We’ve spent a lot of time in this blog writing guides for buyers. The Toronto market is always difficult for buyers, but it is feeling more challenging lately. Here’s our most important advice for buyers right now: Start making bully offers!

What is a Bully Offer?

Bully offers, also called “pre-emptive” offers, are quick. In Toronto, sellers typically list their homes for an artificially low price and then request that all offers come in on a specific date, usually about a week from the day the house hits the market. A bully offer comes in before that requested date. Bully offers are widespread right now because there aren’t enough listings to satisfy demand. Many buyers understandably feel like the trend of bully offers makes their house search unfair and overly complicated. If they can’t see a property the same day that it comes out, then they may not get to see that property at all.

Why Are Bully Offers Good for Buyers?

1. Eliminating competition: If you offer on a property soon after it hits the market, you effectively reduce the number of competing buyers who can see the home. You will likely still compete for the property, but it could be against five buyers rather than twenty, for example.

2. Control the Timeline: If you are the first bully offer, you’re in control of the timeline. If the seller agrees to review your offer, they adapt to the time limits you have set on your offer. On the other hand, if a bully offer comes in on a house that you want to offer on, then all of a sudden, you are scrambling to compete with this offer, and you may not be able to pull an offer together. You may be working or sleeping (yes, I have been notified of bully offers at 10 pm, and I had to wake up some grumpy clients).

3. Price Control: Part of why buyers are always hesitant to do bully offers is that they believe that bully offers need to be astronomically higher than the house value to be accepted. This is usually not true. Yes, your offer needs to be competitive in terms of price, and you will need to slightly overpay to beat the competition. Still, there is no reason to believe that bully offers will always financially bury you in the home. This isn’t a reason why you should make a bully offer. More of a reason why you shouldn’t NOT make one… if you follow the double negative.

But be careful, in presenting a bully offer, you have to make it a sweet deal for the seller. It has to be based on a price they will like and with terms that favour a quick decision and finalization. That generally means forgoing the home inspection – which means your offer is a “warts and all” proposition.

Why Bully Offers are Good for Sellers?

A seller who accepts a bully offer eliminates a lot of the standard steps in the selling process. Chief among these is the negotiation of the selling price based on a series of offers and negotiations (it’s a tactic that’s usually reserved for houses that are likely to inspire competing offers.) Assuming the seller has priced the home according to an accurate assessment of its likely selling price, any offer above that can be satisfying – especially when they might otherwise be feeling nervous about potential bidding.

Assuming the house has been priced and marketed well, the bully offer eliminates the market’s ability to determine the highest price possible. Competitive bids drive offers up. How high depends on the resources and resoluteness of the bidders. The downside of not allowing for bids, within a time frame that allows for full market awareness of the property, is the potential to leave money on the table.

A Final Note on Bully Offers

Overall it’s pretty pointless to argue that bully offers should or should not be considered. The reality is they are here, and they happen. The trick is to have a strategy in place for dealing with them, and to make sure that, at the end of the day, you’re satisfied with the value you achieve.

One caveat, sellers may decide not to look at your offer. I have no hard data, but I always tell my clients that “9 times out of 10” a seller will say “thank you, no thank you” and ask you to come back on offer night. That is changing, and that sellers are more amenable to bully offers, but generally, sellers like to give their homes as much market exposure as possible. Still, it is always best practice to try a bully offer. Happy house hunting!

Looking for more advice on buying? Give us a call at 416-788-1823 or email us here to get in touch.