What Are Bully Offers and How Do They Work?

A bully offer is an offer made to purchase a property before the scheduled offer date. This type of offer is often made in order to try to get a better deal on a property than what can be expected on the offer day. It is called a bully offer because the buyer sending the bully offer has decided not to wait and work on the same terms as other interested buyers. This tactic can either be used to get ahead of competing buyers or put pressure on a seller to accept the bully offer.

Bully offers do two things, they crowd out buyers if the offer is on the high end with little or no conditions, or it makes the seller reconsider the value of their property on the market. Real estate is a complex industry where selling a house is dependent on a variety of factors. The state of the market, the upkeep of the house listed, the location, and so on. Who the bully offer 'targets' depends on which side of the asking price the offer comes in, but in either case, it's up to the sellers to find out whether an offer makes sense in their given situation.

Are bully offers legal?

Yes. While the seller's real estate agent may schedule a meeting to discuss offers, an offer presentation date, a pre-emptive offer or bully offer can be sent to the seller's agent before the period where they are accepting offers. These offers tend to have a short offer period as well.

The listing agent is required to inform a seller of all offers as they come in but there is no need to respond to any of them.

What happens to the other buyers?

The seller is within their rights to refuse or accept a bully offer. If a bully offer was made, then the listing agent usually informs other potential buyers. For the benefit of their clients, listing agents seek out the highest possible price or the best price with favourable conditions. Informing other buyers can lead to an early bidding war to draw out the best offer. It's not all bad for the sellers.

Are bully offers a good thing?

Not all pre-emptive offers are the same and because of that, who they are beneficial to is a complicated question. Here are some of the factors that affect who the bully offer benefits:

What kind of market is the property in?

If a home is in a hot market then a bully offer means that bidding wars are likely. A buyer's agent may send a pre-emptive offer to avoid offer night where competing offers rise and rise. On the other hand, if a seller needs to close the sale quickly for financing their own dream home, then a bully offer can be what they need.

If the house is in a buyer's market then a lower price may make a dent in the seller's plans. At the same time, waiting may not lead to more buyers or a better bid at all. This is when pre-emptive offers start to feel like bully offers - they are the same thing but the two names have a markedly different effect.

Is the bully offer offering a lower bid or dropping requirements for the sale?

Accepting a bully offer doesn't necessarily mean accepting less money in the long run, sometimes it means that the buyer takes more risks by waiving protections afforded to them. This can help a house with some issues get off the market more easily. Bully offers that remove conditions can be of great interest to people that do not expect other offers.

When should a buyer make a bully offer?

A buyer should consider a bully offer if they have done their research, understand the current market and can move quickly. Generally, it's not advisable to make a bully offer when the property is in the early stages of being listed because there are too many unknown factors that prevent an accurate assessment.

The best time to submit a pre-emptive offer is far enough in advance to beat the offer date without giving the seller too much time to think - or have other offers come in. This is the time before the listing agreement expires and there is no risk of losing it by making an offer.

How do you make a bully offer?

A bully offer can be made verbally or in writing, but most prefer text records to keep all parties in check should a problem arise. The key component of a bully offer is that it is sent to the sellers before the scheduled offer date with an offer period that ends before that scheduled date.

If a buyer expects multiple offers on the property then they should work closely with their agent to decide the best course of action. All of the agents involved in the situation want what's best for their clients so confidence will often make the difference.

This also applies when there is a sole bully offer, a buyer needs to show that they can pay for the house and that the offer is the best thing for the seller should the seller accept the offer. This is where working with an agent that has experience with bully offers is important because they can provide valuable insight into the sale.

Is it worth forgoing things like a home inspection?

Bully offers often come 'clean' meaning that there are no conditions for the sale of the house. However, this means that the buyer is willing to take on the house left unchanged or as-is. When preparing to pay property taxes for years on a house, this is not something to take lightly. Many sellers are honest and upfront about the issues of their home but if a bully offer comes in higher than the asking price and with no conditions, then the only question is sometimes what brand of champagne to buy.

Still, for a buyer waiving the rights to a home inspection or other conditions means that they are left relatively defenceless should something negative about the property arise.

Unfortunately, sometimes there is no real choice and a bully offer could be the only thing that helps secure a house in the constantly fluctuating real estate market. Bully offers demand strong financial health for the buyers because of the inherent risks involved.

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