Our agent encouraged us to submit a bully offer, but the selling agent says she won’t present it to her client. Is there something fishy going on? – CONCERNED
DEAR CONCERNED: Under normal circumstances, a selling agent must present offers to their client in a timely manner. When an agent refuses to do so, it’s at the seller’s request. This strategy is known as “holding offers”.
Here in Waterloo Region, the current real estate market has lots of buyers and a relatively small pool of listings. Homes are often priced below market value in an effort to encourage multiple offers (also known as a bidding war).
As part of this strategy, an agent may choose to “hold offers”, which means they’ll schedule an offer presentation for a set date and time. If more than one buyer wants to make an offer on the property, they will be forced to compete, and hopefully each will put their best foot forward. A selling agent must follow strict protocols if they are to hold offers. They must receive specific written direction from the seller (which can vary widely, depending on the circumstance) and offer presentation details must be included in the listing.
If offers are being held on a property, a buyer may try to side-step a potential bidding war by submitting a “bully offer” (also known as a pre-emptive offer). Typically, a bully is a strong offer that expires before the scheduled offer presentation. A bully is meant to force the seller into a snap decision: they can either take what’s in front of them, or cross their fingers and hope for something better when their offer date rolls around.
The right bully offer can set off a chain reaction. When a bully is on the table, everyone who has shown an interest in the property must be informed immediately, and the MLS listing must be updated with the new presentation time. If other buyers have been waiting in the wings for the scheduled offer presentation date, this allows them an opportunity to submit competing offers.
Bully offers have inherent risks for buyers and sellers. A seller doesn’t know if the bully offer is the highest they will receive, and if they fail to accept it, there is no guarantee of getting additional offers or a higher price on presentation day. At the same time, a buyer who submits a bully offer risks paying more than they need to if no other offers materialize.
PRO TIP: Veteran Realtors can navigate bidding wars and bully offers. An agent who understands the true value of a property (above and beyond the list price) can help a client establish what to offer or accept. This expertise develops from a deep understanding of the market; it’s not covered in any real estate course. #AskDavid #Advice