An exploding offer is one that is retracted if not accepted within a very short period of time, usually before the first open house. Buyers will sometimes make one in an attempt to avoid a bidding war in a hot market.
From the seller's perspective, is "a bird in hand better than two in the bush?" If the seller rejects the exploding offer, but no other offers materialize after the weekend open houses, that could influence that original buyer to make a new, lower offer, or possibly even to walk away. On the other hand, if the seller accepts the exploding offer, then they are eliminating the opportunity for other buyers to make better offers.
Let's look at some data, using Brookline as a sample. There have been 690 single-family and condominium sales in Brookline in the past twelve months, of which 415 (60%) received offers within 10 days of being listed. Of those:
- 56 (14%) accepted offers before the first weekend was over
- 347 (86%) accepted offers after the first weekend was over
- (I'm excluding the 12 listings that were posted on a weekend.)
How did they fare?
In this sample, the seller received 6.1% above list price when the offer was accepted after the weekend, compared to 4.0% over list when it was accepted before the weekend.* This means that sellers who waited for the weekend to pass before accepting an offer received $18,682 more on an average sale of $925,465, than their counterparts who caved!
Exploding offers can be a great tool for buyers, not so much for sellers. It's another reason you should have an experienced agent by your side to give you trustworthy and data-backed advice.
* t = -2.3034, p-value = 0.01088