
  • Budget for the Unexpected – Even the most carefully planned project can have unexpected costs. Have a back-up plan to meet these costs.

Real estate can offer solid investment opportunities. Even a first-time investor can realize profit and positive cash flow with careful planning and research. Start building your real estate portfolio now; a real estate purchase could provide a low-risk addition to your other investments for both income and asset value growth.