Six weeks into the 2021 real estate calendar, and I am 2-for-7 this year with pre-emptive offers.
That’s seven attempts with two resulting in the seller accepting our bully offer, but I will stop short of saying, “Two were successful,” since the offer doesn’t always have to be accepted in order for success to be achieved.
How can that be, you ask? Isn’t acceptance the goal of any offer submitted?
Yes and no.
Ultimately, you are attempting to purchase the property. But with any bully offer attempt, even if it’s not submitted, you’re going to gain an edge.
Last week, clients of mine submitted a bully offer on a $1,595,000 listing in the amount of $1,901,000. The offer wasn’t even considered. Never had a shot; not even a discussion with the listing agent, just a flat-out rejection. So was this a fail? Again, I’ll say “not exactly.” Because what the buyer gained was an insight into the price expectation that the seller and the listing agent had. They ultimately decided that if $1,901,000 wouldn’t even get a sniff, then they were going to focus their efforts on a different property.
Knowing when and where to submit a pre-emptive or “bully” offer is key for active buyers in this market, and yet I fear a lot of buyers out there aren’t using them.
While a lot of people might think the mere concept of a bully offer is a farce, (ie. a seller refusing to look at offers until a certain date, and then choosing to look at an offer before that date…) if you’re an active buyer in 2021, you simply have no choice but to adapt or die.
So with that said, let me give you my bully-observations so far in 2021…
1) If you don’t, somebody else will.
Need I say more?
I believe that almost every single freehold property listed for sale, that has a set offer date, will end up receiving a bully offer in this market.
If you’re a buyer, you need to make the bully offer part of your home-buying plan. When I have a conversation with buyers for the first time, part of the discussion is about what bully offers are, how they can be successful, and that the clients must be prepared to make one.
Some of my buyers are rather easy to talk into this. I was out with buyers last week and it was only the second time I had met them in person. We saw two houses, they absolutely loved one of them, and I said, “If this is ‘the one’ then why don’t we run to the bank, get a deposit cheque, and submit a bully offer tonight?” They looked at each other and then said, “Sure, let’s do it.” It was that simple.
Other buyers are apprehensive, and I suppose I don’t blame them. But why are they apprehensive? Is it because this isn’t the right house? Or they feel rushed? Believe it or not, some buyers feel that even if this is the dream house and they can afford it, they just want to wait for offer night. The idea of making a bully offer doesn’t sit well with them. Some feel dirty. Some feel sneaky. Some feel like there’s an added level of anxiety or risk and they just don’t want to do it.
If you don’t, somebody else will.
That’s all but a certainty in this market.
And are you ready to compete if the property receives a bully offer? I mean, if you see the property on Thursday and think, “Yes, we’ll make an offer on ‘offer night’ next Wednesday,” are you prepared to jump in and compete when a bully offer is registered on Friday night at 7:30pm?
If not, then ask yourself why.
The reason will simply reinforce that you’re not fully prepared to work through this frenetic market, and if you want to be successful, you need to step up your game.
2) Sellers and listing agents want to sell via bully offer, don’t kid yourself.
For some property types out there, I’m actually afraid of going to offer night.
Full disclosure: the condo market is red hot right now, but for how long? And is this for all property types? Are there condos for which the “list low, hold back offers” strategy won’t work?
If I’m listing a condo right now, I’m going to list low and hold back offers, but part of me is really hoping somebody brings me a bully offer. The fear of going to offer night and not getting what we want is ever-present, and I just don’t think there are any guarantees out there.
So if you’re a buyer, you have to know that agents out there are looking for bully offers! They want them! So why not give them what they want? Use this to your advantage by knowing the following…
3) Many buyers are testing the sellers with bully offers.
Many sellers out there are hoping to sell via bully offer. Not all, but some. So if you’re a buyer, and you’re all in on a property, submit a bully offer – for less than you’d pay on offer night.
Huh? How’s that?
Trust me, this works.
I had a client looking at a townhouse for which she would have paid $900,000, and that I think had $950,000 upside on offer night. We decided to make a bully offer.
So did we offer $900,000?
No. We offered $850,000.
Another bully offer came in after ours, and we made the seller say, “I guess we’re doing this tonight instead of next week!”
We ended up at $875,000 and bought the house.
I do believe this would have sailed past $900,000 on offer night, and my client couldn’t have afforded it. So while I’m not suggesting that you can all run around making lowball bids and buying houses via bully offers, I am saying that some sellers out there might not realize the upside in this market. Also…
4) Some agents don’t know when to say ‘no’.
Not only do some sellers not realize the upside in this market, some agents don’t know either.
A Leslieville condo was listed for $599,900 with offers any time. Seriously – no offer date, just come one, come all. So within hours of hitting the market, an offer was registered. Then another. Then a third. By the time the seller and agent were ready to sign on the dotted line, they had six offers, and sold for $650,000.
Two things to know:
1) They clearly didn’t know what the property was worth in February of 2021.
2) This property had $700,000 upside.
The public might not realize this, but not every agent out there is working ten hours per day in this market. Many agents are working one day per week! And when they list a property for sale, they have no idea how the market may have changed from last week, last month, or even last year.
Here’s a story that’s a bit of a tangent…
Years ago, probably back in 2015, a colleague of mine had a condo listing early in the year, but she really hadn’t been active for months. She listed at $399,900 with offers any time, and I told her she was going to get a ton of interest!
Sure enough, she received an offer for full price within hours of hitting the market. Her clients were in Mexico, so she sent them the paperwork electronically, they signed, and that was that!
