If buying a home isn’t confusing enough, along comes a bully offer. Until 2016, a bully offer was a rare occurrence mind you, prior to this year as many as 10 offers or more on one home was also rare. More and more we are seeing a pre-determined offer date advertised in an MLS listing. This date is usually set out 5-7 days from the list date of the property. The idea behind this being the property can be marketed to as many potential buyers as possible in the hopes at least one but, ideally several offers will be available for presentation on the offer date.
In this competitive market with historically low inventory levels, a bully offer is becoming a preferred method of securing a home for some buyers. Simply put, a bully offer is an offer to purchase a property in advance of the pre-determined offer date.
For the bully offer to work there are 3 key factors:
- A bully offer is almost always full asking price or well above asking price.
- The seller has to agree to look at the offer and the set offer date is no longer applicable.
- The bully offer is almost always free of conditions (inspection/finance/insurance, etc) and is submitted with a bank draft deposit “herewith”.
A listing agent is legally obligated to present all written offers to their client even if it is before the pre-determined presentation date and it is up to the seller whether or not they will consider it. In some cases, multiple offers may still arise as the Listing agent must make all agents who have shown the property aware of this bully offer. By setting a short window of time for the offer to be valid can sometimes force the seller to act quickly in hopes that no other buyer has an opportunity to re-act.
As a buyer, if you find the perfect home that you have been searching for and it works within your budget, there really is no downside to trying a bully offer. If the seller decides not to deal with your offer, you will only be out your time. As a seller, there are also several factors to consider. The bully offer may be the best offer you’ll get. If it is a firm offer and as much or more money than you were expecting then you are free to accept the offer. Conversely, you may still have lots of potential buyers viewing your home and lots of interest in your home. You may benefit financially by waiting until the pre-determined offer date.