A backup bid isn't a contract to buy. The sellers can still pick anyone that meets their contingencies, even if a lower price. Which is a red flag here for that house. Unless you are a cash buyer with zero contingencies, you aren't likely to ever be the winning backup in a hot market. Or the winning primary either. A hot market demands liquidity and the willingness to assume a high risk in the transaction.

Did you put money into escrow and have a signed contract by both parties with your backup offer? Your realtor gave you the "heads up" that the seller was wanting the inspection to be waived. You were not willing to do that.

We were in a hot market when we lost out on 3 full price cash offers, all to investors who were willing to waive inspections and could close in 2 weeks. Not your case, but you did know what the seller wanted.

Our fishing cabin had a buyer and a backup offer with a contract signed by both parties AND they gave us $5000 to hold their back-up position. Luckily, when the first buyer couldn't get financing, the back-up is in place. They are doing their inspection this week, and it's all expected to close late September.

We put in an offer about 100K over asking, but the realtor asked us
to waive the appraisal contingency - something we were not willing to do
(the house was 100+ years old and while it was lovingly maintained, who
knows what issues it might have?

I dont understand this comment? If you wanted the house and were willing to pay 100k over asking, why werent you willing to waive the appraisal? Obviously, the house probably wouldnt have appraised for 100k over which is why they were asking for you to waive it in the first place. It looks underhanded to make an offer for 100k over asking, and then not want to sign a waiver that says you will go thru with the sale if the house doesnt appraise for your offering price. You put in parenthesis the house was 100+ years old and while it was maintained who knows what issues it might have had. THIS HAS NOTHING TO DO WITH THE APPRAISAL. I suspect every area is different when it comes to back up offers. In my area, there is no contract for a back up offer, the seller can pick and choose which ever one he wants no matter when it came in.

Perhaps rather than meaning appraisal, the OP meant inspection? Because in a hot market I could see a seller wanting the inspection clause removed (that's what I would want).

I would remove an appraisal clause but never an inspection clause without at least a due diligence clause.

There really isn't a standard way backup offers are done. If, for example, the OP made an offer that was accepted, contingent on failure of the first offer, then they do have a contract (note: to be safe you should have some earnest money deposited but it should probably be less than the primary offer). Once the first offer falls through, the contingency is satisfied and their offer becomes primary. At that point the OP should be able to litigate for specific performance.

This information is contrary to my first post (which I deleted), as these arrangements are rare in my area, and I was giving information on a first right of refusal contract. The reason for the rarity in my area is the ability for the sellers to string the deal along. Having another offer in place causes the primary offer to struggle with satisfactory resolution of defects, and can run the price up for financing extensions. Also if the deal takes months you have to wait, as you already have an offer on a home and can't make another.

If there was no money to secure the backup position, all you had, contractually speaking, was an expression of interest -- a contingent offer the seller could come back to. Generally speaking you need consideration by each side (money, an item, product or service rendered, something done) in order to bind the parties. I have heard of rights of first refusal, but I don't know if they are used here, but either form would need consideration (most likely some form of deposit or earnest money) to be binding, Just saying we want to be next in line only means something if the sellers want it to.

OP hasn't posted here since the original post. Our questions haven't been answered. Wonder if he was just venting?

If there was no money to secure the backup position, all you had, contractually speaking, was an expression of interest -- a contingent offer the seller could come back to. Generally speaking you need consideration by each side -

This is typically not true. While you are correct that an exchange of consideration is one of the four elements required in a contract, consideration is only an exchange of benefit. Courts in most of the country (all parts that I know of) have upheld that the promise to purchase is in and of itself consideration. Consideration includes forbearance and prejudice, an agreement to purchase a home at set terms and conditions is a prejudice against purchasing the home at different conditions, and would be consideration in just about every state. A deposit is never (that I am aware of) needed to make a real estate contract fully enforceable.

The only reason I said a deposit would be better is to remove this misconception, if the contract had the failure of the first contract as a triggering condition (contingency) and was accepted and signed by both sides then when that condition triggers, you typically have a fully enforceable contract. Of course, we are speaking in generalities not specifics to the OP's contract.

OP- You said you put in a bid, but mentioned nothing about having a signed, executed contract with the seller, which would normally include a backup offer addendum which outlines the terms of the backup offer, such as when your offer expires. In order for you to actually hold a backup position, you need to have an EXECUTED contract, and in most states that includes a backup addendum. And NO realtor will execute the contract without the earnest money in hand, for the escrow agent to deposit. So while bry911 is technically correct, in a situation where there are realtors involved, they will not execute the contract without the earnest money, so the contract is not valid.

And a seller could ask for you to waive the inspection contingency (and my DH and I have done so, on several homes we bought), but you would still normally get it inspected (or I would at least recommend it), so you know what you need to fix after purchase. Especially safety items.

If they asked you to waive the appraisal contingency, then they want your assurance that if it doesn't appraise (and it may not, selling for over asking price), you will pay the difference because the lender won't finance the amount over appraisal.

The state I currently reside in has ridiculous earnest money rules if the amount is over $1,000. Contracts for $1.2m homes will only have $1,000 earnest money and many deals never have any earnest money. I can't imagine many back up deals having any earnest money, although not impossible.

what state is that?