Buyer beware. Or in this case: seller be wary.
Bully offers are a common tactic in the booming Toronto real estate market. Just like those boastful “sold over asking” signs we see dotting neighbourhoods, both receive mixed reactions yet both seem here to stay. The question is: would you accept one?
What is a bully offer?
When a new property listing goes up, there’s often a note that the sellers are holding back on accepting offers until a specific date. Buyers and agents are still free to submit offers beforehand, but this is referred to as a “bully offer” or, more gently, a “pre-emptive offer”.
Why would a buyer give a bully offer?
For a buyer, making a bully offer often makes sense. You’re navigating one of the country’s most competitive housing markets, and yes, that can feel as scary as it sounds. You find your dream house, and then realize it has a set offer date, in which your offer will be compared to the to those of other serious buyers. In some cases, your offer can be sent back for revisions. It’s an environment that creates anxiety – and a bully offer is a reaction to that. The buyer thinks they can obtain the house for a lesser cost than they will on offer day.
It’s also quite possible that the potential buyer is gauging the sellers’ reaction to their offer.
Why would a seller accept a bully offer?
Toronto’s housing market has a practice that’s so widely accepted, it’s anticipated: underpricing (which could be why the “sold over asking signs” have so many haters). Sellers never really know what’s going to happen on offer night. If their house is underpriced, they could be more likely to give in to a bully offer because they’re anxious to get their house sold.
How should a seller proceed when they get a bully offer?
This is where sellers need to think things through. Most agents agree, that you will do better on offer night.
Think of bully offers like a reality show. Imagine you’ve been selected to be the next Bachelor/Bachelorette (yes, you can admit you know what that show is). The night before you’re set to meet all your potential partners, who will compete for your affection, you get a Facebook message from an high school fling asking you to get hitched. Would you cancel your opportunity to go on the show?
I don’t know about you, but I certainly wouldn’t. Chances are, your luck is going to be better when you have more options. Basically, bully offers are the high school exes of the real estate world.
Obviously, accepting a bully offer is a personal choice and a decision that should be considered with guidance from your realtor. As a seller, when you hold back, you create interest in your property. When in doubt, wait until offer night.