REAL ESTATE 101 – WHAT IS A BULLY OFFER?
You’ve probably heard the term “bully offer” (aka pre-emptive Offer) before but may not know what it means. Basically, the listing agent will list a property on MLS and then have a set offers date. There are usually two reasons for having a set offers date. 1) The property has been intentionally listed below market value in an attempt to generate competition on offers night. 2) The seller and/or listing agent want to make sure that the property gains sufficient exposure to the market before considering offers. Your buyer’s agent should be able to establish the intention of holding off on offers by speaking with the listing agent and researching comparable sales.
So… now the property is on the market with a set date for offers. Let’s make the assumption here that the property is significantly under priced. Let’s say that today is Friday and offers are being reviewed on Monday. Let’s also assume there are public open houses on both Saturday and Sunday where a lot of potential buyers will view the property. While the majority of buyers will wait until Monday to make an offer as specified by the listing agent, there is always a possibility of a buyer submitting a “bully offer” before Monday. It will likely be substantially higher than the list price and will not likely contain any conditions. The goal here is to scoop up the property before too many people see it and to make an offer that is tempting enough that the seller will not want to risk letting it go and waiting until Monday with hopes of a better offer. Note that even with the set offers date, a seller is still able to consider a “bully offer” although they are not obligated to.
TIPS FOR A SELLER IN THIS SCENARIO
If you are going to consider a “bully offer”, make sure that your agent advises all parties who have viewed the property of this “bully offer” in order to try to generate competition with the bully offer. A good realtor will know to do this as it’s in the seller’s best interest. Unfortunately a “not so good” realtor will fail to do this and often the seller will be the victim because a buyer who was waiting until Monday may have had a better offer but didn’t even know the bully offer existed.
TIPS FOR THE BUYER IN THIS SCENARIO
First and foremost, if you view a property that you plan to make an offer on but you are waiting until offers night, make sure your agent asks the listing agent specifically to let them know if any bully offers come in. As well, if it’s a Friday and offers date is Monday, make sure you get a bank draft on the Friday as a back up in case a bully offer comes in over the weekend.
When making the “bully offer”, make sure that your offer is strong (5,000 over asking usually won’t do the trick) and if possible don’t include any conditions in the offer. A short irrevocable date is also a good strategy to allow the listing agent less time to drum up competition.
So there you go! That’s a “bully offer” in a nutshell. Remember that every scenario is different and as such, the strategy and process will change accordingly. If you have any other questions on this topic, feel free to give us a call at 416.465.7850.
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