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Bully Offer In Real Estate

by David Bico on 20 Dec 2022

An offer from a buyer to the seller to buy a house listed for sale on MLS that is made before the day the sellers have said they will consider any offers is referred to as a bully offer or pre-emptive offer.

Many sellers decide to "hold offers" and wait for a specific date and time to examine them when they list their homes in a hot seller's market where there are more buyers than homes for sale.

Pre-emptive offers are a response tactic to put pressure on the seller with high pre-emptive offerings. This can often be a good strategy for buyers who are in dire need of a home, and it can sometimes play to the seller's advantage as well.

Keep reading to find details on bully offers, as well as information on different bully offer strategies and tips.

What Are the Characteristics of a Bully Offer?

As mentioned above, a bully offer involves a buyer making a large offer to a seller prior to the date that the seller has indicated they will consider offers. Even though the seller intends to hold off on considering offers, a bully offer can entice them to consider your offer before other buyers have the chance to get their foot in the door.

On the seller's end, receiving bully offers can be intimidating, but it can also turn up the heat on a bidding war between other buyers, which can ultimately play to the seller's advantage. The key is in the timing, negotiations, and the offer itself.

The basic components of a bully offer are timing, price, and conditions. Bully offers are sent early, typically offering significantly more than the asking price, and often come with no additional conditions (known as a firm offer).

Offer Presentation Date

The offer presentation date is the date after which the seller will begin to consider offers from potential buyers. Bully offers are typically sent before this date and might involve other things such as setting up a viewing ahead of time.

When sending a bully offer, there is always a chance that the seller will ignore it and opt to wait for the designated offer presentation date. Whether or not your bully offer succeeds will depend on a number of factors — namely timing and price.

Should I make a Bully Offer?

Buyers should be aware that making a bully offer won't help you save money on a house, but it will help you acquire the house you actually want. If they are routinely being outbid on a number of other prospects, some purchasers decide to make a pre-emptive offer.

The buyer should think about how much they want the house if they can afford it, and how tough their competition is in this neighbourhood and given the present market conditions. Consult a real estate professional about these issues; they might suggest against making a pre-emptive bid. The choice of how to continue ultimately rests with the homebuyer.

When It’s Not a Good Idea to Deal With a Bully Offer

If you are a seller, then a bully offer might seem tempting. This is especially true if the offer is much higher than what you were expecting to get for your home. However, it might not always be the best way to sell your home.

For starters, if you have a lot of potential buyers chomping at the bit to send you multiple offers, then allowing them to bid each other up might play to your advantage. Taking a low bully offer in this scenario can result in a lacklustre selling price compared to what could have been.

It's always a good idea to take the market into account. If you are in a seller's market, then you might receive very high pre-emptive offers from desperate buyers. However, if the supply in your area is large, then buyers might attach conditions that make the offer less attractive.

Are Bully Offers Unethical?

You'll have a difficult time finding a legal definition of the phrase "Bully Offer" anywhere. This is due to the lack of a formal structure in place for handling multiple offers. The conditions of the accepted agreement between the buyer and the seller are all that matter.

Realtors, on the other hand, are required to abide by laws and a code of ethics. It is expected that you, the seller, and your broker will adhere to any instructions posted on an MLS informing other realtors that you will not accept an offer until a specific date. It is only fair.

The issue is that not every real estate agent acts morally at all times. The ethics of a bully offer will depend largely on your situation, and how your real estate agent intends to proceed.

Are There Regulations on Bully Offers?

Bully offers, according to the Ontario Real Estate Association, provide certain property purchasers with an unfair edge, so the province should outlaw them. However, according to Lorraine Clark, president of the Windsor-Essex County Realtors' Association, no action has been taken by the government to date.

The Real Estate and Business Brokers Act (REBBA), according to a representative of the Ministry of Government and Consumer Services, does outline guidelines for bidding wars, but it does not govern the behaviour of buyers or sellers involved in real estate transactions, nor does it impose any requirements on sellers with regard to accepting offers, including bully offers.

How Much Should a Bully Offer Be?

Bully offers often exceed the asking price and include favourable terms for the seller. This is because the entire point is to make an offer that the seller finds attractive. If the aggressive offer doesn't actually impress the seller, it won't work.

Purchasing a house without first having it inspected is not advised. However, in a competitive market, purchasers occasionally disregard this suggestion. If you are confident (or desperate) then making a huge offer pre-emptively may play to your advantage as a buyer.

Why Would a Real Estate Agent Consider a Bully Offer?

From the seller's point of view, an agent might suggest taking a bully offer if it is significantly higher than the asking price, comes with few or no conditions, and there is low demand from other interested buyers.

From the buyer's point of view, a real estate agent might suggest making a bully offer if the buyer has lots of funds to spare, and the buyer is very interested in (or desperate to win) the house in question.

Should I Accept Bully Offers?

As mentioned above, a bully offer might not always play to your advantage as a seller. Certain circumstances, such as lifestyle considerations, slower-than-expected showings, a neighbour putting their comparable home for sale at the same time, etc., make it reasonable for sellers to consider or accept a pre-emptive offer.

If you choose to take a bully offer under consideration, you should make sure that:

  • has no requirements, such as finance, a home inspection, or a status certificate.
  • is at a price that makes ignoring your pricing plan worthwhile.
  • has a deadline that's convenient for you

 

Bully Offer Strategy

There are a couple of different approaches that you can take when intending to make a bully offer as your buying strategy:

Brute Force

Be aggressive. In other words, make a proposal without discussion. Or, in extreme circumstances, proceed even when the seller has expressly declared that they are not willing to consider offers made in advance.

The rationale for this tactic is that a listing agent is required by law to present all registered offers. This makes the vendor examine your offer and provide a sign-back or an acceptance as a result.

The Diplomatic Approach

This requires first and foremost genuine conversation and interaction with the listing agent. It's crucial to listen in a seller's market where the vendor is in charge. Make an effort to comprehend the seller's requirements and, eventually, their desired result. Each home is unique, as are the sellers.

Seeking to establish a win-win paradigm in every negotiation may be preferable to brokering a bargain via coercive methods.

Final Thoughts

It's crucial for sellers to understand the procedure and to have a solid understanding of their home's market value based on analysis and data. Bully offers can be tempting, but it isn't always a good idea to accept them. Careful planning and decision making are key.



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