Without a doubt, it’s one of the most confusing concepts in real estate. I’m talking about the “bully” offer or what we call a pre-emptive offer. While some buyers see these bids as controversial, others view them as perfectly-fair tools to use in a competitive situation. One thing is for sure: there’s plenty of uncertainty about what bully offers entail—and when (if ever) making one is a good idea!
If you’re planning to buy a home in a hot market, here’s what you need to know…
What is a bully offer?
Let’s start from the beginning. When a seller expects to receive multiple offers, they may decide to set an offer date. Buyers are invited to submit their bids on this day—and told that if they do so beforehand, their offer won’t be reviewed until the official date.
Taking this step allows sellers to maximize competition. Buyers are more likely to make their highest bid first if they know all of their offers will be compared at once.
This is where the bully comes in. A potential purchaser can submit a bid before the offer date—and sellers may be tempted to look at it. If the number is compelling enough (and if it comes with a deadline that makes it difficult for other buyers to jump in and compete), it may be accepted. At least, that’s the buyer’s hope!
The advantage
Like any strategic move a buyer makes, a bully offer can come with both pros and cons. That’s why carefully weighing your options is key!
There’s one major benefit associated with making a pre-emptive bid (aka the “bully”), and it’s a big one. Going this route could allow you to secure your dream home—before the competition heats up.
If you’ve never been part of a bidding war, I can tell you right now that they can sometimes be stressful. By submitting an attractive bully offer, you could put enough pressure on the seller that they decide to accept it early on. If that happens, you’ll avoid some major headaches come offer day.
The cons
There’s also a potential downside. For one, your decision could backfire. While some sellers will look at your bid, others will stick to their guns. There’s a possibility that they’ll look unfavourably on your decision to submit early (though it’s worth noting that you’ll almost certainly get the chance to compete on offer day either way).
If they don’t accept your offer, they’ll also be aware of precisely how much you’re willing to pay. They could use that information to their advantage if they consider selling to you later on.
It’s also worth noting that some buyers view bully offers as dubious. They see them as a way of skipping the line. The thing to keep in mind is, every buyer has the opportunity to make a bully offer—and every seller can choose to refuse one if they’re not interested in reviewing it.
When to consider one
So, let’s say you find your dream home. You have enough money in your budget to make a very appealing offer—but the market is hot, and nothing is certain. The sellers have set an offer date, and you want to make a bully offer.
Here’s what you need to remember. Your bid needs to make buyers think twice about holding off until their offer date. That means the sum you put forth should be significantly over asking.
You’ll also want to ensure that the deadline provides a short timeline for sellers to make a decision. If it’s too long, other buyers will have the opportunity to submit their increasingly competitive bids—which kind of defeats the purpose of making a bully offer.
The decision of whether to take preemptive action is yours to make. Whatever you do, make sure you have an experienced local agent to advise you at every step—including during the offer stage!
Whether you have questions about the market or you’re ready to find your perfect property, I’m here to help. Reach out to connect with me today!
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