Kim Mullan Blog
November 30th 2021
Offer strategies? Who decides when/how offers will be received?
There are 3 basis strategies when it comes to offer consideration.
1) The price is set, the listing is activated and offers are considered as they are received. This is the best model for a home that is being priced on the high side, one that has a smaller, more intermittent audience or one with no direct comparable sales to provide a likely sale price.
2) A legal directive is signed by the sellers stating they are not to be notified or informed of ANY offers until a specific date and time…even an incredible bully offer. Most people refer to this as “holding offers” and it involves signing a document called a form 244 which creates a date that will then be considered the “earliest practicable opportunity” to notify sellers that an offer an offer has been received. This is commonly utilized in conjunction with a price point considered under market value and often generates a lot of buyer traffic and multiple offers. This is only effective if there is a waiting audience for the type of property being offered. This model sends a message to the buyer agents that
a) they have time to arrange a showing
b) the sellers believe the price to be under market value and expect over list price.
This does not work with
a) a unique property that might have a smaller audience
b) a very expensive property that may have a smaller and more intermittent audience
c) a property the sellers want to put a high price on
If the offer date comes and goes with no offers it may indicate to a buyer that the property isn’t underpriced at all and may in fact be overpriced or undesirable.
Consumer confidence can plummet.
3) A date is set for consideration but the seller reserves the right to consider a preemptive offer. In this case the sellers must be notified of all offers that come in prior to the date for consideration and if they like an offer they must give notice to all agents/ buyers that have expressed interest to let them know the seller has decided to stop showings and call in any additional offers there may be because they like what’s in hand. This notice may only be a few hours. This model works well in a transitional market where the seller doesn’t want to miss the opportunity for a bully/preemptive offer.
What is a preemptive/bully offer?
It’s an offer that the seller believes will provide similar results to waiting for an offer date that they believe will yield multiple offers. Basically, it’s a bidding war value before there is any competition. If no Form 244 has been signed by the sellers all offers MUST be presented as they are received. All parties that have expressed interest must be informed that the offer consideration time has begun and they are given a window of time to submit offers as well.
Who decides what offer strategy to use?
The sellers with guidance from their representative. The risks and benefits are explained to the seller and ultimately they decide how they want offers handled.
How should interested buyers respond to each of these models if they want to buy the house?
1) no offer date: submit a strong offer sooner than later. The longer you wait the greater the number of buyers that can book showings and get interested. Try to stop the process by submitting an offer that is attractive enough that the seller doesn’t want to risk losing it.
2) Form 244 signed with no notification of offers until set offer date: get your due diligence done while you are waiting for the offer date. If you want a home inspection book a mini inspection and get your inspector through. Talk to your mortgage broker and ensure you have your ducks in a row. It’s very unlikely sellers will take an offer that has conditions over one that is firm. In multiple offers there are almost always firm offers in play.
3) no Form 244 signed but date suggested for offer consideration: same as option #1. Come in strong and fast to minimize the number of buyers that have time to get involved. Attempt to replicate the sellers expectation for multiple offers. If possible match closing date desired. Don’t ask for furnishings or personal items the sellers have not indicated are included - you can try to buy those after you have an accepted offer. As far as Sellers are concerned Buyers often undervalue the items they are trying to include. Look at comparable sales if possible and expect to pay over list. Sellers won’t shut down showings if the offer isn’t worth it.
As always a Seller has the right to reject offers outright…even strong, firm, over list price offers.
The listing is an “invitation to offers” as opposed to a requirement to sell.