What Is A Bully Offer?
Bully offer also known as a pre-emptive offer is an offer submitted by the buyer and their agent to get their offer reviewed ahead of their competitors before the presentation date established by the seller.
The bully offer is a tactic to put pressure on the seller to make a quick decision prior to the offer expiring. In a hot seller’s market like the one here in Greater Vancouver, majority of these offers tend to be quite good, as in cash offers, pre-qualified, certainly above the listing price, and often with no conditions.
Generally, sellers decide to “hold their offers” on a home they’ve listed because of the current buyers-to-homes ratio. They want as many potential buyers as possible to see the home, and they want to get as much competition as they can, which increases the odds of getting a bidding war that drives the selling price up.
An example of a bully offer is a house listed for sale on Wednesday with public viewings scheduled for Saturday and Sunday with instructions for offers to be accepted the following Monday. On the first day of open house on Saturday, your realtor approaches you with a bully offer that will expire that night at 12 AM. In real estate, this is the concept of a bully offer.
Upon receiving a bully offer, you should know that there is no obligation for you to entertain the bully offer. The only “obligation” is that your real estate agent must present all offers to you. What you choose to do thereafter is up to you. You can accept the offer, negotiate, or reject the offer.
Should You Accept A Bully Offer?
There’s no right answer to this question, but in most cases a bully offer will be very good. Sellers know that in order to get you to accept their bully offer, they’re going to have to make it worth your while, so they’ll often be willing to offer well above asking price with few conditions on the sale.
In real estate, it’s important to know the market value of your home. Some realtors like to list their clients’ homes low in order to generate multiple offers and look good on their sold to ask ratio. You must be able to recognize when a bully offer is worth accepting.
For example, if your home is currently valued at $700,000 but you’re only asking $599,000 for it, and you receive a bully offer of $625,000, that’s not really a good offer. You’re better off waiting if you are getting a lot of interest form potential buyers.
When It’s A Good Idea To Deal With A Bully Offer?
When the offered price is insanely high.
When showings are slower than expected or the market is environment is turning unfavourably.
When It’s Not A Good Idea To Deal With A Bully Offer
The offer is not very attractive.
The offer has conditions on it, meaning it will be sold conditionally.
You’ve got a ton of traffic and a great level of feedback, and you expect to get a lot of offers on offer day.
How To Make A Bully Offer – For Home Buyers
For home buyers wondering if they should use a bully offer or a standard offer, bully offers are no different than a regular offer. The only difference is that you’re submitting your offer earlier than your competition in an attempt to avoid competing with them.
While the seller is not obligated to accept your offer, the listing agent must present it to the seller and inform other interested parties of your offer. To make sure your offer is presented, ask for a signed copy of form 801.
Are Pre-emptive Offers Ethical?
Under the law, there is no official system for explaining and dealing with “bully offers”. The only thing that matters is an agreed-upon transaction between the buyer and the seller. That’s all there is to it.
Real estate agents are required to abide by a code of ethics, and if instructions appear on the MLS telling other realtors that you will not accept an offer unless a certain date, it’s only fair for you and your agent to abide by them.
Unfortunately, in a hot real estate market, waiting until the offer date might be too little too late as other buyers might have already proceeded with making a bully offer that could have been accepted by the seller.
The Final Word on Bully Real Estate Offers
I hope this article helped you understand what a Bully Offer is. The process is really simple, but as a seller, it’s important that you understand what a bully offer is, and what it isn’t. It’s the only way to be sure you’re making the best decision possible whether buying or selling a house.
For more information on the Vancouver real estate market and current trends, contact Kim Lee PREC* – your realtor in Vancouver.