“Just when you think you’ve got this market ALL figured out…”
Good buyer agents will let you in on a little secret: they’re really, really big proponents of bully offers.
When I meet a prospective buyer for the very first time, I’ll explain what current market conditions are like, how the offer process works, and then how you can try to shift the balance of power to your side by utilizing bully offers.
I don’t want to get into the what, when, why, and how of bully offers right not, but let’s just say there’s an advantage to submitting an offer and competing against zero bidders, or maybe three or four, if they materialize after your bully is submitted, rather than twenty on offer night. There’s also an advantage to knowing what price the seller will not take.
Let’s say I’ve got a client who is working with a maximum price of $1,100,000 as we speak. We will routinely look at properties listed at $799,900, $899,900, and $999,900, running our comparable sales, anticipating what the property should, could, or would sell for, and then lining up on offer night to try our hand.
Isn’t it just a lot easier to offer $1,100,000 on that $899,900 listing the very day that property hits the market?
If the seller says, “Thanks, but no thanks,” then you move on. Try something different. Look at other properties.
Maybe you come back on offer night and make that bid again, but chances are, you won’t be successful. I’ve had it happen before on both the buy-side and sell-side; when the bully comes back at the same price, and wins. But it’s exceptionally rare.
Suffice it to say, the bully offer is a fantastic tool in this chaotic, red-hot market.
And unfortunately, more and more agents are saying “no” to bully offers.
Don’t get me wrong – many listing agents still have no clue how bull offers work.
Look at what this moron wrote today:
No kidding, eh?
He doesn’t say when offers are being reviewed, but notes that the owner has the right to accept a pre-emptive offer.
He’s also related to the owner. Yet another reason why you shouldn’t list with your deadbeat cousin who moonlights as an agent, but I digress…
So assuming that the agent is competent, what I mean is that we’re seeing more and more agents decide not to allow bully offers.
As an agent, you either need to specify “Seller Will Consider Pre-Emptive Offers” or “Seller Will Not Consider Pre-Emptive Offers.”
Many agents still don’t do this, but it’s a lot better than it used to be.
So again, assuming the agent is competent, and assuming that the specification is being made, we’re seeing a lot more of this:
That’s from a listing that came out on Thursday, and there are a lot more where that came from!
If I had to guess, I would estimate that one-third of all listings with “offer dates” (which is most) are now saying that the seller will not consider pre-emptive offers. I feel that this is more common for freehold than for condos, but either way, this is way, way up from the same period last year. In fact, it used to be rare to see a listing where they were not open to bully offers.
So now that we know what this is, the bigger question is why?
Why would a seller decide not to work with bully offers?
I suppose first, you need to know who is driving the ship: the seller or the agent. Because each would have different reasons for their decision, and some of these reasons would be in the best interest of the seller, and some might not be. More on this in a moment.
Let’s assume it’s the seller who decides not to review bully offers.
There are two main reasons why I believe this could be the case:
1) The seller thinks it’s unfair and/or B.S.
Imagine trying to explain to a seller, who hasn’t been in the market for several years, how we review offers here in Toronto.
How about something like this:
Agent: “So we set a specific date and time to review offers, and we only review offers on that date.”
Seller: “Really? So people don’t just come in and offer what they want, when they want?”
Agent: “Nope. We have a day and a time for that. And this is the best way to get big money!”
Seller: “Okay, great, so then that’s settled. We’ll set a date and a time.”
Agent: “Perfect. Now do you want to consider pre-emptive offers?”
Seller: “What’s that?”
Agent: “It’s when you allow people to come in and offer what they want, when they want.”
Seller: “But I thought we just said we weren’t doing that?”
Agent: “No, we’re not. We have an offer date. But we’re allowing somebody to not abide by that date!”
Seller: “You mean we have to allow somebody to break the rule, or NOT allow them to break the rule?”
This conversation is insane.
And while a seller might have the process explained to them, and decide that this does make sense, and could be worth there while, that same seller might also just say “This is B.S.”
As a member of the public, you’d hope that seller would also say, “This is unfair.”
In my experience, there’s a not of NIMBY’ism in real estate. People are always clamouring for this or that, but when it’s their turn to buy or sell, they no longer want this or that. They want what’s best for them. Isn’t that only natural? “Do as I say, not as I do,” and all that? Perhaps those who clamour are “Better coaches than players,” as the saying goes.
I’ve had a couple of sellers in the past tell me, “I don’t like the way this is done,” and decide not to entertain pre-emptive offers. Sometimes that’s because it’s B.S., and sometimes it blends with the second reason on our list…
2) The seller doesn’t want the hassle.
Let’s go back to that conversation from above, for a moment.
Agent: “If we’re going to be open to bully offers, it means you’ll need to be available around the clock.”
Seller: “Define ‘around the clock,’ because I’m already living out of the house for ten days while you do showings non-stop.”
Agent: “I mean that somebody might give us an offer at 9:30pm on a Friday night with an 11:59pm deadline.”
Seller: “Why would they do that? That’s so unreasonable!”
Agent: “Because that’s how bully offers work.”
Seller: “But you’re saying that we have to basically give them permission to break the rules; rules that we have set? And we do this by saying they can submit an offer ahead of our carved-in-stone offer date?”
Seller: “So I have to agree to allow buyers to control my every movement for a week, keep me up at night, ensure I can’t be inebriated, and can’t turn my phone off in a movie theatre?”
Agent: “Essentially, yes.”
Seller: “Okay, well then I choose NOT to subject myself to this. I mean, who the hell would?”
