Bully Offers… You’ll hear this phrase A LOT when talking about the real estate market.
The problem is not everyone knows what it means. You’ll hear: “We got a bully offer!” or “We can’t schedule a viewing because the Seller’s accepted a bully offer!” or “Bully offers will be reviewed!” etc. etc. To really understand what a bully offer truly is, we first need to clarify what an offer date is. One cannot exist without the other. An offer date is when a Seller picks a specific date and time to review any and all offers on their property.
The Seller then typically lists the property for under market value to stir up a lot of buzz and to hopefully create a bidding war on the chosen offer date. In essence, It is a marketing strategy. An offer date, when priced properly will help the seller get a firm and high priced offer. Now, you do not need to have an offer date to have a bidding war but it definitely helps. The offer date stimulates a sense of urgency. Typically an offer date is 5-9 days after the listing has been posted. We can assume that the majority of the time the property will sell by that specified date. To secure the property, Buyer’s will scramble within hours to view the property, consult with their real estate agent, lawyer, mortgage broker/bank, and family to figure out if they are going to bid on the property and how much they are going to bid. Those who don’t rush will likely miss out on the opportunity and here’s why:
There are two types of offer dates:
#1: Sellers who WILL review offers prior to the offer date, and
#2: Sellers who WILL NOT review offers prior to the offer date. Sellers who have scheduled an offer date, but are still reserving the right to review offers prior to that date are technically welcoming bully offers.
Now, let’s get into the definition of a BULLY OFFER. A Bully Offer, also referred to as a ‘Pre-Emptive Offer‘ is a strong offer submitted to the Seller, prior to the offer date, made so appealing that the Seller is willing to forego the offer date and accept right away (OR at least this is the goal). If you REALLY want a property and the Seller is having an offer date and is willing to look at bully offers your best bet to secure the unit is to submit a bully offer. If you wait till offer date, you risk an unknown amount of competition. Those who have lost out on properties in the past know the process and will be ready to pounce ASAP.
If you submit your best and highest offer prior to offer date and the Seller does not accept it could mean one of two things:
#1 Your offer is not what the Seller is looking for, OR
#2 Your offer is great, but now you’ve made the Seller greedy, as they may think they could get a higher price or better terms if they hold out till offer date.
Submitting a bully offer can also create a chain reaction. If you submit a bully offer, chances are someone else is waiting to submit too. We see often times, once one bully offer comes in, any interested parties (who are prepared to offer) will also submit, as it could be there last chance to compete before the property is sold.
For those that will NOT review offers prior to offer date, you are safe…for now. This specific direction means that no “bully offers” will be considered. ANY and ALL offers will be reviewed at the same time. There are no guarantees with bully offers and offer dates. But there are a few key tips to keep in mind if you are considering submitting a bully offer: Tip #1 Get Pre-Approved: If you are in the market for a new condo, you should be getting pre-approved before you start going out to view properties, but this becomes more important when you start dealing with properties that have offer dates. If you view a unit & love it and want to submit a bully offer, or even an offer on the actually offer date you are going to NEED to know how much you can afford. As mentioned previously, the units that are listed with offer dates are typically posted under market value, so the prices are appealing BUT also deceiving! Sometimes we see units listed at $499,000, but end up selling for $599,000. If you don’t know how much money you are capable of spending you may lose out on a unit you wanted & could have afforded, OR even worse, you can end up securing a unit that you can’t afford. Another thing to consider is conditions.
Ideally a Seller wants to sell their property FIRM on offer date. It is assumed that most buyer’s would have been pre-approved prior to starting their search. The Seller is banking on the fact that in the 5 – 7 days before offer date all prospective buyer’s will be in contact with their bank or mortgage broker to make sure everything is good to go! If you have not been pre-approved or even in contact with a bank or mortgage broker prior to viewing a property with an offer date, chances are you’ll have to wait for the next one. Getting pre-approved is not instant in most cases. There are certain documents that you will need to compile and certain discussions you’ll need to have to ensure that you can qualify for a purchase. If you do not know whether you can qualify and if a bank or lender will lend to you on the property, you’ll need to include a financing condition. A financing condition in a bully offer, or an offer submitted on an offer date is likely not going to be accepted by the Seller.
When there is a lot of interest in a property, chances are that there are competing offers from buyer’s who have secured financing or cash buyer’s that are ready to submit firm offers. Same applies for a Status Certificate condition, which leads us to Tip #2 Have a Lawyer on Hand to Review a Status Certificate at a moments notice: 99% of the time a Seller holding an offer date is going to have the Status Certificate available in advance. This means that they are not expecting a Status Certificate Condition in any of the offers, as they are providing the necessary documents to allow buyer’s to have their lawyer review. If you are interested in submitting an offer be it a bully offer or on the offer date itself, you are going to want your lawyer to review & approve the Status Certificate documents ahead of time. Again, chances are that in a multiple offer scenario there will be other competing buyer’s that have had the Status Certificate reviewed so if you submit a conditional offer it will likely be a loosing battle. The benefit for the buyer in this case is that if there is anything concerning in the Status Certificate you’ll know upfront before getting into contract with the Seller and before getting your hopes up! We NEVER recommend that you forego having the Status Certificate reviewed by your lawyer, or forego financing preparations. We recommend that you have these steps completed prior to submitting the offer. Conditions are a very big negotiating tool in today’s market. A Seller is going to always want a firm deal so that they can rest knowing that a buyer is committed to purchase the property, both legally & financially. The last thing that a Seller wants to do is accept a conditional offer and have it fall through. That being said, the other key factor in a Seller’s decision making is PRICE.
That is why you are going to want to work with an agent who knows the market so that they can assist you in determining the best price for the property. Which brings us to our final Tip #3 Know Your Market… Better Yet, Hire an Agent that Knows the Market: Many times buyers inquire to us about listings posted at $399,000 & $499,000, etc and want to offer asking price without knowing that the Seller’s are using the offer date strategy. We will always inform you whether the properties are listed under or over market value. A lot of times we see buyers apprehensive because they do not want to overpay. In many of the cases, it is not about over paying – it is simply about offering market value. To know what the true market value is, you’ll want an expert in your corner showing you the comparables & market stats so that you can make the most informed decision when offering on a property. Bully offers & offer dates can be intimidating, and that is why I always guide my clients step by step through the process. If you’d like to get to know more about the purchasing process or want to know how to become a bully yourself, give me a call!