What is a Bully Offer?

Multiple offers – when two or more buyers submit competing offers for a property — are common in an active market. To give the seller’s agent ample time to market a property and increase the chance that more than one buyer will make an offer, many sellers and their real estate professionals set a date and time for submitting offers. All interested buyers are asked to submit offers at that time and will typically be informed of the number of other buyers they are competing against.

But sometimes buyers wait for the seller’s offer presentation date, only to find out the property has been sold before the date arrives. How does this happen? It may be that the seller has accepted a pre-emptive offer – often referred to as a “bully” offer. These are offers that expire before the date and time set by the seller for offer presentation. While submitting or accepting a bully offer is not illegal, there are risks that buyers and sellers should be aware of.

Agents working for sellers are required by law to promptly provide all offers to their client, unless they have been instructed otherwise. When a pre-emptive offer is received, the listing agent will advise the seller that an offer has been submitted that expires prior to the offer presentation date and time and ask their client how they wish to proceed.

Sellers in this situation should consider that by accepting an offer in advance of the presentation date they may receive less for their property than they would have received by waiting until the presentation date and reviewing other offers. It is important for sellers to discuss the risks and benefits of dealing with the offer including, whether or not any other buyers have expressed an interest in submitting an offer on the set presentation date, so that the seller can make an informed decision.

Buyers considering submitting a pre-emptive offer should keep in mind that attempts to subvert the seller’s stated offer process may make the seller less likely to consider their offer. As well, buyers who submit pre-emptive offers may feel the need to offer a higher purchase price than they otherwise would in order to convince a seller to entertain their offer before a presentation date, even though no other buyer may even submit an offer by the presentation date set by the seller.

Whether you are buying or selling property, it is a good idea to discuss the offer process with your real estate professional at the outset of your relationship, to ensure that you understand the risks and challenges you may encounter.

Questions?

RECBC’s Professional Standards Advisors are available to answer questions about real estate transactions and the services to expect from a licensed real estate professional. Get in touch with us, at [email protected].