WARNING - this blog post is not for the faint of heart!
Hello and thanks in advance for reading my blog. I write my own blogs and today I want to give an overview about the bully offer. You know what a bully is, and how not to be one! What you may not know is that, in today's real estate market, being a bully may be your best bet to have your offer accepted. WHAT? Yes that's what I said, you may find yourself suddenly ready to be the bully! Let's dive in deep.
Here on Vancouver Island, buyers are finding that, too often, they are being shoved aside during the buying process. The biggest reason for this is the simple fact that inventory is at an all time low, and the desire to live here is at an all time high. The pandemic sure showed us that living on an island has advantages. Of course those of us who are home grown Vancouver Islanders, or have lived here for a while, know this is paradise. And now, it seems that everyone else is learning that too. Go figure!
It's a crazy time to be working in real estate I can tell you that. It's common for a listing to go live on Tuesday, have some showings on Wednesday and sell on Thursday. Heck, last week a home on my street sold after 1 day on the MLS. If you are not ready to buy, you might as well view photos of properties from the comfort of your home and/or do virtual showings. It is very likely that listings you see on the market today will be sold in a very short period of time. Now that is not to say that you shouldn't spend time viewing homes, watching the market and learning about what's happening out there! All I am saying is that it makes sense to have all of your ducks in a row prior to viewing homes in person.
Let's define the term bully offer: typically a bully offer is well above list price, made prior to the offer date that has been stated publicly, and an offer with no conditions. Put simply, it's too good to turn down! Bully offers are commonly seen during a "Seller's Market" where the demand far outstrips the supply. The current popular strategy is for home Sellers to intentionally list the home at a lower value than what they think they can get, in order to attract multiple offers on a specific date and time of their choosing. The theory is that this allows time for prospective Buyers to view the home, get the due diligence done, and make an offer. Doesn't that sound nice? Sure Jacqueline, that sounds great. Here's what has been happening:
Home is listed on Monday, priced at $799,000 (everyone knows the home is going to sell for way over that btw) and Seller states that they will be looking at offers on Friday afternoon at 3pm (maybe). Bully offer arrives on Wednesday evening for $850,000, with a $100,000 deposit and no conditions. Listing Agent puts out a message to all Agents who showed an interest in the home saying they have received an offer. More offers arrive and are presented to the Seller. Price of home climbs and a few hours later, property sells for $950,000 with an unconditional offer Wednesday night. Agents and Buyer's that did not get it pull all their hair out (ok maybe not all of it). Now I say to you what my kids used to say to me: no I am not joking you!
A smart Buyer's Agent will keep the offer open for a short period of time in order to lessen the window of opportunity for other competing offers to fly in. The longer your offer is on the table, the more likely it is that others will arrive! And while that is great for the Seller, it means a Buyer will have a more challenging time getting their offer accepted. It's important to note here that it is up to the the Seller / Homeowner to decide what offer he/she/they will accept. Agents are simply doing their job in a very competitive market. While I truly started out thinking that I would steer clear of this folly, here I am having played the game and won, already having eating my words, telling you all about it!
Here's what I say to my Buyer clients:
What is your Logical Comfortable Budget (LCB)? If you are my client, you must have a clear and certain answer for that question, because I will be reminding you of your LCB when the going get's crazy.
What is the market value of the property under consideration? If you are my client, you know what that is and it is based on facts and a proper CMA. Therefore you have your two eyes and two ears wide open.
Does the property need an inspection? I advise that every property with few exceptions should be inspected. It's up to my client ultimately, but unless you are a home inspector, you don't know what you don't know. Let's be reasonable...Is the property an older home that could contain hazardous materials? Do you intend to renovate? Is it a condo building that is older, has a 4000 page depreciation report and 2 years of minutes that show disgruntled owners and nothing getting solved? Is the property needing a whole bunch of TLC? Then yes, you would be very wise to get an inspection done prior to submitting an offer. This is a major decision and a huge investment, get an inspection is my advice.
Are you pre-approved? Nothing more to say about this question except that in this market you must be pre-approved.
What does your heart tell you? That's great if you are looking for love, but you are shopping for your next home so let's listen to our brains now.
So you've decided that you can live with no inspection (or you have managed to get an inspection done quickly, which is often possible and I can help you with that); or the property has had a pre-sale inspection (insert loud applause here); you have your financing all in order; you are positive that you can get insurance; you are ready to play hard bully ball. Grab your balls, get the gloves and put on your funny tights ok?
There are still ways to use negotiation and strategic information gathering in conjunction with a bully offer to increase the likelihood that your offer is accepted. Without giving it all away (come on, I get to keep some secrets), it will also depend on the Seller's frame of mind, specific wants and needs. Remember, bully offers have a higher likelihood of falling apart! They are certainly not my favourite cup of tea for my Seller clients.
My parting words on this subject? Bully offers are here to stay until there is a significant change in the market. Never lose sight of your LCB, and do your due diligence. At the end of the game, you want to feel good about winning.