Before we talk about bully offers made to homeowners and prospective home sellers, let us understand the meaning of the word ‘bully.’ A bully is a person who uses strength, or power, or both in harming, hurting and intimidating those who are weaker than them.
The problem with bullies is that they are not limited to schools only. They are found everywhere. In real estate, they are out there either buying houses or condos and making bully offers in buying them.
In Toronto’s tough real estate market (especially residential properties), bidding wars are a common sight. Sellers have control in a seller’s market by setting their asking price and conditions in a strategic manner. This results in them either getting multiple offers on an offer date they have set or hope of generating multiple offers leading to a bidding war.
What are bully offers?
Bully offers are also known as pre-emptive offers. They take place when a buyer tries to overturn and implode the process set out by sellers and take control of them. They may often use the following sentences and statements:
• So, Mr. Baines, You want to review offers in a month? I might be seeing you in a week.
• Do you need time in reviewing what I am offering you? All you get is 60 minutes, nothing more, nothing less.
• This is what you want for the condo you are selling? I will offer you much more than that. You simply cannot refuse the zeros I have added in my offer, will you?
The bully offeror hopes that:
• A small number of people have seen the property. Thus, interest in that property will be lower than it would be 7 days.
• Those who have seen the home and are interested in buying will not be able to put together an offer quickly enough to complete. If they do, the bully offeror hopes that they won’t have time to get the financing and home inspection complete, which then makes the bully offer strong.
• The home seller gets excited by a huge amount offered and gets intimidated by the process that the seller accepts the bully offeror’s offer.
A strong bully offer is made by those who want to buy a home they desire. It might mean that the one making a bully offer may pay more than the listed price for the property (a house, condominium, loft or apartment). It also means that the bully offeror gets a bargain too. This depends on the seller’s mindset and the realtors’ skills.
Strategies for buyers regarding bully offers – how they can make it count?
Buyers who have found a house, an apartment, a beautiful Toronto Condos or a loft they desire the most and seek to avoid a bidding war on the date of the offer, they can make a bully offer work for them in this regard.
They simply must follow the following steps:
• Buyers should take the seller (and their agent) by surprise. Ontario’s real estate rules require the listing agents to inform potential buyers that they have received a pre-emptive offer, so it can be submitted on time.
• Buyers should make the bully offer either within a few hours or days of the property being listed for sale. A slight delay will give sellers the advantage.
• Buyers should make an unconditional offer after getting their financing in order as well as getting a home inspection done. This is aimed at making the seller feel comfortable.
• Buyers should offer a price that will Wow the seller. This is often more than the selling price. The key here is to convince the seller that they will not get such a price on the offer night.
• The buyer should make the closing date agreeable to the seller. They should also do the same for any inclusion, exclusion and the like.
• Buyers should give sellers a short time period to either accept their offer or leave it (this is known as the irrevocable period).
• Buyers should avoid showboating. In case they do cannot make the best offer, it is best for them to wait until the offer night and hope that there is low competition.
• Buyers should work with an agent having experience in bully offers.
• In a bully offer, buyers must accept the fact they are paying more than the selling price for the property they are buying.
• Bully offers are made to raise the certainty of obtaining the property, not about getting a good deal on it.
• Convenience might also be a reason for sellers to accept a bully offer too.
Tactics for sellers in terms of bully offers – should they accept one or not?
Sellers often look to get multiple offers so they can select the best out of them. Top-class realtors often advise them to resist the urge of exploring offers until the offer date. Bully offer makers (often colloquially referred to as bullies) often try to dodge the home selling process as they hope to catch at a price below the market value, in comparison to what they might pay for in a bidding war.
In most cases, if buyers are ready to make an immediate offer, they will be there on the magic offer date. What is good for the bully is hardly any good for the seller.
There are some cases where it looks right for sellers to either accept or consider a bully offer, which is due to lifestyle changes, a slower showing than what was expected, a neighbor listing their home for sale at the same time and the like.
If sellers are considering a bully offer, they must ensure the following:
• It should not have any conditions (such as financing, home inspection, status certificate and the like).
• It is at a price that is worth evading the seller’s pricing tactics and plan.
• It has a closing date in accordance with the seller’s wishes.
If sellers are facing ambiguity, they can consider consulting with their realtors in this regard.