If you’re thinking about listing your home for sale at some point soon, you’ve probably already discussed the idea of setting an Offer Date for your home with your real estate agent. If you did, then the second part of that conversation should’ve been about bully offers.
Knowing what to do in the scenario that you receive a bully offer from a buyer is something every seller should know how to handle.
Make the wrong choice and you could end up losing out on a huge payout. Make the right choice and you could end up selling your home for much more than your initial asking price. But how do you know which decision to make, and what do you need to consider to help you make the right choice?
My guide below on how to navigate bully offers when selling your home is here to help answer all of those questions so you can approach the situation with full confidence (if it ever comes about).
Why Set An Offer Date?
In order for you to receive a bully offer when selling your home, you (by definition) need to have set a specified Offer Date for your sale first. As I’ve covered before in related blogs, an Offer Date is a specific day and time when the sellers of a property will permit buyers to submit a formal offer for their home.
The reasoning behind setting an Offer Date is pretty straightforward — the sellers get to review all of the official bids from their potential buyers at the same time. This mitigates the risk of the sellers accepting a bid before a better one comes in at a later time, as the sellers can simply choose their preferred bid from the bunch they receive simultaneously on their set Offer Date.
Of course, this doesn’t always work out as planned. Enter; the bully offer — that pesky bid from a certain buyer that disregards your request and presents itself before your set Offer Date. A perfectly legal maneuver, but a potentially annoying one nonetheless.
For sellers, one of the biggest motivating factors of setting an Offer Date is to encourage a bidding war between the potential buyers of your home. Find out more about bidding wars and why they can be a very good thing for sellers by reading my post about Bidding Wars In South Etobicoke: Everything You Need To Know.
The Typical Bully Offer
As a seller, you’re always entitled to reject and even ignore bully offers, of course. However, they’re usually structured in a way that’s designed to catch your attention and give you something to think about before your Offer Date rolls around.
Typically, a bully offer submitted before your offer date will include a few trademark features, including:
- An offered sales price that is well above your original asking price
- A short irrevocable period, which prevents other buyers from presenting competing offers
- No terms or conditions for the seller to complete the deal (like a home inspection, for example)
- A cash deposit in hand, which is usually a minimum of 5% of the total purchase price
Basically, bully offers are designed to be just enticing enough for sellers to accept before their Offer Date rolls. If a buyer really likes a home and sees that it has a set Offer Date, they’ll want to convince the sellers with their impressive bid to take it off the market before they even see any other offers.
Even in the most frantic of seller’s markets, staging your home is still one of the best strategies sellers can leverage to earn the highest rewards from their home sale. See what I mean by reading my post “Do You Really Need To Stage Your Home In A Hot Market?” here.
Which Market Conditions Work Best
Of course, Offer Dates and bully offers are really only common under certain market conditions, and largely depend on the amount of demand for a home.
If you’re in a seller’s market where there are more buyers hunting for homes than there are actual properties available on the market, then you can see why the heightened buyer demand might encourage sellers to set Offer Dates and buyers to submit bully offers.
However, not all properties come with an Offer Date or receive bully offers, even in competitive seller’s markets. Ultimately, this all comes down to the pricing strategy of the listing agent. If they want to encourage a bidding war for their client’s home, they may take the risk of setting an Offer Date so that all bids come in at the same time (and buyers end up competing with each other).
If you’re based in South Etobicoke and are thinking about selling your home, it’s in your best interest to do a bit of research on local market activity. Start by catching up on the Home Selling Trends In South Etobicoke here.
The Risks Of Sticking To Your Offer Date
It’s well worth noting, though, that the Offer Date strategy doesn’t always work for sellers, however. There’s no guarantee that by setting an Offer Date, sellers will receive competing bids — or even any bids at all.
If that happens, then sellers can simply keep their home listed for sale and continue to wait for offers that reach their asking price. However, that strategy really only works if the seller has listed their home at its fair market value.
Let’s say that you as a home seller have listed your home for below market value in the lead-up to your Offer Date in hopes that the reduced price will attract more competing buyers and entice them to pay more for your home. However, once your Offer Date rolls around, you don’t receive any offers from buyers.
Unlike the scenario above, if you’ve initially listed your home for below its market value, re-listing your home after your Offer Date expires and increasing the price to its fair market value isn’t a good look for your listing.
Doing that would run the risk of stigmatizing your property, and would likely raise questions among buyers about why it didn’t sell in the first place, why nobody made any offers for it, why the price has suddenly been raised, and what could be wrong with your property.
There’s a lot more to the psychological aspect of a real estate transaction than you might think. Learn more about why timing, pricing, and reading the market are so important in my home selling guide, Steps To Selling A Home here.
The Upside Of Accepting A Bully Offer
Of course, all of the risks associated with waiting for your Offer Date to come around instantly go away if you choose to accept a bully offer.
The clear advantage of accepting a bully offer is that it’s essentially a done-deal guaranteed. While nothing’s confirmed until all parties have signed on the dotted line and a firm sale has been reached on closing day, bully offers tend to mean transactions are completed pretty quickly because they typically include minimal (if any) terms and conditions from the buyers.
That means that theoretically, you could sell your home in record time — like, in under a week. Plus, you’ll receive a guaranteed amount that doesn’t depend on what other bidders might raise their offers to.
Bully offers offer an easy way out for sellers that would rather skip out on the stress of their Offer Date. But are bully offers something you should really hope for? Find out in my related blog post “Should You Consider Accepting a Bully Offer?”
What Should You Do?
As always, my advice would be for you to consult your listing agent and ask for their advice.
Your real estate agent should have a thorough understanding of your home’s local market and how to read its most up-to-date data and statistics. This will inform them about the likelihood you could end up receiving multiple competing offers on your Offer Date or whether they think it’s unlikely you’ll receive many.
That will also inform your pricing strategy, as your agent will be able to leverage their market research to determine whether it’s best to price your home at or below its market value ahead of your Offer Date.
If you do end up setting an Offer Date and receiving a bully offer for your home, the decision on whether or not to accept it can often be too overwhelming for a homeowner to make on their own. By relying on the experience and expertise of a trained real estate agent for guidance, you can take a lot of comfort as the seller knowing you’ll have their best judgement on your side.
No matter which stage of your home selling process you need help with, I’m always available for a quick call, email, or consultation to offer you my guidance. If you’re in need of some seasoned real estate advice, simply click Chat With Me here to talk.