Trends in real estate tend to start with someone trying to gain a little advantage. Buyers want more house for their money, sellers want more money for their house – between the two there are any number of tricks for negotiating up on one side and down on the other. Bully offers fit neatly into this trend, and are increasingly prevalent in the market. That’s why it pays to understand the strategy and its nuances from the outset – whether you’re a buyer, a seller or both.
Here’s what I’ll call an enumerated “Bully Offer 101.”
1. What are they?
A bully offer is an offer to buy, usually with attractive terms, that’s presented before a stated time that offers will be considered. They have become a tool for motivated buyers to get ahead of competitive bidding, and (as with any tactic) they have their advantages and disadvantages. A bully offer will likely be higher than the asking price, free of conditions (like home inspections) and will include a short window for acceptance. They are named for the feeling they create for sellers of being forced to go outside of their planned selling approach.
2. Why they’re good for sellers.
A seller who accepts a bully offer eliminates a lot of the standard steps in the selling process. Chief among these is the negotiation of the selling price based on a series of offers and negotiations (it’s a tactic that’s usually reserved for houses that are likely to inspire competing offers.) Assuming the seller has priced the home according to an accurate assessment of its likely selling price, any offer above that can be satisfying – especially when they might otherwise be feeling nervous about potential bidding.
3. What sellers might be missing.
Assuming the house has been priced and marketed well, the bully offer eliminates the market’s ability to determine the highest price possible. Competitive bids drive offers up. How high depends on the resources and resoluteness of the bidders. The downside of not allowing for bids, within a time frame that allows for full market awareness of the property, is the potential to leave money on the table.
4. Why they’re good for buyers.
The obvious advantage to the buyer in presenting a bully offer is the opportunity to set the terms. You get to say “Here’s what I’m willing to do, the choice is yours and the clock is ticking.” You avoid the blind ally that is multiple competing offers. Finally, you eliminate much of the back and forth of negotiations.
5. What buyers might be missing.
In presenting a bully offer, you have to make it a sweet deal for the seller. It has to be based on a price they will like and with terms that favour a quick decision and finalization. That generally means forgoing the home inspection – which means your offer is a “warts and all” proposition.
Overall it’s pretty pointless to argue that bully offers should or should not be considered. The reality is they are here, and they happen. The trick is to have a strategy in place for dealing with them, and to make sure that, at the end of the day, you’re satisfied with the value you achieve.