Buying

When you submit an offer on a property, it’s really not a complicated document.  Consider how much money you’re investing, it’s only about 7-8 pages for most residential properties.

Included in your offer are things like price, deposit amount, conditions, the closing date when you take possession, inclusions and exclusions, other clauses like being able to book a revisit and that everything will be in good working order.

There’s one more part of the offer called an irrevocable period, which is how long your offer is open for acceptance.

As a buyer, you have the option of giving a LONG irrevocable time, perhaps so the seller can think about your offer.  This can work well in commercial real estate and rural properties… because those markets tend to move more slowly.  And you know that there’s likely NOT going to be someone else interested.

On the other hand, if you’re worried other buyers will be interested in the home, putting a SHORT irrevocable time puts the squeeze on the seller to accept your offer quickly… especially if you’ve put your best foot forward and it’s a strong offer.  Putting a weak offer with a short irrevocable time period might mean you don’t get ANY response.

Listing agents (who are representing the seller) will often ask for a 24-hour or 48-hour irrevocable time on offers.

Sometimes the reasons can be valid, like an estate where there are multiple decision makers, or dealing with a bank or lender where they often have bureaucratic delays.

But there are other silly excuses like the seller being out-of-town.  We’ve had clients across the world with 10-18 hours time difference, and we’ve still always been able to get an answer from them in less than 24 hours.

The best is when the listing agent says the sellers are out-of-town, but you drive past the home at 8:00 PM and they’re making dinner in the kitchen.  That’s happened more times than we care to mention.

But that’s the cat-and-mouse game of negotiations.  Don’t hate the players.

Here’s the main point of this post…

Why is a long irrevocable period a BAD idea for the buyer?

Because once you submit your offer, the listing agent will do everything they can to try to find ANOTHER buyer during the irrevocable time.

The terms of your offer will not be disclosed to other parties – that’s against the rules.  But the fact that your offer exists, and it’s open for acceptance for 1-2 days, allows the sellers to dig in with any interested parties to see if they would be interested in trying an offer before they lose out.

You are at the mercy of YOUR OWN offer for as long as the irrevocable period lasts!

You can’t really make an offer on another property, because what if both of them get accepted?

You open up risk by giving other buyers a shot at making an offer, and you give the sellers leverage.

So you end up being stuck.

The bottom line?  No matter what the listing agent wants or needs, be sure to put an irrevocable time that YOU feel comfortable with.  In the age of digital signing, getting answers shouldn’t take two full days.  Although in certain situations, it’s unavoidable… work with your agent to understand when it’s a legitimate time to leave a longer irrevocable, and when it’s time to squeeze for a quick answer.

Comments

  1. I encountered a situation (while representing a Buyer) in which the Seller’s Realtor was just “so busy [they] didn’t get a pee break until 8pm” that night, and on account of their busy-ness, asked for a 36 hour irrevocable. In this instance, say my Buyer’s submit a 24 hour irrevocable, knowing full well the Sellers themselves, are work-from-home tech savvy individuals who have adequate time to respond. Does the listing Agent have a standing responsibility to present that offer within the Buyer’s irrevocable period? Or can the Listing Agent simply let the Offer die on account of not having had the time to present it?

    • Hi MGR,

      Great question!

      In Ontario, we’re governed by the RECO Code of Ethics. Section 24 of the Code spells it out pretty clearly.

      Conveying offers

      24. (1) A registrant shall convey any written offer received by the registrant to the registrant’s client at the earliest practicable opportunity. O. Reg. 580/05, s. 24 (1).

      (2) A broker or salesperson shall establish a method of ensuring that,

      (a) written offers are received by someone on behalf of the broker or salesperson, if the broker or salesperson is not available at the time an offer is submitted; and

      (b) written offers are conveyed to the client of the broker or salesperson at the earliest practicable opportunity, even if the broker or salesperson is not available at the time an offer is submitted. O. Reg. 580/05, s. 24 (2).

      Ultimately I think the Seller client needs to know what’s happening as quickly as possible. There are times when a “strategic delay” can be a good thing for a Seller, and there are times when delaying too much may lose the Buyer, because they will move on — either because they get upset, or because another property listed that meets their needs just as well.

      A 36 hour irrevocable seems like a long time, even for an agent with a busy schedule. Wake up earlier, or go to bed later. Skip a meal if needed… that’s what you get paid to do!

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