Except that wasn’t ‘that.’ Before she could email the accepted offer back to the buyer agent, another agent had submitted an offer. And it was for over the list price.
She had absolutely no idea what to do.
She literally sat at her desk for an hour, and in that time, a third offer came in.
Now here’s the fun part: she tried to get in touch with her clients, but they thought they had sold their condo and thus they were celebrating! They had turned off “roaming” on their phones, and sidebar: this was the first time I had ever heard of “roaming.”
What is this? Are these people the cheapest humans alive?
When you arrive at a hotel, do you connect to the Wi-Fi? I don’t. I never have. Yes, my cell phone bill is a write-off, but how much would this actually save me?
And from phone calls? Seriously?
My colleague was losing her mind, as her clients were unreachable, and I was losing my mind with the state of society and their goddam roaming.
Long story short, six offers came in on the property that day, the highest of which was $475,000. The clients happily signed and accepted the $475,000 offer, and thankfully for my colleague they never thought to question why in the world she told them to sell for $399,900 only six hours earlier.
I reference this story all the time these days as it serves as a cautionary tale for every participant in this market.
But for buyers out there, believe it or not, you can find value in the market when a listing agent is a part-timer, or a fly-by-nighter, or just sum total scrub. However, you want to describe it.
So far this year, I have seen several properties updated as “SOLD” on the MLS system, having been purchased via bully offer, and the prices were way, way lower than I expected. Part of me wanted to take notes, jot down the listing agent’s name, and keep track of his or her listings for the rest of the year!
When it comes to bully offers, sometimes you never know until you try. And just to flush out point #3 again…
5) If you want to know what the seller is looking for, submit a bully offer.
As I said in the introduction: we submitted a pre-emptive offer last week for $1,901,000 and it was rejected without a modicum of consideration.
While we didn’t “win,” we most certainly gained some insight into the price the seller and the listing agent are looking for.
My clients can’t go to $2,000,000, and won’t. They have other houses to consider.
So rather than waste our time on offer night, we’re going to be elsewhere.
And if my clients did have $2,000,000, then now they know they’ll have to go to that price.
6) You’re not always going to be kept in the loop.
This sucks, but what can you do?
Back in early-2017 when the market was insane, we were seeing MLS listings with this written in the brokerage remarks:
“Seller Reserves The Right To Accept Pre-Emptive Offers Without Notice.”
This was clearly against RECO rules, but agents don’t care about that. Never have!
It was an epidemic by the time March rolled around. We were seeing agents accept bully offers without notifying any of the agents who had shown the property, which, again, is what you’re supposed to do.
Imagine seeing a property on Tuesday night, with offers scheduled for next Monday, and the seller and listing agent accept a bully offer that night, without telling you? First of all, they’re doing a disservice to their seller! By notifying another five, ten, or fifty agents that there’s a bully offer, you’re likely going to get another few buyers coming to the table. But on the fairness-scale, this is downright shitty.
Have we learned, over the last four years?
Check this out:
That’s for an active listing.
Forget the fact that I’m writing this on February 15th, and the offer date was on February 12th (ie. he hasn’t updated the listing), but imagine an agent having the audacity to include this remark in a 2021 listing?
Yes, well, it’s not just this one.
A search of the words “without notice” in the remarks for brokerages field on MLS right now generated 14 results.
“Rules are rules,” or so the saying goes.
But if you’re a buyer in this market, don’t ever assume that if a bully offer comes in on a property you’re considering that you’ll be notified in a fair and timely manner.
“Expect the worst, and you’ll be pleasantly surprised when things go well,” I tell my clients, rather sadly, but I digress…
7) You can’t wait for the weekend.
If the pandemic has done one thing for us, it’s certainly added a level of flexibility that we didn’t previously have! How many people worked from home before the pandemic. And now? Isn’t everybody working from home?
Many of my clients have flexible schedules, and whether their boss knows it or not, they can take an hour during the day on a weekday to head out and see a property.
Ten years ago, I’d head out on a Saturday to view eight houses with a buyer-client.
Today, we might get 1-2 options per week, and if we don’t go see the property immediately, we risk losing out to a bully offer.
As a buyer, you simply have to act as though every property that hits the market will sell before the weekend in order to avoid being disappointed. Then work your schedule accordingly. You just can’t wait for the weekend anymore.
I was planning to see a property in Wychwood with clients this Saturday.
It sold on Friday night…
8) If you’re buying a condo, do it now, not on offer night.
I know that the condo market has new life, and I know that inventory is low. But as a buyer-agent, I still don’t think we should be lining up to “bid” on offer nights.
Sure, some condos are getting ten offers, and others are getting twenty. But that doesn’t mean I’m going to advise my clients to partake.
If a $599,000 condo listing hits the market, with an offer date, and the stage is set for fifteen offers, twelve of which are from idiots who can’t afford the place, then I’m not going to have my buyer-clients sit around and wait a week. We’ll offer our price, the first day of the listing, and attempt to buy the place. If it doesn’t work, then we’re moving on.
Unless we’re considering that rare hard loft, that sought-after condo townhouse, or a condo that’s literally next door to my client’s brother, then there will be another condo tomorrow, then next day, and the day after.
Those are my observations on the market and bully offers through six weeks of 2021, but ask me again in another six weeks, and I might have something different to say.
Hot markets evolve rapidly, and the flavour of the week is exactly that; with potential to change the week after.
As an experiment, I’m going to track a particular market segment this week and see how many properties sell via bully offer. Should make for an interesting discussion next week…
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