What is a Bully Offer
What is a Bully Offer? We’ve all heard the term but what does it mean? A Bully Offer is submitted ahead of a predetermined posted offer date by a party with a strong interest in a property that is for sale. The correct term is a “preemptive offer”. There are several points at play. The first is that the listing Brokerage must disclose on the MLS Listing that the seller is open to entertaining preemptive offers prior to any posted offer date. Another is that the Listing Sales Representative must inform all other brokerages that have booked showings and taken clients through that a Bully Offer has been received. This theoretically allows other potential buyers with a strong interest to submit their own competing offers, or not. A third point is that the agents to the sale must present all valid offers to the sellers for them to see. This means that any offer, no matter what it is, must be presented unless otherwise stated on the MLS Listing. This last point is the foundation to any preemptive offer.
As with any offer to purchase there will be conditions that need to be fulfilled in order to firm up the deal. Typical conditions include a home inspection, maybe a status certificate review for a condominium apartment or townhouse, financing is a common condition. A Bully Offer typically comes in with no conditions. This makes it a very clean offer, so why is it called a Bully Offer?
This type of offer often has a very short irrevocable, that is the period of time that allowed to the seller to accept or reject an offer. Sometimes only hours are allowed. This puts pressure on the seller to make a decision where large sums of money are at stake. Hence “The Bully”. If the irrevocable dies the deal dies with it.
Preemptive Offers are common in a tight or “Seller’s Market”. A practiced agent will coach their clients on the importance of preparedness and being able to strike on the right property. In order for an offer to be entertained seriously it must be a serious offer. It is usually over the asking price, sometimes significantly over.
There are pros and cons to Bully Offers that affect both buyer and seller. Lets look at some of them from the seller’s side.
The Seller:
Pros: A quick clean offer with no conditions that fulfills expectations is attractive. Often sticky points like the closing period are favourable to the seller. The hassle of continually showing the property is reduced.
Cons: It can be nerve wracking. Will there be another better offer?
Our experience has shown that Bully Offers can be fraught with difficulty. The one saving grace that any seller can have is to have a strong agent between them and the buyer making the offer. Sensible decisions can be reached when the facts are dealt with one by one.
These and many other points must be considered by the seller in conjunction with their agent. We have dealt with many Preemptive Offers on behalf of our sellers over the years and are always free to answer any questions.
Bully Offers can be a powerful tool in the right hands. Conversely they can be a dangerous tool. It is one of the most controversial topics and tactics in Toronto when it comes to Real Estate transactions.
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