You’ve likely heard the term “Bully Offer” numerous times but what is a bully offer? How does it work? And who does it benefit?
In a seller's market, which we are experiencing now, there are more buyers than there are homes listed for sale. This means sellers have a strong negotiating position with often more than one buyer showing interest or offering on their home.
Bully offers, also referred to as pre-emptive offers, occur when a Buyer tries to short-circuit the process set out by the Seller and re-take control.
What is a bully offer?
A bully offer is an offer from a buyer to the seller to purchase a home and the offer is submitted before the date that the sellers have indicated they will look at any offers.
Many home sellers make the decision when they list their home to “hold offers” and wait for a certain date and time to review them.
For example, a seller lists their home for sale on Thursday but has agreed not to review any offers until Monday, giving buyers time to view the home and prepare their offers prior to submission. However on Friday night, after only 1 day on the market, the real estate agent calls to tell the sellers that they have a bully offer and it’s only good until Friday at midnight. This is the meaning of a bully offer in real estate.
What are the benefits of a bully offer?
A bully offer is typically well above the asking price and unconditional.
A buyer submitting a bully offer knows they need to make the offer as irresistible as possible to grab the buyer's attention.
Sellers are not obligated to accept bully offers, however, your agent is obligated to present all offers to you. That said, bully offers are often very attractive and many sellers will accept them for the simple facts of the high purchase price offered and the ease of closing.
Is a bully offer bad?
While it may seem unfair or unethical, there are no written laws stating that they are illegal.
They do, however, push many buyers out of the market and increase the price of homes in the market. Accepting a bully offer is completely up to the seller, there’s no right or wrong answer.
When to avoid a bully offer?
A bully offer should be avoided when:
The offer is not well above asking price.
The offer has conditions on it, meaning it will be sold conditionally.
The property has had a ton of interest, showings, and excellent feedback, meaning you can likely expect a large number of offers on offer day.
Your agent doesn’t have enough time to notify all other interested buyers that an offer has been submitted.
Bully offers can be fantastic for buyers, they are usually ridiculously high, unconditional, and work around the seller's desired closing dates.
However, as a competing buyer, they may seem unethical and can drive the prices of homes up.