With homes selling incredibly fast, and demand sustaining, the fast paced Calgary real estate market has proven once again how dynamic it can be and as more and more of the homes we list entering into multiple offer situations, buyer bidding wars, and sellers setting up (Bring your best) dates, it's important to stay up to date with current market trends and terms.
Our blog covers bully offers or pre-emptive offers, current market trends, situations our sellers are seeing, and the various lengths we're seeing some buyers go to secure homes.
How Does A Bully Offer Work?
First things first, we unpack a bully offer and what this term means. As you may have guessed, a bully offer acts and works similar to how it sounds.
A bully offer is an offer that puts pressure on the seller to commit and act in order to not lose out. When sellers list their home, and have instructed their agent to put in the remarks "Offers accepted and reviewed by 6:00pm at XX-XX-2021" it generally means that they're committed to seeing and receiving all offers at that specified point and making their decision from there. While this sounds ideal for all parties involved who are looking for a fair and equal opportunity to present an offer, it's an advantageous position for sellers as they can work other offers against one another to potentially raise the price. Often buyers who love a home, are instructed to come at it with a best and final offer in hopes that their bid will be the best. Bully offers come in strong, loud, and aggressive, these offers are typically time sensitive, with little to no conditions for the sale, high deposits, and well above list price.
As inventory remains low, and demand is high, buyers become more and more aggressive in their efforts, especially those who have been shopping for a prolonged period of time and are more accustomed to a buyer friendly market. Our team has seen many bully offers come through recently, offers from out of town buyers (Sight unseen) to our off market / coming soon campaigns generating offers from local residents submitting offers simply from watching our video walk throughs.
An example of a few of our latest listings where we were able to obtain multiple offers, buyers from out of town / province, unconditional offers, and were able to generate massive interest in our coming soon / off market campaigns through the power of our marketing (including videos) see a few examples below.
When Should You Submit A Bully Offer?
There simply is no one catch all response for this question, this answer can vary from property type, to style, to the communities that are within, after all, supply and demand is the name of the game and our market across the board isn't presently feeling inventory stresses. There are plenty of home builders presently who have many great builds and developments being launched. We are working with Streetside Developments in Evanston Park and with Shane Homes at the Mark 101 in Sage Hill. While their products are in high demand, they still have plenty of opportunities for home buyers to purchase new homes in Calgary's newest communities.
Our advice is simple, chat with your Calgary REALTOR® or if you're just beginning your search contact us and we'll help you get informed on the current market conditions and trends, statistics, and help you decide what the best path and route is for your personal situation. There's no solution or fix that's suited for everyone, the smallest
Are Bully Offers Risky?
In most instances, yes. Quite often, bully offers do not have any conditions, another tactic to make their offer more attractive. Traditionally in a balanced or buyers market, buyers will have conditions and condition periods, this is when a home is considered conditionally sold or under the 'pending' status on the Calgary MLS® Examples of conditions you may find in a residential purchase contract could include:
Condition for financing - Many buyers require a mortgage in todays real estate market to purchase a home, as a buyer, you should have a good idea of where you're at, you've likely received a pre-approval and spoken with a mortgage professional if you're writing offers on a home, if not, this should be an urgent first step you complete. Buyers will add a financing condition typically to ensure and protect their deposit from being forfeited in the event that they're unable to obtain financing.
Condition of a Satisfactory Home Inspection - Another common condition seen in most offers, a home inspection condition protects buyers and allows them to hire an independent, professional inspection on the home that will outline any minor or major repairs that may be needed, and can flag any areas of concern. For example, a home inspector could flag old or outdated plumbing or electrical setups, detect moisture and leaks from the foundation, identify issues with the main line going to the sewer with a sewer scope, or catch damaged roofs that are on their last limbs. After a problematic home inspection, buyers will discuss remedies with their REALTOR® and this can lead to further negotiations (price decreases, or repairs needed) All of this is eliminated in an unconditional offer and the buyer must be prepared for anything.
Other less common conditions could include a clause sale condition which affords a buyer the opportunity to sell their home before the deal becomes firm. You'll also find condominium document review conditions with condominium purchases, this allows a buyer to have a satisfactory review of the condominium documents prior to a deal becoming firm, and can allow a buyer to review any concerns that may come up regarding the condominium and how it's managed (reserve funds, upcoming assessments, etc)
For sellers, a bully offer can also be risky. Depending on demand a seller could risk losing out on a bidding war for their home that could exceed the bully offer. You should consult with your REALTOR® to understand the risks of accepting a bully offer, and the best strategies to implement to ensure you're in the best position possible. For example, you can require the buyer to provide a substantial deposit, this ensures that in the event that their offer falls through you'll be compensated.
Bully offers can be incredibly risky, especially for first time home buyers who are less likely to have as much experience in home ownership, identifying potential issues, or knowing how to solve them or the potential costs involved to address them. We've heard many horror stories where a buyer puts in an unconditional offer thinking their financing wouldn't be an issue to later find out there are barriers and in some instances were forced to back out of the deal forfeiting their deposits which is typically a significant amount of money.
Tips For Buyers Considering A Bully Offer
If you're ready to make a bully offer, here's a few tips we recommend to ensure your offer is in its best position
- Move Fast - A bully offer sent the night before all other offers are being considered will likely just be mixed in with the other offers and could be utilized to generate offers above.
