What is a Backup Contract?

Ginny Ledwell
Apr 5
2 min read

In Texas, a backup contract to the TREC Residential One to Four Family Residential Contract (Resale) (often just called the "One to Four Contract") is a fully executed contract that becomes effective only if the primary contract terminates. Here’s a breakdown of how it works:

🔹 1. What is a Backup Contract?

A backup contract is a secondary offer that the seller accepts while already under contract with a primary buyer. It's legally binding, but subject to the termination of the first contract.

🔹 2. How It’s Created

The Texas Real Estate Commission (TREC) provides a form called the “Addendum for ‘Back-Up’ Contract” that is used in addition to the standard One to Four Contract. This addendum spells out the terms under which the backup contract becomes the primary.

Key parts of the addendum:

Paragraph A: States that the contract is a backup and becomes primary only if the first contract is terminated and notice is given to the backup buyer.
Paragraph B: Allows the buyer to terminate the backup contract at any time before it becomes the primary, by providing written notice.
Paragraph C: Can set a specific date for when the backup offer expires if it hasn’t become the primary.

🔹 3. Important Points to Understand

Earnest money and option money: The backup buyer deposits these when the contract is executed, just like in a primary contract.
Option period begins immediately, even though the backup status is in place. So, the backup buyer is using their option period while still in the backup position, unless the form is modified or negotiated differently.
Buyer can back out anytime before becoming primary, and get earnest money back.

🔹 4. What Triggers It Becoming “Primary”

If the first contract falls through (for example, due to financing, inspection, or other contingencies), the seller provides written notice to the backup buyer. The backup contract then becomes effective immediately as the primary contract.

🔹 5. Pros and Cons for the Buyer

✅ Pros:

You're first in line if the first deal falls apart.
You lock in the deal without competing again in a multiple-offer situation.

⚠️ Cons:

You might not get the house.
Your option period might expire before you become the primary buyer.
You might tie up earnest money or pass on other properties waiting for the first deal to fall apart.

🔹 6. Tips for Agents and Clients

Monitor dates closely, especially option period deadlines.
If you're representing the backup buyer, make sure they understand that they don’t control when—or if—the backup becomes primary.
If you're representing the seller, make sure to handle notice of termination and backup status changes in writing and through proper documentation.