As a child, the phrase “no take-backs” was a common phrase used in social circles to indicate that you couldn’t change your mind when trading Pokémon cards, Krazy Bonez (I think that’s how it was spelled), or even gel pens which had their turn in the spotlight circa the year 2000. Essentially, it was a sign of good faith, or a way to secure a one sided trade by an unscrupulous pre teen.
Either way, “ no take-backs” was binding and was the law of the land so to speak. It simply could not be refuted.
Fast forward to adulthood, and I think the closest that I will ever get to saying “no take-backs” ever again will be discussing an irrevocable period with a client that is submitting an offer to purchase a property.
The irrevocable period is one detail of any Agreement of Purchase and Sale on our standard forms (hereinafter referred to as an APS) and it essentially means “my offer is good until X time on X day” aka “I can’t revoke this offer” and you have until that date and time to accept this offer.
During that time, the party making the offer cannot change any element of that offer, or withdraw said offer. So don’t take making an offer lightly, because once it is sent, you would be bound by the terms of that offer should the other party accept.
So now that we all understand that an irrevocable period is part of every offer your typical Realtor puts together, and what it is, you might be asking yourself why we are talking about it. Well that’s a great question and I’m glad you asked it. Please allow me to explain.
If we were to rank the pertinent details of an offer in order of importance, price would be first, usually followed by any conditions. Some sellers or buyers might put more weight on things like closing date or deposit amount/terms or chattels included, but most people would agree that the irrevocable period isn’t at the top of the list.
But, as I’m sure you’ve guessed, there are some scenarios where the irrevocable period is far more important than others. Why else would I be writing this blog? I want to shed some light on an important part of the APS that I think has become ground zero for the latest “games” we play while buying/selling homes in Ontario.
If I am a buyer in this market, do you think I have more or less leverage than I have had in the past 5+ years? If you said more, you are bang on correct. Buyers have so much choice available to them right now compared to previous markets, it can be overwhelming in some cases. But it has allowed buyers to be more selective, patient and thorough when deciding to submit an offer on a property. I think a lot of people would argue that is a good thing but the flip side of that coin is this: seller’s have less leverage than they have had in recent memory. Less interest, fewer showings, definitely fewer offers, it’s a very different landscape for sellers out there right now.
In any market, a buyer or seller is going to do anything they can to create leverage for themself. People are creative and will come up with a whole slew of ideas to gain the upper hand in negotiations. Something that I think we are all familiar with is the seller setting an “offer date” on a listing that is listed artificially low in an attempt to attract multiple buyers at the same time. That is a strategy that has yielded great results for a lot of sellers in our recent “seller’s market” by forcing buyers to compete amongst themselves and offer lots of money with no conditions.
That strategy seems like a thing of the past at this point in time (save for some very select market segments) but like I said, people are creative. The games never end! I give you the “extended irrevocable period”.
What the hell is that Cam? It is something that a seller might ask for in an attempt to gain some leverage.
As a buyer, I want to avoid competition. So either I can go look at homes that have been listed for a long time and unlikely to draw multiple offers once a first is submitted, or I can force a seller to deal with my offer quickly and negotiate with me one on one.
As a seller, I want to encourage competition! I want multiple offers! But how am I going to make that happen in this market? I’ll make any interested buyers give me lots and lots of time to think about their offer and in the meantime, I’ll have my agent call everyone else to say “we have an offer, you better act fast if you want this house” thus creating the desired multiple offer scenario.
What does this look like in practice? There is a section on our MLS platform called “offer remarks” under which a listing agent can provide details that the seller would like included on any offers or would be valuable for an agent to know before they submit an offer. In today’s market I often see something like this: 24hr irrevocable required.
In fact, I just did a quick search of the 25 most recent resale listings in London, 11 of them said something along those lines. Most of those 11 asked for 24hr irrevocable, some of them asked for 48 hours and one of them even asked for 72 hours!
How would you feel as a buyer submitting an offer on a house where the seller is asking for 2-3 days before responding to that offer? That’s a rhetorical question FYI. Why would a seller need that much time to respond to an offer? In most cases they don’t. They are trying to use the irrevocable period as a way to alert other interested parties and to create leverage for themselves.
Buyers see through this. They want to avoid this. But there are some situations where this request is actually legitimate, or it will be enforced, legally, by the listing agent.
Here are the most common things I hear as an excuse, or a reason, for requesting a long irrevocable on an offer: the seller is travelling, out of country, hard to reach, works shift work, etc. Sometimes, the listing will simply say please provide XX hour irrevocable as per the seller’s request. Ummm how about no.
Usually, when these requests are BS facades that are used to “shop an offer around” as they say, it’s really easy to tell. But there are some scenarios where a seller might actually require a long irrevocable. Here are some:
- an estate sale where multiple parties need to make a decision together.
- An elderly seller that needs help going through or signing a document.
- A bank is selling the house either through a power of sale, or as a trustee, etc.
- Any of the reasons listed above, but it’s actually true (it’s usually not).
So ya, there are sometimes legitimate reasons for asking a buyer to submit an offer with a long irrevocable.
But what if I don’t have a real reason for requesting that, but I want to force people to do what I want? Spicy! There is a legal way to do that!
Any agent is required to follow any legal instruction from their client. At the same time, any listing agent is required to present any offer submitted in a reasonable time period, unless instructed otherwise by their client. A listing agent might have their seller client sign something that says “I will only consider offers that include a XX hour irrevocable period” and with that paper in hand, the listing agent can say “I won’t even show my client your offer unless it has the proper irrevocable period”. Boom. Mic drop. Good for you.
Yes, that is legal and I have been seeing it more and more often as of late. I told you people are creative! Of course, there are downsides to this strategy. Some buyers won’t like that and will simply say “see ya” I’m going to go look at 10 other properties that look interesting to me. Or, you might have a buyer submit an offer that is really a good offer, but without the proper irrevocable period. In that scenario, your listing agent might call you and say “hey we should change this piece of paper”. That happens too.
Personally, I’m not a fan of the long irrevocable request on behalf of a seller. I think it turns more people off of a property and in a market like this, you can’t afford to do that. I also think that 90% of the time a seller or an agent requests a long irrevocable, they don’t get it anyway. So what’s the point.
I am definitely not a fan of the strategy to force buyer’s into submitting offers with long irrevocable periods. I’ve seen it work, but I’ve seen it fail a lot more.
I always find it funny when I come across a listing that has been on the market for weeks but it still says “24 hour irrevocable required” with no explanation. Everyone knows that you aren’t getting that 24 hour period to try and get multiple offers in hand. Just move on and deal with offers as they come, and if they come.
My last thought: what is an appropriate amount of time for an irrevocable period? It all starts with a call to the listing agent. “How long do you need to present this to your seller?” Most of the time, I find agents are honest and reasonable. If they aren’t, it’s easy to tell. If a buyer is trying to muscle their way in with a strong offer on a new listing, 3-4 hours should get the seller’s attention and allow time to communicate with all necessary parties.
I do think, in this market, it’s all about collaboration and it starts with that call to the other agent. See what type of response you get and act accordingly.
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