Whether you’re a keen follower of the real estate market or not, chances are you’ll most likely have heard all about how our local Ontario and GTA markets have been bustling over the past year or so.

Low interest rates coupled with multiple lockdowns forcing people to spend more time at home due to the COVID-19 pandemic have spurred our local markets on to new heights, with Canadians more eager than ever to invest in where they live.

With such a high demand for homes, the supply simply hasn’t been able to keep up, resulting in what’s known as a seller’s market. With such strong competition between buyers, many have resorted to using more bold negotiating tactics to help increase their chances of landing a home.

One common negotiating tactic we’ve seen from buyers over the past year or so is the pre-emptive offer. To learn more about what they are and when they come in handy, use this post as your introductory (or reminder) to the power of the pre-emptive offer.

What Is A Pre-Emptive Offer?

A pre-emptive offer, or ‘bully offer,’ as it’s also commonly referred to, is an offer to purchase a home submitted by a buying party to the selling party.

A pre-emptive offer can only be submitted when the selling party has set what’s known as an Offer Date, meaning they will only receive and review offers for their listing at a certain time and date. As the name suggests, a pre-emptive offer is when a buyer submits an official offer for a home before the set Offer Date.

This is where the term ‘bully offer’ comes from, as this eager buyer is essentially skipping the line to get their offer in front of the eyes of the sellers first.

These days, buying a home isn’t as simple as just paying the ticket price. Learn more about bidding tactics and rules in the related posts here:

• Multiple Offer Scenarios: Tips for Home Buyers
• Should Open Bidding Come To Ontario Real Estate Markets?

Why Do They Happen?

While submitting a pre-emptive offer is completely legal, they do directly challenge the requests of the selling party. However, when they are submitted, they’re generally submitted by buyers in order to make a clear statement of intent to the selling party.

If a buyer is willing to break the requests of the sellers so that they can get their offer in front of the eyes of the seller before any other buyers have had a chance to, it usually means that the pre-emptive offer will be of predictably high interest to the sellers.

How are They Different?

Most often, a pre-emptive offer includes a pricepoint that far exceeds the sellers’ original asking price and expectations and comes with a set of terms and conditions that are favourable to the selling party.

When buyers submit a pre-emptive offer to a seller, they obviously run the risk of aggravating or annoying sellers who have made it clear they wish to wait to receive offers to purchase until a set offer date. Therefore, in choosing to submit a pre-emptive offer, it must be convincing enough that the sellers don’t experience that negative reaction. In fact, Seller’s often sign forms instructing their Realtor® not to present any offers to them until the set date. So, if a Bully Offer arrives the Sellers may not even see the offer depending on how the Realtor® handles it. For the Seller to review the offer, the Seller must agree and the written instructions for the Offer Date must be changed and all interested parties must be notified of the Offer Date change.

That being said, sometimes Offer Dates are set by selling parties with the hope that a strong pre-emptive offer does come in, in fact. Understanding when that’s the case can prove to be quite tricky, however.

Are you a first-time buyer? Don’t let inexperience get in the way of buying your dream home — read these useful links for first-time buyers:

• 5 First-Time Home Buyer Mistakes To Avoid
• Our Top 8 First-Time Buyer FAQs

When Should You Submit A Pre-Emptive Offer?

An Offer Date is sometimes set by sellers when they would, in actuality, like to entertain the idea of receiving a “blow your socks off” bid. In that case, your Realtor® needs to have had some kind of indication from the selling party’s Realtor® that this is the case.

If that’s not the case and your Realtor® isn’t exactly sure the sellers are hoping to receive pre-emptive offers, you must navigate your approach to submitting one carefully. Here are two rules we suggest you follow:

1. Only submit a pre-emptive offer if it’s significantly higher than the initial asking price of the sellers and higher than the expected market value sale price — an amount that will truly raise their eyebrows and consider the bid before reviewing the others.

2. Additionally, the bid should contain terms and conditions that are very favourable to the sellers, which more often than not means little-to-no terms or conditions and an agreement you’ll buy the home “as-is,” and without the requirement of a secondary home inspection.

No matter what you’re trying to accomplish in the real estate market, having proven, qualified real estate guidance by your side makes everything easier. Here’s our best advice on How To Hire a Real Estate Agent As a Buyer.

When Should You Avoid A Pre-Emptive Offer?

The first rule here should be to trust the experience of your real estate advisor. If they advise that you don’t go down the route of submitting a pre-emptive offer, it’s best to trust them — especially if they have comprehensive experience in negotiations and/or dealing with the selling party’s real estate advisors.

In addition, it’s also not a great idea to submit a pre-emptive offer if it doesn’t significantly exceed the sellers’ initial asking price. The last thing you want is for your sellers to feel “low-balled” before they’re even prepared to start reviewing offers.

Most likely than not, if your pre-emptive offer includes terms and conditions that aren’t minimal at most, then it simply won’t be considered by the sellers. With that in mind, if you don’t already have a great knowledge of the home you want to buy, it can be risky submitting an offer for it as-is.

At the Barnett Real Estate Team, we help clients of all experience levels and price points buy the homes of their dreams. Learn more about what we do and how we can help you here:

• How We Help Buyers
• Start Buying Today

In recent years, there’s been a very public conversation about the buying and selling of real estate. The subject is open bidding, an offer process that proponents say leads to greater transparency and fairness. Some even believe it’s good for the market (since it can, in theory, prevent excessive price escalation). Having said that, there are also skeptics—on both the buyer’s and seller’s side. Do you know where you stand on this important real estate issue?

When it comes to open bidding in home transactions, here’s what you should know…

What is open bidding

Let’s start by delving into how things work now. As it stands, any buyer who makes an offer on a home is notified when a competing bid is made. However, they aren’t made privy to the details. From the dollar amount to the closing date, elements of the new offer are kept under wraps. This puts buyers who wish to stay in the running in an uncertain position. When they think about how to amend their bid, they’re essentially in the dark.

In October of 2018, the Ontario Real Estate Association (OREA) made some recommendations to the province. The organization suggested that all elements of offers made on a home be disclosed, so long as everyone involved in the transaction agrees. If this process became commonplace, here’s what the implications might be.

What it would mean for buyers

For buyers, an open-bidding process can lead to more informed decisions. With all the details on the table, purchasers can choose to up their bids or bow out—and do so based on more than speculation. Since they’ll know which number they have to beat, they can also avoid vastly overpaying when they’re eager to win their dream home.

A more transparent process could also be more pleasant for buyers. As anyone who’s been in a bidding war will tell you, it can be stressful at times. When you’re not approaching the situation blind, you’ll have fewer headaches to contend with (and a less time-consuming back and forth).

While the benefits of open bidding are clear to most buyers, there are those who have raised privacy concerns. Fortunately, since all parties would have to agree, these potential issues could be avoided.

What it would mean for sellers

On the other side of the transaction, some sellers feel that agreeing to an open-bidding process means giving up leverage. They reason that when buyers don’t know the contents of other offers, they’re more likely to put forth their highest bids. That may be true in some cases, but it’s not always.

An auction-style offer process, whereby buyers bid against one another openly, has the potential to lead to intense competition. That could work out in a seller’s favour. It could also attract buyers who tend to shy away from traditional bidding wars, which often leave them wondering if they ever stood a chance. The result? More offers on the table for sellers—a clear advantage.

The bottom line

The conversation surrounding open bidding has yet to be resolved. It’s true that it may not be the ideal solution for every buyer and seller, but it’s another potential option—one that’s attractive to many. Chances are that this issue will pick up steam in the years ahead, so make sure you stay in the know!

Are ready to start the search for your first home? Reach out today to get started!