Consider this scenario: You’ve found the perfect home. After a few showings and a quick check of the school district, you decide to place an offer. Then, you see that the Seller’s have elected to hold an offer presentation evening one week from today. Prospective buyers have booked the home straight. You know that there will be some serious competition to get the home for the right price. What do you do? It’s in this scenario that you might want to consider a Bully Offer.
What is a Bully Offer?
A Bully Offer is written submission of an offer to buy a property, before the date the seller has indicated they will accept offers. It is also known as a “preemptive offer”.
It’s a confusing topic with a lot of subtleties. Not all Bully Offers are equal. Not all REALTORS® present the offers to their sellers. To understand a preemptive offer, it is important to understand when they might occur. The Toronto Real Estate Market is complex and nuanced; riddled with irregularities.
Most REALTORS® choose to define it in only two ways: “Buyer’s Market” and “Seller’s Market”. In a Buyer’s Market, there is more product available than active purchasers. Home prices tend to lower and inventory sits on the market longer. In a Seller’s Market, the opposite is true. There are more buyers, with too few product to go between. Demand outpaces supply, leading to an increase in price, and shorter Days-On-Market (DOM) times.
Bully offers are usually found in a Seller’s market. Sellers elect to price the property below market value, and refuse to review offers until a date. This strategy ensures that everyone interested has enough time to view the property and perform adequate due-diligence. In these cases, the property can end up selling for more than originally expected. Emotional attachments can form and a worried buyer will bid more than they might want. A bully offer seeks to avoid this route altogether.
The submission of a Bully Offer creates a “take it or leave it” scenario for the seller. If the Seller decides that the price offered is adequate for the property, they may choose to accept.
Three Things You Should Know Before you Make a Bully Offer
There are some common misconceptions about Bully Offers in the marketplace. These could be detrimental to the Real Estate Experience. Here are three important things you should know before you add Bully Offers to your strategy.
Sellers Don’t Receive Every Bully Offer
In Ontario, the Real Estate and Business Brokers Act, REBBA, mandates that REALTORS® have the responsibility to convey every written offer to their client as soon as possible. A common misconception arises from this fact.
Buyers assume that their bully offer will be presented to the seller. Yet this isn’t the case. The seller can sign a written direction indicating that they do not want to receive or be notified of any offers registered on the property before the considered date. Sellers can do this by signing form 244 – illustrated below.
A Seller CAN choose to accept a preemptive offer. To check, look for a “Seller reserves the right to review preemptive offers” notation on the MLS Sheet.
Your agent should ask for confirmation of a signed form 244. Agents tend to hold offer nights without the proper forms in place. In this case, a Bully offer would legally have to be presented to the seller if submitted.
The Seller Has a Price In Mind
If the Seller has decided to hold an offer night, they likely have a target price in mind for their property. While this price is not publicly disclosed, it’s likely above the list price. This is one of the reasons multiple offer scenarios can be effective. Buyers can fall in love with a property thinking its a great deal, and be persuaded to outbid competitors, paying more than originally anticipated.
Ensure you do your research (via your agent) to predict their “real” asking price. Don’t get tricked into overpaying for the property, either. Seller’s can price offer nights too high. There are cases where the property sells for far beyond its actual value, simply due to emotion.
At the proper prices, Toronto Real Estate can still be a good investment.
Others Can Still Compete with a Bully Offer
In Ontario, a REALTOR® must make best efforts to notify all other interested buyers of the offer. A Bully Offer does not guarantee you exclusive rights to the property. Another buyer could bid higher and sweep the property from underneath your feet.
Two Things You Should Consider Before you Accept a Bully Offer
Is the Offer Any Good?
“If something looks too good to be true, it probably is.”
If you’re in the position of accepting a Bully Offer, consider not only the price, but the quality of the offers. When is the Closing Date? Are there any conditions? How much of a deposit is the Buyer Offering?
Cases occur in Toronto Real Estate where buyers come in with a bully offer that looks too good to be true. Conditions riddle the offer, and it contains an embarrassing, small deposit. These indicators signal that the buyer could be looking to “tie down” the property and scare away the competition. Then, they decide if its the property for them. If they back out, you’re left with a property that may not have any more interest. Its important to have your offer reviewed by a Real Estate Agent and a Lawyer. Catalyst can help by offering integrated Legal and Real Estate services, paid for by the same commission.
Are You Satisfied With The Price?
Knowing the market value of your home is extremely important. Don’t let greed get in the way of making a good decision. If the interest on your property is strong and you are confident that you could potentially get more for your property, don’t be afraid to turn down the Bully Offer.
Bully offers can be complicated, but Catalyst can help simplify the process. Contact Us today to discuss your Real Estate and Legal Needs.
