Bully offer. The term gets thrown around a lot in real estate. But in my experience, it’s often misunderstood by both buyers and sellers. That’s too bad, because making a bully offer can lead to a fantastic outcome—and so can accepting one.
Of course, bully offers don’t have the best rap. You may even have heard that some real estate agents believe they’re unfair. That’s why it’s so important to know the basics—and weigh the pros and cons—before making or saying “yes” to this type of bid.
Whether you’re a buyer or seller, here’s what you need to know about bully offers…
Bully offers: what are they?
They may be somewhat controversial, but bully offers aren’t that complicated. Here’s how they work. A seller sets an offer date when they list their home, and they state that they won’t be accepting any offers before then. A buyer goes ahead and makes one anyway. Usually, they’ll stipulate that it has to be accepted within a certain timeframe—one that ends before the offer date. That’s it!
Of course, the bid has to be attractive to be worthwhile. If you’re a buyer making a pre-emptive bid, you want the seller thinking they might seriously miss out if it slips past them. The pressure they might feel—and the fact that other buyers may not be considered during the process—is why some people believe bully offers are unfair. But it’s worth remembering that a seller can simply ignore pre-emptive bids if they want to.
Buyers: the pros and cons of making a bully offer
So, you’re ready to make a bid on a home, and you want to do everything possible to increase your chances of success. Should you make a bully offer? Let’s look at the pros and cons.
One of the biggest benefits of a pre-emptive bid is the possibility of bypassing the competition. The truth is, when several buyers are hoping to purchase a property, there’s no telling how the situation will shake out. By putting your best foot forward (before other home hunters do), you can increase your chances of coming out on top—and avoiding the stress of competing with others.
Another bully-offer benefit? They can help you avoid a lot of wasted time and energy. The truth is, going through a long offer process only to lose out to another buyer can feel pretty awful. If your pre-emptive bid is accepted, you can avoid this outcome. If it’s not, you’ll know where you stand—and you can decide whether to focus more of your energy elsewhere.
There are only two potential “cons” to making a bully offer. The first: in rare cases, it can backfire. Not every seller appreciates a buyer who doesn’t follow instructions. That said, it’s likely that they’ll wait until offer night and consider you then, as opposed to counting you out altogether (that is, unless a more tempting bully comes along in the meantime!) The other potential downside? If the seller doesn’t accept your offer, they’ll know exactly what you’re willing to pay for the property. If you’re in the running to buy it later on, they can use that information to get the highest sum possible.
If you’re thinking of going the bully offer route, there a few questions you should ask yourself. Have you lost out to other buyers in the past? Are you tired of going through a long, drawn-out process? Last (but certainly not least), is the home your dream property? If you might regret not making the offer, it may be wise to consider it.
Sellers: the pros & cons of accepting a bully offer
If you’re a seller who receives a bully offer, you’ll probably feel at least a little bit torn. On the one hand, the bid may seem too good to pass up—otherwise, why would the buyer bother making it? If they’re working with a good agent, they will have taken the true value of your home into account—and come up with a sum that’s more than fair.
On the other hand, you never know what’s going to happen on offer day. You could receive a (much) higher bid if you hold out. So really, it comes down to what you’re comfortable with. Do you think it’s worth the risk to wait, or would you rather opt for a sure thing? Will changing your plan cause you more stress than sticking to your guns, or vice versa?
There are a couple things you’ll want to consider before making a decision. The first is your home’s true market value. Having this knowledge will help you assess just how great (or not-so-great) a particular bully offer is. The other is market conditions. If they’re in your favour (and let’s face it, they usually are in Toronto), you might want to hold out—unless the offer is truly remarkable.
What you should remember
As with so many things in real estate, navigating a bully offer successfully is all about your representation. If you’re a buyer, a knowledgeable agent will help you determine how much your property is worth. Based on what’s happening in the market, they’ll advise you as you reach the decision that’s right for you.
If you’re a seller, the right real estate professional can help you make an educated guess about what’s going to happen on offer day. Of course, it will be just that. A guess. But being armed with the right knowledge will help you make a truly informed decision—one that will set you up financially for your next step!
Ready to buy or sell a home? I know real estate transactions inside and out—including the offer process. Get in touch to learn more about how I can help!
