Okay. Time to turn up the discussion on a topic that seems to be at the forefront of real estate these days. A topic involving a wide range of perspectives, with varying opinions. From perception, to execution, this negotiating ‘strategy’ (shall we call it) is controversial at best. I’ve mentioned this tactic in plenty of conversations along the way – both in a professional and personal context, and it seems as though the general public (and in some cases, the real estate industry!) remains unaware of this strategy receiving so much buzz these days. What is it, you ask? The bully offer.
Here’s the long and the short of it. A bully offer is when a Buyer submits a bid on a property ahead of the scheduled time outlined for offers to be considered. It’s like dangling the candy for a Seller – usually a flattering offer, too good to pass up, in hopes that the Seller with cave, sign on the dotted line, and call it a day without waiting on other interested Buyers.
In our current marketplace, we often see Sellers holding off on reviewing offers until their home has been appropriately exposed to the public, with the anticipation of stirring up multiple offers – a bidding war – to drive up the price and fetch the most favourable sale terms. Now: cue an eager Buyer who simply doesn’t want to wait… Cue that Buyer who is chomping at the bit to snag a deal, who may have already lost out on other properties due to higher bids, who is bent and determined to beat out the competition, who wants to get an edge on other Buyers who aren’t as quick in the chase, and secure a home knowing that waiting until ‘offer day’ could land them in a position of even greater risk with increased demand and therefore smaller odds of success if they don’t potentially put up more doh. Despite the instructions outlined by Sellers, Buyers forge ahead with their bully offers, fingers crossed that they can muscle their way in and make some headway in their home ownership endeavors. For the sake of semantics… perhaps a better name would be an “Eager Offer” rather than a “Bully Offer”. I hardly think of myself as such! (lol)
Now, take a step back and imagine the backlash when consumers think they have a weekend to casually and calmly mosey on through an open house, set up a showing at their leisure, do their diligence before making a decision… only to then be informed that the house they were contemplating is now SOLD. Too bad for you.
This is where a new form comes to light – a conveyance from Sellers (often referred to as “Form 244”), and their ‘promise’ not to consider an offer ahead of schedule. This certainly took some of the pressure off when Realtors and Buyers alike were scrambling to get to a property without any guarantee that they’d have time. Using this conveyance successfully worked to organize some of the chaos, but not without pegging the Seller as a bit presumptuous in some cases – essentially declaring their confidence that a plethora of offers would hit the table on offer day (because let’s be honest – you wouldn’t hold off unless you truly expected more than one). As the market ebbs and flows, it became a risk to consider holding offers off with no ifs, ands or buts … and an uncomfortable place to land when (perhaps surprisingly!) the phone was a little too quiet on the day a frenzy was expected. Hearing nothing but crickets on offer day is super fun. Said no Realtor ever.
A quick aside here: It is the Seller’s choice regarding whether they choose to sign this form. They are not obligated to do so. This decision makes up part of the discussion when listing documents are prepared. Without the form signed, the Seller is still free to “keep their options open”. What I don’t understand is the more recent practice of using the form, only to include a disclosure that the Seller reserves the right to consider a pre-emptive (kind language for ‘bully’) offer. Completely contradictory, if you ask me…
Of course, we can’t forget the risk involved on the Buyer’s side of things when submitting a bully offer… for a reasonable chance of success, you better bet your bid should be good. Reeaalllly good. So a Buyer needs to be comfortable paying more ahead of schedule rather than holding out and potentially gaining some negotiating power (and paying less!) if competition doesn’t pan out as anticipated. Lots of odds to weigh.
So … how do you make sense of a bully offer scenario?
From a Seller’s perspective. Is it wise to shut the door on eager, motivated, sometimes emotionally driven Buyers and tell them to wait? Are you certain you could fetch the terms of a bully offer again should you decide to hold off? Is it prudent, at the very least, to keep your options open to consider a jaw-dropping, truly ‘too good to be true’ offer ahead of the schedule outlined? Maybe even multiple bids spurred on by a bully offer? From a seller’s perspective, it seems irresponsible and counterproductive to limit their options and be closeminded to the possibilities that could unravel.
From a Buyer’s perspective. Ahem, “The Bully”. Isn’t it your job (or at least your Realtor’s job!) to keep up an aggressive property search, to be first to the table, and to negotiate a deal that is ultimately accepted? In a market where there isn’t enough inventory to go around, where competition is steep, would you not welcome any strategy that could give you an upper hand to snag a deal? Truly… if you found your dream house – and if the opportunity presented itself – would you so kindly flutter your wrist and agreeably settle to wait until ‘offer day’ when you could be up against goodness knows how many others? I think not. You’d pull the trigger if you had a chance. And you’d be doing a celebratory jig after your victory while those other slowpokes are left in the dust.
From the public’s perspective. Bully offers can definitely be perceived as annoying. They intensify the marketplace by keeping shoppers (and Realtors!) on their toes, unsure of how the sale of a property may unfold. They force people to scramble, hightailing it to the table should they want to get in on the action, without a moment to ease off a search just in case a property gets scooped before it’s supposed to be. They can also be frustrating – perhaps even distasteful – when Realtors are blamed for failing to stand behind their word, for instructing one thing, and turning around and doing another.
Now… from a Realtor’s perspective. Here’s the thing. As long as Sellers hold the power (which, for the moment, they do), Buyers’ hands are tied. And as long as the Seller holds the upper hand, it’s a Buyer’s job to be prepared. You must be ready to pull the trigger and jump in if you need to. You better not drag your feet if that perfect property hits the market, and you better have a plan in place to initiate seamlessly should you get word of a competing bully offer with minutes to spare. It isn’t fun, but it’s the brutal reality of our marketplace these days. It’s the honest nature of competition – may the fittest survive.
When it comes to listings, it’s our job to do our best for our clients. Sometimes a bully offer gets us there. Of course, a scheduled date to review offers might keep life neat and tidy. It means you can work around soccer practice and date night… but it also limits the possibilities and could lead to less success if multiple bids don’t come down the pipe. Would it not make more sense to suggest a date for offers to be considered, without making any promises to hold to this? Then, let the Buyers have at it… and see what the market will dictate.
I’ve been on both side of bully offers. I’ve presented them. I’ve been turned down and told to come back later. I’ve also been successful, snagging dream properties for Buyers who understood the risks and were over the moon to beat out the competition, even if it meant they pulled their socks up higher in their bid than they perhaps needed to. I’ve received bully offers on listings that still turned into bidding wars and enabled my Sellers to push their sale values to levels never anticipated. And I’ve sat with Sellers weighing the odds of whether it was better to wait or jump on an opportunity that might not be available to them if they held off. Bully offers aren’t necessarily convenient… but they can be a great tool to keep in mind for Buyers and Sellers alike. Until our regulating body puts some perimeters up to streamline the process – and as long as they allow free competition to persist – it’s our job to set our clients up for success as best as we can… even if that means getting pegged as a “bully” or shifting gears on selling instructions to entertain an offer from the eager beaver.
There’s no science to this stuff… it can make you mad at times. But there is logic, and with a bit of experience to back that, some good instincts, and some confidence to steer a client in the right direction, I believe keeping the bully offer in our back pocket as Realtors is a useful strategy when representing our clients. What do you think?