What's a bully offer? Here's what you need to know if you're buying a home
Some say bully offers are unfair, but the tactic can land you the house you really want
Bully offers: Some argue they give home buyers an unfair advantage — but others say, given the state of today's real estate market, it could be the best strategy to land the house you want.
Jazz Chappus, a realtor with Royal Lepage Binder Real Estate in Windsor, explains that a so-called bully offer, or pre-emptive offer, is made prior to an offer presentation date set up by the sellers.
"It's called a bully offer because it quite literally is a bully offer," she said. "It's a buyer and their agent who are somewhat bullying their way in to get their offer reviewed before the presentation date to beat out the competition."
Most of these bully offers are pre-qualified, cash offers, above the list price and without conditions, Chappus said, adding that about 75 per cent of her clients are ready and willing to submit these kinds of offers.
"Once they've missed out on a couple of offers or once they've heard the horror stories of people who have found their dream home and lost out because of a bidding war or a pre-emptive offer, they tend to get their ducks in a row and get everything ready to go for a pre-emptive offer," she said.
'Getting ahead of the game'
In October, the Windsor-Essex real estate market was deemed the hottest in the country, according to a survey from Royal LePage, with strong demand and record low supply continuing to drive up housing prices.
"This market's very difficult for buyers — especially for first-time home buyers," Chappus said.
When 24-year-old Scott Neilson, one of Chappus' clients, set out to buy a new property earlier this year, he quickly recognized that a bully offer might be his best approach.
"If you are the one trying to put a pre-emptive offer in, you're getting ahead of the game," he said. "Anybody who didn't get in there yet, I'd beat them to it."
Neilson said it's important to be aggressive because the market is so fast-paced and you have to fight to not get "chewed up."
Even with a bully offer, buyers are often still going up against multiple competing pre-emptive offers.
Neilson unsuccessfully made bully offers on two houses, and both times was beat out by higher offers. Eventually, he was able to buy a home by making an offer the traditional way; the sellers had already declined other pre-emptive offers.
How do bully offers work?
If a buyer finds a house they truly like, Chappus will arrange a viewing as soon as possible for her clients.
She says she also usually sets up a pre-inspection, done before the offer presentation date. If that goes well, she'll work with her clients to make a pre-emptive offer.
But Chappus said a pre-inspection isn't always possible. As a result, bully offers can sometimes force buyers into feeling like they need to make an offer without a home inspection, which is risky.
The process carries risks for sellers too, she explained.
"There are pros and cons to accepting a bully offer," Chappus said. "One of the pros would be, you're typically receiving an offer that's going to be no conditions and higher than your listed price. One of the cons is if you accept that offer, you'll never really know if you would have gotten a higher offer if you would have waited."
Waiting is exactly what Neilson chose to do when it came time to sell his current house.
Though, as a buyer he liked the advantages of a bully offer, he decided not to entertain them as a seller. He was patient instead, to see what the open market could do for him.
Are bully offers regulated?
Last year, the Ontario Real Estate Association had called on the province to ban bully offers, saying that they give some home buyers an unfair advantage. But Lorraine Clark, the president of the Windsor-Essex County Realtors' Association, says so far, the government hasn't acted.
According to a spokesperson for the Ministry of Government and Consumer Services, the Real Estate and Business Brokers Act (REBBA) does set out rules around bidding wars, but it does not regulate the actions of buyers or sellers involved in real estate trades, "nor does it place any requirements on sellers related to accepting offers, including bully offers."
"Our government took action to introduce legislative amendments to REBBA to ensure that rules for real estate brokerages and professionals reflect contemporary business practices through the Trust in Real Estate Services Act (TRESA), 2020," said the ministry spokesperson in an e-mailed statement,.
Clark maintains that bully offers are unfair.
"It's not fair to the rest of the people that have gone through the house and they're waiting for the offer date," she said.
Chappus explained that the province does require sellers to declare in writing whether or not they'll be looking at pre-emptive offers, so that everyone is on the same page. It's called a "sellers' direction."
"This was put in place to try to slow down that process [of bully offers] so that the rug is not being pulled out from beneath buyers feet when a bully offer is brought to the table," she said.
However, she added that a seller can still change their mind after signing the direction — they just need to sign a new form.
Clark says bully offers have become more popular but she couldn't quantify by how much compared to previous years.
"I think a lot of people are frustrated, a lot of the buyers are frustrated, and so you're seeing more and more all the time," she said.
Tips for buyers and sellers?
Chappus' number one tip for a buyer considering making a bully offer is to be ready.
"Have your pre-approval set with your mortgage specialist and if you're able to, get a pre-inspection done on the property, because as soon as somebody brings a bully offer to the table, you don't know if they're going to be presenting that night or the next morning, but it's going to be quick," she said.
As for sellers, she suggests doing your research and having a discussion with your listing agent to make sure you understand the pros and cons involved.
"Know that there are a lot of buyers that are going to come forward and try to bring a pre-emptive or bully offer right off the bat," she said.
"It might be the best offer that you'll get — but you might get more if you wait until your presentation date."
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