You know you’ve heard the term, even if you are not entirely sure what it means. Say it with us now:
As far as a straightforward definition goes, a bully offer is when the seller has set a date for accepting offers and you decide to make an offer prior to that date.
In the raging battle for Toronto real estate, these pre-emptive offers are unsurprisingly on the rise. But for a bully offer to work, there are three key factors:
1) The buyer must be prepared to pay significantly more than listing price with the aim of avoiding competing offers. Always ensure when making ANY type of offer that it is one is within your financial means, bully offers especially.
2) The seller has to agree to look at the offer and decide the previously set offer date is no longer applicable.
3) The offer will have to be free of any conditions, such as home inspection or financing, and a bank draft for deposit ‘herewith’… meaning in-hand and on location!
So, are bully offers a good thing or a bad thing?
To that end, we believe it really depends on the perspective.
On the buyer’s end, it can be a great thing. Especially these days. In case you haven’t noticed, Toronto’s real estate market is scorching hot. Bidding wars are now commonplace, with selling prices skyrocketing above listing prices consequently. As such, prospective buyers are frequently finding themselves on the losing end of the deal and they’re fed-up. So why continue getting bullied when you can become the bully yourself? Avoid the competition outright and chances are that you’ll get the house for less than if you had gone against others.
On the seller’s end, it varies. On one hand, if you are are happy with the price, then why not accept a bully offer? It’s not rocket science. That said, should you accept that pre-emptive offer, you’ll never know the outcome had you welcomed competing bids at the previously scheduled offer presentation.
All of the things considered, perhaps the real question is whether bully offers are fair or not.
While the traditional process of holding back offers may not always seem convenient, on the surface it does create a level playing field. Not only do interested buyers know they have a window of time to see the property, but an equal chance to bid on it. It’s a concept of structure.
Now imagine having that same property you were interested in sold out from under you the night before? It’s hard to deem that fair, but also worth it to consider how quickly that outlook would change if you were on the other (winning) side of it.
Truth be told, bully offers are a complex issue, period. These types of “controversial” negotiating tactics typically rear their heads when facing highly competitive (aka desired) dense, urban/city real estate markets with low inventory and expensive price tags.
Our best advice to dealing with the presence and use of bully offers (regardless of how you feel about them) is an age-old adage, that “if it’s meant to be, it will be.” Lost your dream house to a bully offer? That just means that something better is coming your way, so hold on tight because the Toronto real estate market is a bumpy (but well-worth it) ride!