Updated September 28, 2026
A backup offer is a fully signed purchase agreement from a second buyer that only activates if the first buyer's deal falls apart. It is not a bid. It is not an option. It is a complete contract sitting in a drawer, waiting for a phone call you hope never comes.
Most sellers only learn backup offers exist after the primary buyer starts asking for extensions. By then it is too late to negotiate one from a position of strength. The time to line up a backup is the week you accept the first offer, while every other bidder is still calling your broker to ask if they lost.
Every accepted offer on an LA multifamily building carries contingencies — inspection, loan approval, sometimes appraisal. Until those contingencies are removed, the deal can collapse. A backup offer is the seller's insurance against restarting the entire marketing process from zero if that happens.
Without one, a failed escrow means relisting, re-marketing, and absorbing however many weeks or months the market has moved in the meantime. With one, a failed escrow means a phone call to buyer two and a much shorter restart.
Backup offers almost always come from the underbidders in your original marketing round — the buyers who lost the deal by a small margin and are still interested at or near their original number. This is a second reason to run a competitive process the first time: it produces your backup buyers automatically. If only one buyer ever looked at the building, there is no backup pool to draw from.
The backup buyer signs a real purchase agreement. It has price, terms, and contingency periods, just like the primary contract. The one difference is a clause stating it does not take effect — escrow does not open, contingency clocks do not start — until the seller delivers written notice that the primary contract has terminated.
You can accept it without telling the primary buyer. In most transactions, a seller is not obligated to disclose that a backup exists, and doing so rarely helps you — a primary buyer who feels pressured sometimes gets defensive rather than more cooperative.
You can't force the backup buyer to wait indefinitely. Backup agreements typically include an expiration date. If the primary escrow drags past it, the backup buyer can walk, and you are back to zero anyway. This is one more reason a seller should push a slow primary buyer toward a decision rather than let contingencies drift.
You can't use the backup as leverage against the primary buyer's price. Some sellers are tempted to tell buyer one "I have a backup at a higher number" to squeeze a better outcome. This usually reads as pressure tactics, can sour a cooperative buyer, and does nothing for you if the primary deal was going to close anyway.
A backup offer is worth the effort when the primary buyer is financed with a lender you don't know well, when the building has a diligence item that could realistically spook a buyer (a pending report, an open permit, a tenant issue), or when the market is moving quickly enough that a failed escrow would cost you real money in re-marketing time. On a clean building with a strong, well-capitalized buyer and no unusual diligence risk, the probability of needing the backup is low enough that some sellers skip the paperwork entirely.
The judgment call is the same one that runs through every stage of a multifamily sale: how much does certainty cost you, and is it worth paying for. The full sequence from pricing through close, including where backup offers typically get discussed with buyers, is in how to sell an apartment building in Los Angeles.
A backup offer only has value if it comes from a real, competitive round of interest. How many offers you should expect explains why offer count is a poor predictor of price on its own, but it is a good predictor of whether you'll have a backup buyer available if you need one. And if the primary buyer does walk, what happens when a buyer backs out of escrow covers the mechanics of terminating that contract cleanly enough to activate the backup without delay.
A backup offer doesn't guarantee your building sells at the number you wanted. It guarantees you don't start over from nothing if the number one buyer disappears. On a building with any real diligence risk, that is cheap insurance for a seller to carry, and it costs nothing more than asking the second-highest bidder to keep their paperwork current.
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Does the primary buyer know a backup offer exists?
Not usually, and sellers are generally not required to disclose it. Some brokers mention it in general terms to keep the primary buyer's timeline honest, without naming the backup buyer or their terms.
Can I accept more than one backup offer?
Yes, ranked in order — second position, third position, and so on — though in practice most LA multifamily sellers only pursue one backup because the pool of serious underbidders is usually small.
What happens to my backup offer if the primary buyer removes all contingencies?
It typically terminates on its own once the primary deal becomes non-contingent and heads to close, since the risk the backup was protecting against no longer exists.
Michael Sterman is Senior Managing Director Investments at Marcus & Millichap.
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