Have you ever put your house or condo up for sale when, out of nowhere, an offer appears that’s so far above your asking price that it seems too good to be true? This is known as a bully offer – an aggressive move on the part of a potential buyer to pressure sellers and ensure they secure their desired property.
But while these exorbitant offers may appear tempting, there are some risks to bear in mind before committing to such a tactic. In this blog post, we’ll discuss what bully offers are and explore whether or not they’re worth considering for both sellers and homebuyers.
What is a Bully Offer in Real Estate?
In real estate, a bully offer (also called a pre-emptive offer) is a bid that is made to a seller before the offer date.
When sellers list their homes on the market, they’re often advised to set an offer date – the earliest date when they will start accepting bids on their houses. This is done so that sellers can compare all their options simultaneously and avoid accepting a low bid out of fear that they may not get a similar or higher offer later.
The bully offer strategy is used by buyers who want to “skip the line,” so to speak, and attempt to convince a seller to consider their offer before everyone else. As a result, bully offers are often significantly higher than the asking price and expire before the seller’s offer date. Other common characteristics of bully offers include:
- Little to no conditions (to simplify the closing process for sellers)
- Cash payments
- High deposits
- Flexible closing dates
Are Bully Offers Legal?
Yes, bully offers are legal.
In 2019, the Ontario Real Estate Association urged the province to put an end to bully offers as, the organization claimed, it gives some home buyers an “unfair advantage.” However, the Ontario government has not made any moves to ban them outright.
There are rules for bidding wars, and real estate agents are required to inform sellers once an offer is made on their property, but when it comes to the actions of buyers or sellers in real estate, the Ministry of Government and Consumer Services does not interfere.
Should You Accept a Bully Offer?
Whether you should accept a bully offer depends on what you’re willing to compromise in selling your house.
Bully offers indicate a hot seller’s market or increased demand for homes and limited inventory. You’re more likely to get a bully offer in a major city like Toronto or a more desirable part of town.
In this situation, sellers have the upper hand. So, buyers need to make strong offers to convince sellers that they’re probably not going to get a better one on their offer date.
But the operative word here is probably. Accepting a bully offer will always be a gamble. On the one hand, saying yes to a bully offer means you’ll never get a chance to know how much you could actually get from other potential buyers. On the other hand, not accepting a bully offer means letting go of possibly your biggest – or worse, your only – offer.
The key is finding a good agent. Don’t attempt to sell your house on your own unless you have experience in the real estate industry. An agent can pull up data on similar properties for sale in your area to determine the range in which your asking price should fall. This can help you decide whether the bully offer you receive is worth the risk.
How to Make a Bully Offer and Win
Bully offers are high-pressure sales tactics that, when done well, can pay off greatly for both buyers and sellers. It does, however, come with unique risks for both parties.
For one, submitting a bully offer can make sellers less likely to consider you, especially if a particular seller is a stickler for following things like offer dates. You’ll also have to sacrifice a few things when you make a bully offer, like setting conditions that could otherwise protect you.
So, how can you minimize these risks and improve your chances of winning with a bully offer? Here are some tips:
Show Them the Money
Money talks, as the saying goes. In most cases, the higher your offer, the less likely a seller will reject you. If you do your research well, you’ll be able to figure out how much other buyers would be willing to pay for the property you’re interested in. Once you do that, consider how much more you can afford to tack on.
But remember, it takes more than just a good offer. You should also have a big deposit check ready and be willing to make an offer with zero conditions. Most sellers are eager to get their properties off their hands as fast as possible, so they’d be more likely to entertain someone who won’t delay closing to no end.
Know When to Make the Offer and When to Back Off
It’s important to have a keen instinct for when to press ahead with the offer and when to take a step back. Your agent may be able to help you figure out if the seller is open to early offers. Often, sellers who don’t have much time to be hands-on in the selling process – like people with busy, full-time jobs, people who travel a lot or aren’t in the country currently, etc. – are more willing to consider a pre-emptive offer. It allows them to skip all the time-consuming and stressful aspects of going through bidding wars.
However, some sellers will be adamant about not considering bully offers. If they specify this on their listing or make any type of hint that they’d rather wait for offers to come in on the offer date that they set, don’t push it. It can turn sellers off from you and cause them to be less than excited when they see your name on the list come the offer date.
Don’t Make Unconditional Offers on Unique Properties
While unconditional offers can be worth the risk for newly built houses, they’re a bad move for unique homes with standout features that may require additional work or research. You should be sure you already know all of the quirks attached to the sale before committing to an offer; otherwise, you risk buying a property sight unseen and taking on more costs than expected.
For homebuyers, bully offers can be a great way to win a property – as long as they know when and how to make them. By understanding what bully offers are, how they work and when to make one, you’ll be in good shape to put your best foot forward the next time you find yourself in a bidding war.