If you have bought or sold a home, you may have heard the term irrevocable period, but what is it?
"The irrevocable clause states a date and time up to which time the offer is irrevocable. Before the time on the specified date, the party offering cannot revoke their offer. The irrevocable clause usually states that when the time and the date passes the offer becomes null and void."
There are a few factors that go into determining the best irrevocable period, but it's important to note that if you put in an offer, during the irrevocable period you cannot put in another offer as you will be legally bound if both are accepted.
Once you send an offer in writing, the seller can either reject your offer, accept it or counter it. If they counter, they have to change the irrevocable party from buyer to seller and they may or may not change the irrevocable time. If they counter, your first offer has technically been rejected, allowing you to move on if you don't like their counter, however during this new irrevocable period, a seller cannot consider or accept other offers.
From a buyer perspective, you want to send a short irrevocable so that the seller has to make a quick decision and has less time to consider other competing bids. However, sellers usually want as much time as possible, to both ponder the offer, prepare a counter or to call other interested parties to see if more offers will come in. As a seller, more offers typically translates to a better sale price.
Determining the irrevocable time is tricky, as it depends on the strategy and the market. If you are a buyer, and you're sending in a strong offer (close to or over asking price and with few conditions), you can generally use a short irrevocable (2-3 hours) and get an answer quickly. If you are sending a "low-ball" offer, with lots of conditions and an unfavorable price, you typically do not want to rush the seller, as they will need time to send you a counter, if you're lucky (some sellers will reject or go silent)! When going with option 2, you run the risk of another offer coming in and losing the property altogether.
In most markets your best bet is to send in a strong offer first, and avoid the back and forth, however if a property has been on the market for a long time, is overpriced, or not desirable, then there is usually room for some negotiation (longer irrevocable). Most offers in the Toronto buying market do not exceed 24 hours.
Another thing to consider is the seller - are they elderly, do they work shift work, or are they in another country? These factors will also impact the irrevocable period, as you cannot give a few hours if the local time for the seller is midnight and they are already sleeping. At that point you must give more time for their consideration, or wait to send it when they are awake.
While the irrevocable period is a bit of a fine dance, an experienced realtor will be able to help you determine the best amount of time to provide when placing an offer. This is an important consideration, as it can determine whether or not you win the property!
Did you have questions about how this works? Book a call with me to discuss further!
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