The Bully Offer - Welcome to the Wild Wild West!

The Wild Wild East is more geographically accurate but it doesn't have the same ring to it, does it, lol...Bully offers have become commonplace in our area as Buyers search for any advantage that will put them on top! Sellers too are trying to take advantage of it as we often see right in the listing that offers are set for a certain date but that they reserve the right to look at pre-emptive offers.

What is it?
A Bully offer, otherwise known as a Pre-Emptive offer, is an offer that is submitted by a Buyer ahead of a set offer date. It's an attempt to gain control of a situation where Buyers are not typically in control due to our current market conditions. For example, a property is listed on Monday with the Broker remarks indicating that offers will be reviewed on Friday, as per the Seller's instructions. However on Wednesday morning a Buyer submits an offer that is only good until Wednesday night...and the Seller has to choose whether they want to entertain the offer or follow the plan and wait until Friday.


What does it do?
Creates chaos, that's what! If the Seller decides to look at the offer then the listing agent has to contact all the other agents who have shown the property to let them know that the plan has changed & when the offer will be presented. All of a sudden you've got a mad scramble as other Buyers who may be interested in the property try to decide what to do about this change of events. Sadly, not all listing agents know how to properly handle this scenario & if they don't handle it well then they are costing their Seller clients money.

If the Seller decides NOT to look at the offer then things remain unchanged on the buying side and the chaos switches over to the selling side, often creating fear & doubt in the mind of the Seller! Fear of Missing Out or FOMO can be a powerful motivator to do things that may not necessarily be in your best interests. What if you wait & don't get a better offer on offer night & you lose that extra money? What if you don't get any other offers & you're in a weakened negotiating position? What if, what if, what if...

Here are 3 different scenarios that I've encountered with Bully offers:

Buying side as the Bully - My clients had already lost a couple of bidding wars & they were completely in love with this particular home so we decided to give it a try...the worst they could do is say no... & that's exactly what the seller did, lol. Random fact: I got a speeding ticket in my rush to get this offer submitted. On the actual offer night we were 1 of 4 & we came back with $10k more than we offered in the bully and took it in the first round! I had the opportunity to chat with the Seller while she was signing the acceptance & she told me that she chose our offer because my clients loved it enough to submit the bully in the first place & then came back on offer night with that little bit extra to sweeten the deal...that sold her!

Buying side getting Bullied - My clients were interested in a property but wanted to see it a 2nd time before making a final decision. Offers were to be reviewed 5 days later so there was plenty of time. Or not, lol...I was 2hrs away at an all-day training course when I received the text message saying that an offer had come in & would be presented that evening at 7pm. The scramble was on! We did manage to see the property again & prepare an offer but it was a stressful & chaotic situation for all of us & we were ultimately unsuccessful.

Listing side receiving a Bully - This one was a crazy situation! We were in the pre-MLS phase, preparing the home for the market & I had posted the property online as an exclusive listing to start creating buzz on it. And we received an offer, sight unseen the next day! It was conditional on finance & inspection so that wasn't really appealing but the price was exactly what my clients hoped they would be able to get! They were really torn about it but in the end, they were already committed to doing things a certain way & decided to reject the offer. We all agreed that that was the best course of action to take, but we definitely all felt the pressure & were aware of what the risks were as we moved through the process! Lucky for us the risk paid off with 4 offers and the ability to choose the one that worked best for them...firm and for more money than that original bully offer! But we also knew that it could have gone differently because we see the cautionary tales, the ones you need to learn from, in this business every day!

What are the risks?
For Sellers, it's leaving money on the table. Competition on the open market in most cases is the key to achieving the highest selling prices & the best terms. With bully offers they have to be so good that Sellers feel like they can't refuse....but is that offer the MOST the market will bear? You'll never know...

Another part of the equation is ensuring that the Buyer has the ability to close. Because Buyers can sometimes get carried away & write offers that their bank accounts can't cash. If an appraisal on the property comes up short, can the buyer cover the shortfall? You need to know this & measure the potential risk vs the reward.

For Buyers, it's overpaying...as I said, the offer price needs to be so good that the Sellers can't ignore it. But if things go wrong on the financing side, can they make up the difference or will they end up in breach of contract because they can't close? The domino effect of just 1 deal not closing can be far-reaching & getting sued for damages by multiple parties could be a very real possibility. Read my post on Appraisals from last year's Spring Market HERE

What are the rewards?
For Sellers it's potentially more money in their pocket...but there's no way to really know that for sure.

For Buyers, if successful, it ensures that they get the house that they want (and maybe get it for less if they didn't have to compete for it) & then being able to step off this crazy rollercoaster ride.

So what do I recommend to my clients?
Every situation is different but it's usually that my Buyers should go for it & that my Sellers should not, lol...

Good luck out there!



For more articles about buying, selling & living in the Durham region, visit my full blog at www.AtHomeInDurhamBlog.com

Have a fabulous day!