June 12, 2014 | bully offer
I know, I know… bullying is bad. And these days there is less and less tolerance for bullies out there. And rightly so! Long live the nerds and the bullied! They deserve better, and will come out stronger and richer in the end.
Of course, the use of the word “bully” can mean something a little different than calling someone a bad name in the school yard in my line of work. In real estate, being a bully can sometimes work for you in the right set of circumstances and the right market, but you better pack a pretty good punch.
When you choose to be a bully in real estate, you are deciding to put in an offer on a property before the seller has indicated they are willing to review offers. So, you would bully the seller into reviewing your offer before their preferred date.
Now unlike the classic bully, you don’t want to be cruel to the seller, but you want to offer to buy a property in demand before other buyers bid on it.
But are bully offers the way to go? Well, that depends on the angle from which you are approaching. There are really two ways to look at it: From a buyer’s perspective and a seller’s perspective.
If you have been losing out on one bidding war after another, and you finally discover the house of your dreams that you just know you gotta have, you may want to consider a bully offer. It doesn’t always work, but it can land you a house after a lot of frustration built up from lost bidding wars and doing battle with 10-20 people in a bidding war.
The best way to illustrate the advantage of a bully offer is to give an example. Let’s say you would like to purchase a house that has had a great deal of interest situated in a great neighbourhood. The owner is holding back offers until a certain day, likely in the anticipation of getting several offers well above the listed price. So, instead of waiting until the day where the owner is accepting offers – let’s say a Wednesday – you put forth an offer on a Monday and only make your offer good until 11pm that Monday evening.
If it’s the kind of neighbourhood where the listing agent likes to list below market value, keep in mind that you will need to have a price comparable to recent sold prices of a similar property in the area. If you are going to be a bully, you have to impress the seller enough so that they would take your offer before the offer date. Also, keep in mind that the selling agent is obligated to let everyone that has gone through to see the property know that you have submitted a bully offer, and allow them to bring forth an offer with the new time frame. This strategy could catch some curious buyers off guard. They may not have time to get in an offer to compete with yours by the Monday night. However, just because you bully, doesn’t mean the fellow buyers cannot move quickly to produce more offers on the desired property.
Of course none of this matters if the sellers say they are not interested in a bully offer. If the seller is not interested, then he or she can refuse to review it until the offer day they selected. Also, they may review the offer and still say no.
So, if you decide to take the bully route, make sure the property you are giving a bully offer on is worth it.
Let’s say you have one awesome house in one awesome neighbourhood. You and your selling agent, say me, will be holding back offers for one week from Wednesday to the following Wednesday. Then, we receive a call on Monday that someone wants to put in a bully offer that is only good until the end of Monday.
Now, all offers are worth considering and circumstances differ from property to property, but from my experience I generally feel that someone who would like to bring you a bully offer on Monday will likely come to offer night on Wednesday. Simply put, if you say no to a bully offer, they will likely appear on offer night with a good offer in hand. In addition, you may see other offers that Wednesday night of your choice that are even better than the bully offer.
Usually, I would not recommend taking bully offers. There are exceptions of course. Maybe you have not had a lot of interest in your house, and you feel the bully offer may be better than the offers you will receive on offer night. Maybe the buyers with the bully offer won’t or cannot present on offer night. Perhaps they have an interest in another home that has an earlier offer night, like Tuesday. Still, in most cases, bullies will wait. It’s really the seller who is calling the shots when there is a lot of interest in their property. Use your powers wisely.
Unlike the real world, being a bully in real estate is not always such a bad thing, though you have to pick your bullying targets very wisely. There are some advantages to being a bully from a buyer’s perspective. You can throw off your competition, namely, the other buyers. This strategy can also backfire. Some sellers don’t appreciate pre-emptive offers. From a seller’s perspective, it’s rarely wise to accept the bully offer before offer night. Finally, I should point out that bully offers are not the norm, even in the current Toronto housing market. Most properties don’t pull in that kind of frenzied interest, and even if they do, most buyers prepare for offer day before offering.