- Consider your conditions - While some buyers are in the position to write an offer unconditionally, we do recommend that you consult with your agent to ensure this is the best step for you. In the event that you do decide to write a bully offer, demonstrating to a seller that you're far less likely to change your mind can go a very long way into securing a deal.
- Closing Dates - Should be portrayed as being flexible, the less friction and the more you work within a sellers timelines, the more likely they are to accept your offer.
- Remember that a bully offers purpose is to obtain the home, not to obtain a smoking deal. Your expectations going into this aggressive offer should be focused on ensuring the home you love is sold to you, and not securing a good deal or having items tossed in to sweeten the deal.
- Pricing - Your offer should be realistic but enticing to the sellers. Remember that your home still needs to appraise by the bank, and while our goal is to get the right home, we do ensure our clients are educated on pricing and typical market values so they're not putting themselves in a compromising position by significantly over paying.
- Quick Contract Expiration - Writing a bully offer that's open for 24 hours allows the sellers and selling agent to get to work. You should have an offer in place that expires quickly and only gives the sellers a few hours to respond.
As a buyer writing a bully offer, you're essentially hoping that other buyers are adhering to the sellers wishes and withholding their offers until the designated offer consideration date, that other buyers aren't able or are not in a position to write an offer with limited to no conditions, and that the seller is enticed enough by your offer that they are worried that they'll lose out if they do not take it.
Tips For Sellers Considering A Bully Offer
First and foremost, if you're thinking about selling your home, give us a call and find out how we can get your home sold fast, for top dollar, with less hassle. As one of the top performing teams in Calgary, it's our mission to elevate marketing and the services REALTORS® provide for sellers, give us the opportunity to prove to you why you SHOULD list your home with the Real Estate Partners Team (Dusko Sremac) at RE/MAX FIRST and what we can do for you!
Discuss this scenario early on with your agent, have a game plan, and know what you want to do. Bully offers can typically leave one party with cognitive dissonance and it's important that you understand the stresses and pressures of a bully or multiple offer situation early on.
Consider the stresses of selling your home and the 'mental' costs that come along with this. While some home buyers may have an easy time managing showings, condition dates, etc, others may be battling bad neighbours, relationship stresses, sick family members etc. Consult with your agent and understand what other offers and interest may look like.
Ensure your agent is well prepared and ready to act. One key element of the bully offer is the time and pressure element, that's under the assumption that no other buyer is as or actively ready to act. Your agent should contact all parties who have seen the property or are booked to test the waters and see if there's any interest on their end, there's still the possibility of entering or generating a multiple offer / bidding situation.
Gauge the interest with your agent on your home before it's listed and when it goes lives, if the demand is exceptional, you may consider passing on the bully offer. Remember it's your choice on whether you want to accept the offer or not, your agent should not pressure or push you one way or another and should provide you with enough information and facts that allow you to come to your own decision, but remember that just because you've received an offer, it doesn't mean you'll receive another, and you could be losing out not only on a quick sale of your home, but for an amount that may be lower than the bully offer.
As a seller you should have a good idea of what your magic number is, answer this question honestly, which scenario are you more likely to favor:
Your home is listed on the market for $xxx,000, we wont get into market specific influences like property type, or location and your home has just been listed on the MLS® its been thoroughly researched and while you cannot predict the demand from active buyers, you've priced it accordingly with plenty of recent comparable sales and have instructed your agent to put in writing that offers will be reviewed in 3 days.
- You receive an offer day one, site unseen, 3% above list price, financing condition, with a $25,000 deposit and a possession date that works for you.
- You have a high number of showings and interest in the home, with multiple agents saying they're likely to write with their clients and submit an offer.
- You receive an offer day two, it expires in five hours and is for full list price, no conditions, with a $15,000 deposit and a flexible possession.
In these scenarios there's a lot to consider.
1 - Who are these clients, why site unseen, how strong is their financing, and how much do you believe their agent that they're in a good financial position? If their conditions dates are 5 to 10 days, and they end up falling through, your home could potentially have lost out on the momentum it would have otherwise had. Buyers who were previously interested could have secured another property or be involved in negotiations elsewhere.
2 - Ideal situation in many instances, but when a bully offer comes through, knowing vs expecting becomes the dinner table debate for many sellers and many other factors may need to be considered as mentioned previously, these include the stresses of showing, your risk tolerance, where you realistically see the offers coming through.
3 - While this may seem ideal, in certain times, this could leave thousands of dollars on the table. When a home is in high demand you could very well end up in a bidding war that drives the homes price well above 3% of list price (unconditional)
The first step to handling a bully offer is already done, after reading this article, you should be well positioned to have a better and more thorough understanding of the nature and risks involved with bully offers. Sellers who receive pre-emptive bids that are ahead of their scheduled offer dates can be bothered by receiving them, and if the pre-emptive offer doesn't impress them quickly, they're often rejected just as fast. However, sellers who accept a bully offer, will question the value and full potential of their home.
We look at bully offers as a positive for our sellers. Through our advanced training, thorough understanding of the market, and agents who know how to navigate these specific scenarios, our sellers can see these pre-emptive offers as just another option or opportunity to make the most of their home sale.Posted by Calgary Homes Real Estate Partners Team on