Have you ever seen a listing that states a seller may or may not accept a bully or preemptive offer? If you’re unfamiliar with these terms and in the market for a new home, it’s important to understand what they mean.
What is a bully offer?
A bully offer, or a preemptive offer, is the same thing. The term “bully offer” comes from a buyer bullying the seller into considering their offer before a scheduled offer review date. The buyer is usually gambling that they stand a better chance of getting the home with less competition today. Bully offers are usually over the asking price with few to no conditions. The hope is to persuade the seller to accept the offer without seeing competing bids.
Getting more than one bid on a property isn’t uncommon in an active market. And signs point to this being more common again as we head into the spring market. In this scenario, a seller wants to increase the chances of getting multiple offers. Sometimes it’s because it’s hard to gauge how much a buyer will pay for a unique home or a home of limited supply.
Bully offers typically come with a short irrevocable period to push the seller to respond quicker.
However, there are some very distinct pros and cons that both buyers and sellers should be aware of when considering a bully offer.
Bully Offer Pros and Cons for a Buyer
From a buyer’s perspective, the obvious benefit of a bully offer is eliminating the competition and getting the house you want. In a seller’s market, the stress and time-consuming effort of searching for a home can take a toll. A bully offer may avoid this. After all, every time you lose out to a higher bid in a Seller’s market, a new precedent is set for valuing the next property –the sooner you get in, usually the better.
The con is the risk of overpaying. You’ll never know if you would have had any competition. You may have paid thousands of dollars more than you needed. Ultimately, you’ll never know. It comes down to how badly you want the house. A Realtor can help you determine the home’s fair market value and whether it’s worth making a preemptive offer. Afterall, a house is only worth as much as somebody is willing to pay for it –how much are you willing to pay? And, is it enough to convince a Seller to skip the offer presentation?
Pros and Cons for the Seller
From a seller’s perspective, the pros are in having negotiating power. Bully offers tend to be condition-free, well over your original asking price, and, perhaps, your expectations. All of this, combined with a favourable closing, may be enough to motivate you to accept the offer to avoid further inconveniences of showcasing your home.
The cons are that if you’d waited until the scheduled presentation date, you could have ended up with something better –or not! Perhaps no offers come on the offer night, or few, or none at a price that intrigues you.
Bully offers are a tricky scenario and a gamble. From both buyers’ and sellers’ perspectives. The bully offer has been known to instill uncertainty, buyer’s remorse, seller’s remorse and regret. Rely on the guidance of your real estate agent to provide insight into their analysis of the amount of showings you’re receiving, the feedback they’ve received, their expectations for offer night, etc.
If you’re looking for a Milton Real Estate Agent or are planning a move in Oakville, Burlington, and surrounding Regions call the KT team at 1 (800) 617-0090 or hit us up on Insta with a DM.