The “irrevocable” is a term you hear realtors throw around, but most of my clients have no idea what it is.
It’s the time period — or deadline– to make a decision, sign the necessary papers, and get it back to the party that’s asked for the decision to be made. So, for example, if the buyer makes an offer that is “irrevocable by the buyer until 9 PM” tonight, that means the seller has to either accept the offer by 9 PM or provide the prospective buyer with their counter-offer (which will likely set a new deadline) within that same 9 PM deadline.
The irrevocable period is decided by whoever is making the proposal so it applies to offers and amendments to accepted deals. It binds the party who’s imposed the deadline. For that period of time, they can’t withdraw their offer or amendment; they’re stuck.
It’s very strategic. When the buyer makes an offer on a house, they have to decide how long to leave that offer open. A long period is risky. If they leave their offer open for too long, the seller may take the time to find another buyer and negotiate a better deal, knowing they have the first offer in their back pocket.
But some institutional sellers, like trustees of an estate, require a 48 hour irrevocable (you’ll usually see this condition right in the listing). They need time to get hold of beneficiaries to get instructions. Often, if it’s a financial institution like a bank, they want 48 “business” hours which drives agents nuts, because it means if an offer goes in on a Friday morning, it could be Monday before we find out if we have a deal. It’s not only stressful for the buyers, but as mentioned, it leaves the door open for other buyers to come in and make an offer within the same time period. When that happens, we’re in a multiple offer situation, and the price just went up.
Personally, if I was acting for the buyer, I would never put a 48 hour irrevocable in an offer unless I had to, for those very reasons.
Making an irrevocable period too short can be a problem as well. There is no deal if an irrevocable period isn’t met: it’s null and void. So if an agent makes an irrevocable period too short, say a few hours, they risk losing the deal altogether.
I’ve had offers come in on properties where my sellers were expected to make a decision within an irrevocable period of only hour or two. I’ve had to race across town and then back to my office to fax the paperwork. We’ve just barely managed to get together, discuss what to do and get things done before the deadline. I’ve also had situations where I simply couldn’t reach clients; they were at the movies or out at dinner, and didn’t have their smartphones on. There’s also the risk that if the agent makes it too short, there’s a chance they’ll simply put the seller off and they’ll decide not to respond– no one wants to be pushed into making hasty decisions when so much money is involved. (I always tell my sellers that if the buyers are difficult to deal with in negotiations, you can expect a difficult deal throughout.)
That kind of situation — a very short irrevocable — usually applies when the buyers are afraid another buyer may be around the corner. They want the seller to make a decision quickly, before they find themselves in a multiple offer situation. The same thing applies where there are already multiple offers coming in.
The irrevocable applies to amendments as well, but here, at least, the pressure is usually off. So if there’s an amendment to a deal, for example, to extend the closing date, realtors usually give each other ample time to meet with their clients and get the necessary signatures approving the change.
So that’s the meaning of the irrevocable. It’s another factor to consider if you’re listing your property: if you want a 24 or 48 hour irrevocable, it should be specified in the listing. Your realtor will have a form (Form 244) for you to complete because you’re imposing a condition. If you’re the buyer, you need to talk to your realtor about what strategy is going to work best in a given situation.