Kim Mullan Blog
The Bully Offer
When there are more Buyers house-hunting than properties for sale we have a Seller's Market.
This means the sellers have a stronger negotiating position and often more than one buyer showing interest or offering on their home.
A seller may choose to price their property for maximum exposure and to reach the largest audience. This may be under what comparable sales would suggest. In order to protect the seller from leaving any money on the table the listing agent may recommend holding off offers for a few days to ensure that there is enough exposure to the market (showings, presence of advertising) to get the best offer possible.
There are 2 ways that this occurs:
1- The Listing Agent will state that the Seller will review offers at a specific time or date.
2- The Listing Agent will state that the Seller will review offers at a specific time or date AND that the Sellers have signed a FORM 244.
These are very different circumstances.
Form 244 is a stated direction to the LISTING AGENT that they are not to present or inform the Seller of any offers prior to that time/date instructed. These are legal, contractual instructions and the Listing Agent would be in violation of the contract if they informed the Seller of any early offers. In this scenario there is no possibility of a Bully Offer because it would not be permissable to convey it to the Sellers without violating the Sellers instruction. The sellers have scheduled a time and date as the earliest practicable opportunity for any offer conveyance. The legal language specifies conveyance as "presentation, communication, transmission, entertainment or NOTIFICATION of. No Bully Offer. Although the Seller may miss an early offer they want to ensure maximum traffic and Buyer opportunity.
Without a Form 244 it's really just a nice suggestion. The agent must inform and convey all offers as soon as they are received. This is where the Bully Offer may be an option. The Bully Offer attempts to provide an offer SO attractive to the Seller that the Seller decides to work with it immediately instead of waiting for the scheduled offer review date. Making it attractive generally involves 5 things:
1- no conditions - firm offer. The seller isn't likely to slow down their activity for something that could fall through on conditions as it's very hard to recreate the early momentum and urgency of a large audience on a fresh listing.
2- Seller's preferred closing.
3- no additional Chattel or inclusions.
4- hearty deposit. The Seller will want insurance that the Buyer is strongly invested so there is less risk of a breach of contract on closing day. If there are no conditions/confirmation of financing they will want to see the Buyer has some liquid assets.
5- most importantly A BIG DOLLAR to incentivize the Seller to stop increasing the size of their Buyer audience.
It's important to note that presenting the Bully Offer doesn't mean that the seller will choose to engage it.
The listing agent also has a duty to inform every agent or party that has expressed interest in the property that an offer has come in and the Sellers have changed their plans and will review it. This allows anyone who has been through the property to act quickly if they wish to present an early as well. So the Bully may still find themselves competing for the property.
It's also critical to understand that if Sellers do price conservatively your offer should be based on comps and activity/consumer confidence (represented in # of or potential # of offers), as well as, your own level of interest as opposed to using the list price as a guide to value.