Over the past year or so, the super-competitive Toronto and South Etobicoke real estate market has been making quite a few headlines in the news — mostly because of how frantic the market has been. One topic of conversation that keeps arising is the bully offer.
If you’ve been thinking about buying or selling a home recently, you’ve probably heard all about bully offers and, unfortunately, why they tend to get a bit of a bad wrap. In reality, though, bully offers are a very fair and legitimate negotiating tactic used by most real estate agents — when the situation calls for them, that is.
That being said, however, bully offers certainly are something buyers and sellers need to be aware of, whether they’re concerned about when to deploy a bully offer as a buyer or how to handle one as a seller.
So if you’d like to learn more about bully offers, let my guide below lead the way.
What Exactly Are Bully Offers?
To understand what a bully offer is, you need to know what an Offer Date is. When some sellers decide to list their homes for sale, they might also choose to set what’s known as an Offer Date. This is a specific date when the sellers will allow buyers to make formal offers for their home.
In general, Offer Dates are set by sellers so that they can review all of their offers at the same time, which means they have the added benefit of being able to choose the offer they like best without worrying they might receive a better one at a different time.
A bully offer is when an eager buyer makes a formal bid for a home before the seller’s Offer Date, which although is perfectly legal, clearly goes against the wishes of the selling party. But why would the buyer do it?
The reasoning behind submitting a bully offer is so that it forces the hand of the seller to either accept it or risk the offer expiring before the Offer Date comes around. If accepted, this means the buyer doesn’t have to compete with the other bidders or participate in a bidding war on the Offer Date, though it also means the seller will never know what the other bidders might’ve offered.
If you were unfamiliar before, the name “bully offer” probably makes a lot more sense now. But if you’re a seller, are there actually any advantages to accepting a bully offer?
Selling your home? Check out these other blog posts for important advice and information.
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When It Might Make Sense
Although bully offers might seem inconvenient or annoying initially, they can actually work to a seller’s advantage (if they play their cards right, that is).
If you’re selling your home, and you’re presented with a bully offer, chances are that offer is going to be a pretty enticing, lucrative one. Buyers who submit bully offers know that they’re jumping ahead of other potential bidders in order to get their offer in front of your eyes first. Typically, this means their offer will really have to stand out and catch your attention if you’re going to accept it before even seeing what the other bidders offer.
That’s why personally, I would only ever advise my selling clients to accept a bully offer if it’s substantially over their initial asking price. Assuming a home is priced at a fair market value, a bully offer would have to be at least $50K over the asking price in order for me to recommend my selling client has a look at it.
The Catch
Most bully offers come with an expiry date — one that almost always expires before your set Offer Date, which is what makes the situation so tricky. As a seller, if you accept the bully offer, you’ll never know what other bidders might’ve offered, but if you don’t accept, there’s no guarantee you’ll receive the same amount or more on the Offer Date.
If the bully offer just looks too good pass up on, however, this is an instance where it might make sense to accept the offer. And why not? It means the transaction will be completed quicker and you’re guaranteed to receive the amount that enticed you to consider the offer in the first place.
If you’re based in the South Etobicoke or Alderwood area, these will give you a great idea of just that:
When To Avoid A Bully Offer
As a seller, there are definitely some scenarios when rejecting or avoiding a bully offer makes more sense, however — the most obvious reason being if the amount offered for your home in a buyer’s bully offer isn’t substantially higher than your initial asking price.
If you receive an offer that doesn’t improve upon (or worse, falls short of) your initial asking price, then it makes sense to turn it down. Why? You’ll have a much, much better chance of getting more money on your offer presentation night considering you’ll most likely be able to foster a bidding war between your potential buyers.
But, it’s always vitally important you be careful not to get too greedy.
I’ve personally presented a bully offer to a seller on my client’s behalf, which the sellers turned down, only to have their home sell for less than the bully offer on the offer presentation night. Of course, once the seller’s offer night had come and passed, my buying clients decided they no longer wanted to bid on the home, which meant less money for those particular sellers than they could’ve received.
Looking to sell for the highest dollar amount possible? You may want to consider making some strategic upgrades to your home. Check out these blogs for advice.
Leave It To A Professional
At the end of the day, it’s ultimately up to you — the seller — whether or not you want to accept a bully offer. With that in mind though, the single best piece of advice I can give you is that you should seek the guidance of an experienced real estate agent before making your final decision.
A seasoned, professional real estate agent with lots of experience working in different market conditions and lots of experience with handling negotiations will be able to tell you if a bully offer is worth your time and consideration.
Use their expertise and intuition to your advantage, because you truly never know what kind of night you’re going to have when your set Offer Date comes around, and bully offers can oftentimes be the safest route to selling success.
In need of guidance from an experienced local real estate agent ahead of your upcoming sale? Call or text me at 647-239-7587 or send me an email at melissa@southetobicoke.com to get started.
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