What is a bully offer? When Sellers list a good property in a hot market they are often hoping that their property will generate multiple offers (bidding war). Bidding wars have a track record of generating the highest prices for sellers. When implementing a marketing strategy that is designed to attract multiple offers then a date, typically five to seven days down the road, is set for interested buyers to submit their offers to the seller for consideration. Even though a seller may have established this specific date for reviewing offers a buyer is legally entitled to ignore that request and submit an offer earlier than the ‘offer date’ hoping that the seller will immediately accept or negotiate with their offer. Should that happen their offer would be called a bully offer.
Sellers are not legally required to consider a bully offer, however if a bully offer is duly registered with the listing brokerage then the seller must be advised of the existence of that offer. Sellers must then decide whether or not to actually entertain that offer.
Part of the seller’s decision making process whether or not to consider a registered bully offer often revolves around the price of the offer. While initially not formally presenting the offer to the seller, the buyer’s Realtor (with the buyer’s permission) might verbally disclose to the listing Realtor the price of the offer in an effort to get a formal presentation of the offer.
Sellers need to go through several considerations before deciding whether or not to look at the offer. Such as: How many people are viewing the property?; How many other hot prospects exist in the wings?; Might they lose this buyer if they refuse to consider that offer now?; How much more might they possibly hope to get on offer presentation night above what is being offered now in the Bully Offer? There are a host of other considerations that all give rise to deciding whether or not the seller will entertain the bully offer.
If the seller decides to go ahead the listing Realtor has a set procedure to follow regarding advising other potential buyers and those who have expressed an interest in the property about the advancement of the offer presentation time and then the seller is at liberty to view, accept or reject the bully offer.
Should a seller accept a bully offer?
Sellers have to face the ‘bird in the hand’ conflict. It puts the buyer more in the driver’s seat. i.e. here is my terrific offer, take it or leave it.
Sellers need to rely upon the guidance of their Realtor before entertaining and accepting a bully offer.
The basic question to answer is: What is the likelihood that on the time scheduled for multiple offers will there be a better offer than the bully offer?
Frankly, it is impossible to say but here are some indications for sellers to consider:
How many showings have there been? How many showing appointments are scheduled? How many Realtors have expressed that their clients are interested in the property? How many clients have expressed interest themselves? How attractive is the offering price? What feedback to the asking price has the Realtor received from other interested Realtors and buyers? What is happening in the marketplace? How long is the irrevocable on the offer? What really is the risk I am taking by refusing to accept a bully offer now?
Don’t feel negative towards or pressured by the Realtor or client registering a bully offer just because they have chosen to use this tactic. Concentrate on getting the very best price for your home and accepting a bully offer might well do that. However, we have found in many cases that the prices generated by a bully offer are somewhat lower than the selling price a multiple offer scenario would have produced. But there are no guarantees.