The term “bully offer” has come up a lot recently, both in the media and in conversations between agents and their clients. Many Ontario Realtors have raised concerns about this type of bid, stating that it gives the buyers who use it an unfair advantage. Others believe it’s just one more tool home hunters can leverage in a multiple-offer scenario. As a buyer in a competitive market, you may be left with questions.
What (exactly) are bully offers? Can making one help you secure your ideal home? If you’re ready to purchase property here in Ontario, this is what you need to know…
What is a bully offer?
When a property is listed, the seller may stipulate that they won’t be considering any bids before a specific day. The decision to set a date is usually made when there’s a strong expectation that the home will generate multiple offers. While the seller may request offer(s) on a specific date, the buyer is under no obligation to follow the seller’s instructions and if they feel it is in their best interest to do so, will make an offer prior to the date specified. This is often referred to as a “bully offer” or a “pre-emptive offer.”
Why do buyers make them?
When a home hunter makes a bully offer, it’s because they want to avoid competing directly with other buyers. Their hope is that the seller will accept it before reviewing any others. For this reason, the buyer will typically set a date by which their bid must be accepted—one that comes before offer day.
If the bidder is working with an experienced agent, the sum they offer will be highly attractive. That may mean offering a price which is over the asking price of the property. To help their client come up with just the right number, the buyer’s agent will first determine the property’s true value. They’ll consider several factors—such as the pace of the market—to aid the buyer in coming up with a pre-emptive offer that’s truly compelling.
Should you make one?
As a buyer, your biggest question is probably whether it’s in your best interest to make a bully offer. In the Toronto real estate market, the deck is stacked in the seller’s favour, and “Offer Dates” are common; but the buyer has a competing interest to the seller and is not obliged to follow the seller’s requests. Pre-emptive bids are legal and ethical but you should consider whether it is beneficial to you before you submit one.
It’s important to think about why you’re considering a bully offer. Many buyers make them because the home they’re looking at is perfect for them, and they feel they’ll regret it if they don’t do everything in their power to secure it. Others do it because they’ve lost out in multiple-offer scenarios before, and they want to avoid the stress of a bidding war—and the disappointment of losing.
Of course, it’s important to remember that just because you make a bully offer, it doesn’t mean you’ll avoid competition. Other buyers will be notified of your bid, and they may be spurred into taking action. The seller may also disregard your bid and take their chances on the actual Offer Date.
Ultimately, the decision of whether to go the bully-offer route is yours to make. Being clear on what you hope to achieve through this step will help you decide whether taking it is right for you. Just ensure that you’re aware of the potential pros and cons before deciding either way.
The bottom line
Bully offers represent just one strategy that buyers can take in a multiple-offer scenario. However, some buyers and sellers are uncomfortable with using this strategy. Fortunately, an experienced agent can help you explore your options—and stay competitive. If you’re absolutely committed to making a bully offer, remember: bids that are substantially above asking with no conditions stand the highest possible chance of success.
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