The current real estate market is white-hot, with many homes selling in a single day after a bidding war. A tactic some buyers use to elbow past competition is to put an expiration on their purchase offer. Does this tactic work, and under what circumstances?
How offer expirations work
When you make an offer to buy a house, you can set a deadline for the seller to respond, after which the offer will expire. In some states, the law sets a buy offer expiration date of two to three days after an offer or counteroffer is made, but generally the buyer can shorten that deadline. Within the expiration period, a buyer can withdraw an offer.
If the seller allows the deadline to pass, any acceptance of your offer by him afterward is a counteroffer, not acceptance of the original. This counteroffer may come with its own expiration date. You as the buyer can then accept, bow out, or make a counteroffer. There is never a binding contract until both parties have signed an offer and acceptance has been communicated to both parties.
Buyers sometimes make an offer with a soft expiration, requesting a date, but not demanding. For example, a buyer’s offer may state “we would appreciate a positive response by 12:00 noon tomorrow.” The seller might honor this request, but with no requirement to do so, sellers often ignore this sort of buy offer expiration.
When does this strategy work?
A buy offer expiration is designed to limit the number of competing buyers for a property and can help a buyer with a short window to find a home. But a buyer using an offer expiration must think like a seller. How does the expiration help or hurt him?
Market conditions often determine whether a seller will accept an on offer with an expiration date. In a brisk seller’s market, the seller knows that the more he shows the home, the likelier he is to get multiple competing offers. For this reason, sellers usually do not benefit from accepting an expiration offer in a hot market. To have a chance, an offer with an expiration date must be rock solid. There can be no contingencies or demands about repairs or closing dates, and the buyer must be easy to work with.
In a typical buyer’s market, showings and offers on listings trickle in. A buy offer expiration protects a buyer in a slow market by preventing a seller from sitting on an offer and leaving the buyer in limbo. A buyer using an offer expiration creates a dilemma for the seller. This might be the best offer the seller may receive, and if he doesn’t accept it, he may end up selling for less.