Sellers have the option to review offers on their home upon receipt of the bid or in the future, better known as an “offer review date.”
In a hot sellers’ market, establishing a date to examine bids – especially on a popular home in a desired neighborhood – is a common strategy and one that can generate a frenzy among buyers. The seller sets the time when all offers are due, typically 4-7 days after a listing hits the market.
It’s important to note the date is non-binding and merely a point in the future that the seller plans to examine offers. However, some sellers will accept an early overture that was too tempting to resist.
Why does this happen? Buyers often present an offer with an expiration date earlier than the sellers’ review date. This puts sellers in a pinch – wait for all offers to arrive at the established date or accept the earlier (usually incredible) offer.
While it is tempting to accept an early bid, a little patience can pay off. On average, listings with offer review dates received 10.4% above the list price, while listings in which sellers choose to review offers upon receipt received 1.2% above list, according to 2020 data from the Northwest Multiple Listing Service.
Savvy sellers can generate a surge of buyer activity when listing the property slightly below market value with a review date. Strategic pricing often creates a scenario where buyers include an escalation addendum that, when competing with similar bidders, can generate a sharply inflated offer and produce a happy seller.
In addition to competing on price, buyers will often exclude contingencies for inspections, financing or low appraisal. It’s essentially a win-win scenario for sellers in today’s real estate environment.
To accept an early offer may be forgoing more favorable bids yet to be presented. It can create ill will between brokers representing buyers and their counterparts. Though not a legally binding date, buyers may claim the early acceptance is disingenuous and stains the practice of residential real estate sales.
A good listing agent will keep buyers/brokers informed of the possibility of an accepted early offer. Communication with all parties amid the possibility of an early decision can help quickly cool off heated buyers – plus, providing incremental updates to brokers may generate a late bid that sellers accept.
There are differing thoughts on whether to submit an offer within a day of the home being listed or wait. To be sure, buyers should be assertive by visiting the property as early as possible, have a lender letter ready and prepare to submit an offer as soon as possible after viewing the home – if interested.
It’s not uncommon for listing agents to share details of those early offers with other buyer/brokers; this is to help later buyers submit a bid that is worthwhile instead of taking hours to draft a contract only to learn the overture is far inferior to an initial offer. On the other hand, submitting an offer in the final hours of the review date may be too late if sellers have already made up their minds.
There is no way to know if all other offers exist unless a buyer includes the aforementioned escalation addendum and the bid is accepted. In that case, the seller is required to provide a full copy of the offer that bumped up the price on the accepted bid.
For everyone’s sanity, sellers should honor their statement in the listing and wait to review offers on the established date. It creates a more level playing field for buyers and still allows sellers to almost always embrace the best offer.