Should Homebuyers Engage in A Bully Offer to Buy A Home?
Thursday Mar 25th, 2021
The still ongoing low inventory and high-demand real estate market situation have sparked a lot of bidding wars. Homebuyers are getting frustrated but home sellers are still wary of selling their properties due to the pandemic and unsure market future.
So most home buyers are trying their hardest to get the house of their dreams or win the bidding war to purchase a listing - or try a different tactic altogether.
When there are multiple offers for a listing, the home seller usually delays or holds all offers until a specific date and time, when all competing offers can be considered at once to maximize exposure of the listing and get more offers as much as possible.
Some stymied home buyers have resorted to what is termed as “bully offers” or “pre-emptive offers”. It is not restricted to Ontario real estate but it can seem to be a means to gain the upper hand to get the listed property. And in an ethical view, it can seem shady. Most MLS listings have presentation dates, and it is generally expected that the home seller and their real estate representative follow the dates.
How does it work?
A bully offer is a take-it-or-leave-it offer that expires in a short time (before the announced date that the seller will look into all offers made) given by a home buyer to a real estate representative to convey to the home seller. The offer is usually higher than the listing price to attract the home seller to concede with the offer. Usually, a home seller should indicate with his real estate agent if he wants this type of selling direction.
You should know that bully offers can or cannot be entertained as it is not obligatory. The only obligation to you is that your real estate agent should present all offers on your listing - yes including the bully offer.
Here is an example. Mr. Smith has listed his house for sale on Wednesday and has decided with his real estate agent to consider offers by next Wednesday. Mr. Smith wants to have as many (and higher) listing offers as he can. However, after just one day on Thursday night, your real estate agent has told Mr. Smith that there is a bully offer that will expire by Friday noon.
It would be up to Mr. Smith to agree to the bully offer or not - he has to work with his real estate agent to know what is best for his listing, but ultimately it would be up to the home seller to go ahead or look into the other multiple offers on his property listing.
Difference between a bidding war and a bully offer?
Bidding war means multiple offers being considered on the presentation day listed in the MLS. Bully offers try to stand out among these multiple offers to win the listing before the presentation day.
In a bidding war case, the real estate representative is obliged to disclose the number of competing offers to all those who submitted an offer to the listing and must do this without disclosing the terms and conditions of each offer. It follows the presentation date on the schedule.
Meanwhile, for bully offers - the real estate representative has to inform everyone that booked a viewing, has viewed the property already, or has informed the brokerage or the listing representative that they will be submitting an offer on the property, or those who have submitted an offer on the property. This tactic of home buying does not usually honour the presentation date.
There is not really much of a difference as both home buying tactics of bidding war and bully offers are still offers to the listing. The main difference is the latter one usually is time-sensitive prior to the presentation date.
Depending on the situation, bully offers can get accepted and the real estate agent proceeds with negotiations.
How do you know if a bully offer can work to your advantage in getting your listing?
Always consult with your real estate representative on the pros and cons of a bully offer. A
A homebuyer can afford a ridiculous higher listing price
Make the offer a surprise but earlier than any other offers
Bully offers with when the market is changing, or the showings are slower than usual
Your real estate agent has notified all potential buyers who have expressed interest in your listing
You have prepared your financing and confident in the completed house inspection
Get a closing date that is amenable to the seller to make them get the time to discuss with their real estate representative
With the seller’s market, it is not surprising to not even get the chance to put in an offer with listings you have your eye on. Be prepared with your numbers and paperwork and work closely with an experienced and professional real estate representative to get the house of your dreams. Discuss different home buying or selling strategies with JoAnn Visaretis to get your dream home or get the best market value for your listing.