You can see this conversation playing out, couldn’t you?
I suppose it depends on the demographic of the seller, their level of experience in the market, their lifestyle, and to some extent, their committment to the process. But can you see how some sellers just wouldn’t want the hassle?
Of course, this might also depend on the advice they’re getting from the listing agent.
I often go into listing presentations and the seller will ask, “What do you think about open houses?” I’ll tell the seller that they’re essential.
The sellers will often respond, “But we interviewed another agent yesterday, and he said that open houses are a waste of time.”
And I’ll tell the seller, “Well, that agent told you this because he’s a lazy piece of crap, who doesn’t want to sit in your living room for two hours on Saturday and on Sunday.”
By the same token, many listing agents will tell a seller that they should, or shouldn’t work with bully offers, for reasons that benefit themselves, and not necessarily the seller.
Let’s look at the three reasons why a listing agent advises the seller not to look at bully offers:
1) The agent doesn’t want the hassle.
Unlike the #2 point above, the agent shouldn’t get to make this decision.
If the seller doesn’t want the hassle, then fine.
But the agent? Oh please.
Lazy agents are born daily, as I remark on this blog all the time. Bad agents, unqualified agents, unscrupulous agents.
Some agents will decide they want bully offers because they don’t want to carry the listing for a week, and do an open house, and answer the phone, and essentially do their goddam job!
I secured a fantastic deal last summer, right before a long weekend, because I told the listing agent she was better off taking my bully offer, and going up to her cottage instead of staying back and doing the open house. I played her. I got the property for my buyers, she put up the SOLD sign and headed up north, and her seller probably got less for the property.
Then sometimes, and agent will decide he or she does not want bully offers, because it means another fifty phone calls, and probably receiving 3-5 bully offers, having to present them to the client, make more calls, send more emails, spend more time, etc. etc.
Yes, I’m painting a really shitty picture of some agents, but once again, it’s the fault of the sellers who hire them. These people wouldn’t be in business if they had no business on which to work.
2) The agent is paralyzed with fear.
What is a 3-bed, 2-bath, semi-detached, 16 x 100 foot lot, finished basement, no parking, B+ interior condition worth, at Danforth & Coxwell?
Do you know?
Because in this market, most people have no clue!
If you’re a listing agent, and your job is to get the most money for the property, on behalf of your seller client, then leaving yourself open to bully offers means you may not accomplish that goal. The fact is: you’ll never know.
If you advise your seller to allow bully offers, and you receive an offer that you advise your seller to accept, then you’ll never know what you could have got on offer night.
But some agents are just paralyzed with fear.
“We got a bully for $1,101,000? Should we take it?”
Some agents just don’t want to be faced with that decision, and often they don’t want their sellers to either.
The safe play is simply saying “No Pre-Emptive Offers,” and going straight to offer night.
You can’t make a wrong decision if you’re never presented with a choice in the first place.
3) The agent fears the listing could get messed up.
After crapping on agents with the first two points, here’s a valid one for agents that know what they’re doing.
I had a listing once where a bully offer was registered, but said bully would never have been accepted. It was awful. Conditional, barely over list – it was an out-of-town agent without a clue what he was doing.
A new staff member at my front desk, upon receiving the bully offer, took it upon herself to page all the agents who had shown my listing, and say, “Pre-Emptive Offer Registered On 123 Smith Street.”
I didn’t know this, of course. Not until one of the agents called me and said, “How much time to I have??”
You see, if a bully offer is registered, or emailed to you, you don’t have to tell all the other agents unless you are going to “work with it.”
Just because somebody sends over an offer for $1 doesn’t mean you need to let every agent in the city know.
In this case, the offer was junk. I had no intention of calling everybody and telling them that we were going to review a pre-emptive, since we were NOT going to review, or work with, this pre-emptive.
But once the 70-something agents had been called, the frenzy had begun. Phone calls, emails, and questions!
I had to tell every agent that the offer date remained in place, and because I was so worried that I might lose a potential buyer, I called every one of them that night, emailed them, and then followed up with another email on Monday.
Once you set the wheels in motion, there’s no turning back.
When you decide to forego your “offer night” and work with a bully offer, whether it’s at 2:00pm on a Tuesday, or 10:00pm on a Saturday night, you’ve signalled to the rest of the buyer pool for that property that you’re moving forward without them.
So if you’re not moving forward without them, then you’d better let them know!
Some agents don’t want to leave the door open to pre-emptive offers for exactly this reason: they don’t want to rock the boat, in an ocean that’s already filled with choppy waters.
4) You have a plan, stick with it.
This is the simplest answer of them all.
Whether you think that some buyers and buyer agents won’t put as much effort into properties that are open to pre-emptive offers, or whether you think you’ll do better on offer night anyways, many agents just have a plan, and stick with it.
Some agents think this is the classy thing to do.
Some think you really do attract more buyers when you run a “fair” game.
Some are never open to bully offers. It’s just their business model.
There are all kinds of valid reasons why agents don’t elect to consider pre-emptive offers, and in the end, a seller should want an agent who has a plan, and sticks to it. A seller should want an agent who never wavers, and is passionate upon a “yes” or a “no” toward bullies, and backs that decision up with solid reasoning.
If you’re a buyer out there, then use the bully offer as a tool.
If you’re a seller out there, make sure you ask your agent when and why he or she would advise you to consider pre-emptives, and if one was received, what your evaluation criteria would be for that offer.
And remember – the market changes all the time. The trend now is toward more and more properties saying “no” to bully offers, but it doesn’t mean this will last…