In the intricate dance of buying and selling real -estate, every step, every move, and every strategy plays a pivotal role in crafting a deal. Among these strategic maneuvers, two terms stand out for their rising significance and impact in the Canadian real estate market: “Holding Offers” and “Irrevocable Period.” Although one is heavily used by home sellers (holding offer) and the other by home buyers (irrevocable period), both aim to secure the best deals for the party. Whether in the bustling streets of Toronto, the scenic vistas of Vancouver, or the historic neighborhoods of Montreal, these concepts play a central role in shaping the final outcomes of property transactions across the country. In this blog, we simplify these seemingly complex terms so that the next time your real estate rep mentions them, you don’t lose track of the conversation and stay a strategic equal in securing the best deals on your next sale or purchase.
What’s Holding Offer?
Holding an offer is the strategy to review an offer, or offers, on a property listing at a specific date and time after the listing goes live. This is done by the seller in order to invite more and more buyers and introduce a sense of competition between them to raise the ultimate selling price of the property finally. Up there, we’ve defined the concept. Now, let’s try to understand it. The key word here is – holding. Think of this concept as a tactical pause—a calculated waiting game played by sellers. Instead of jumping right at the first offer, the seller holds all offers until a specific date and time. This is not about playing hard to get but inviting competition. By holding offers, sellers signal to the market that they are expecting multiple bids and are willing to wait to review them all at once.
What does this do? It helps maximise the outcome – both financially and otherwise. It gives time for more buyers to be interested parties. But it also sets them against each other in competition. So, in a final bid of prices, the seller ultimately gets the best value. Holding offers are usually played out in seller’s markets, where a high demand and a low supply situation exists. The property sale is much like an auction, where the listed price is just a starting point. Whoever makes the biggest bid, gets the house. Well, if all this has started to make you feel like you can simply put up a ‘Holding Offers’ card and be rest assured of your profits, then you might want to rethink things. Even though holding offers ensures price hikes, buyers today are much smarter. They’re unwilling to jump straight into a bidding ground without being offered something of value. If your offering does not give them any value, you might not have any offer.
To combat the possibility of such a nightmare, the key is to set the right pricing right from the start. Don’t think of buyers as naive and set a deceivingly high starting price, but also do not be timid in your approach and set the bar way too low. The key is in balance, observe the market trends and make the move accordingly.
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Pros of Holding Offers Strategy
For a seller, the holding offers technique provides multiple advantages. From profit maximisation to increased demand, here are a few of the advantages:
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- High Prices: Holding offers can actually help gain a final sale price for your property that is even higher than the average market price. Since the buyers have no real access to how much the competitors are bidding, they make wild guesses, which can sometimes reach unexpected heights.
- Perfect for High Demand Situations: Holding offers best suit real estate markets like British Columbia, Alberta and Nova Scotia, where demands mostly outstrip supplies.
- Sealed Bids: In sealed bids, buyers only get to know the number of offers and other details – including pricing and closing date are inaccessible. This further makes it difficult for them to make an exact guess and leaves greater room for the seller to get the ultimate advantage.
- Control Over The Process: Due to a lack of information to the buyers, sellers always have the upper hand in maneuvering negotiations, setting the pace and parameters under which the sale will proceed.
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Cons of Holding Offers
Like everything in the world, there are two sides to this coin as well. Here are some cons of the seller-favourite holding offers strategy:
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- Overestimation: The biggest demerit of this technique is the possibility of price overestimation by the buyer. Therefore, buyers need to consult with experienced market reps who know the ongoing trends and prevent them from paying higher than the market price for a property.
- Offer Value to the Buyer: Just announcing to hold offers would not result in a flood of bids from interested buyers. Ultimately, the property and the listed price have to offer value for the buyer to get them interested in the listing.
- Offers Don’t Come At All: This is the worst of all, having no offer at the end of the period or having an offer much lower than the listed price. All of this depends on how the property was listed. Therefore, consulting an experienced representative is essential at all times.
What is an Irrevocable Period?
An Irrevocable Period refers to a specific time until a buyer’s offer cannot be retracted. The seller must report to this deadline, or else, they might lose the buyer. During this period, the buyer essentially says, “My offer stands firm until this date and time. Take your time, give it a thought and let me know when you’re ready” It’s a gesture of commitment, a signal of serious intent, but also a strategic play in the high-stakes game of real estate negotiations. For instance, an irrevocable period of 72 hours would mean that the offer made by the buyer is up for the seller’s consideration for up to 72 hours. Unlike holding offers, the irrevocable period helps buyers get some power in the game. It gets the seller to respond on a date and within a timeframe set by the buyer. The urgency and the pressure this time is created by the buyer, and the seller has to counter that accordingly. Let us explore the good and the bad sides of this strategy.
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Pros of Irrevocable Period
Irrevocable Period gives the following advantages to the buyers:
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- More Control For the Buyer: With the deal not being dictated by seller-induced competition, buyers feel more in control of the situation. This raises the overall chances of a transaction happening and the property being sold in the end.
- Beneficial for First-Time Buyers: Irrevocable period offers first-time home buyers a defined window to have their offer considered exclusively, reducing the pressure of immediate decisions and helping secure a home without the fear of being preempted by other buyers.
- Commitment Signal: An irrevocable period helps buyers communicate a commitment without putting the buyer in a desperate position.
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Cons of Irrevocable Period
Bringing its fair share of downsides, Irrevocable Period involves the following disadvantages:
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- Tempting for The Sellers: Receiving a hefty offer early on after listing the property can be tempting. The urgency to respond to the offer, with the awareness that the listing might not yet have reached its potential stretch, can be tricky.
- Expiration without Action: An expiry of the irrevocable period, without any follow-up from the seller, makes the offer null. It further leads to a waste of time and effort on something that stood in progress for days.
Picking Your Cards Well
When buying or selling property, it’s about picking your cards well. With multiple listings are happening every day, it’s the techniques and strategies you use that are going to help cut. When you are a seller, keep the strategy of holding offers handy to get the most profitable pricing for your property intelligently.. When you’re a buyer, use the trick of irrevocable period to take charge of things even when the money’s flowing out of your pockets. Whether a buyer or a seller, ultimately, the goal is to find a sweet spot where the interests of both parties align and a successful transaction can take place.
As we go, we’ll leave you with two industry insider tips while using these strategies. When deciding to hold offers, set the offer review dates a few days after the listing. This helps gain as many interested clients as possible, potentially driving up the final sale price. And when listing on an irrevocable period, prefer listing close to the weekend. This helps gain the maximum advantage of the weekend and makes room for more and more buyers. With these insights, your selling ship is ready to sail! Happy Selling!
Frequently Asked Questions (FAQs)
Having an irrevocable offer means the presented offer cannot be retracted until its specified time. For instance, an irrevocable offer for 48 hours gives the seller the time to respond to that offer within 48 hours.
Holding offers means keeping all offers on a listing on hold till a specific date of review. On that given date, the offers will be reviewed together, and the seller will decide.
There are two possibilities for this. If the buyer backs out much earlier, without signing any contract, everything stays more or less the same. However, if a buyer opts out after signing agreements, it could result in serious legal and financial complications. What does it mean to have an irrevocable offer?
What is holding offers in the Canadian real estate market?
What happens if a buyer accepts an offer and then backs out?
