Bully Offers – How to Beat the Competition.
Due to the overwhelming number of buyers in the market right now taking advantage of all-time low mortgage rates, the prospect of winding up in a multiple-offer scenario when trying to buy a Toronto home is very real. In this article, I’ll show you a technique I use to break through the competition and put sellers who ‘hold offers’ on their heels.
But first, what does ‘holding offers’ mean? ‘Holding offers’ is a strategy listing agents and sellers will employ to try and effectively create an auction for their listed property. A request for all buyers to submit their offers at a specific date and time is included in the property marketing materials, in the hope of having multiple buyers register bids for the property at once instead of on a first-come basis. This can sometimes effectively inflate the price paid for desirable properties, as eager buyers offer more money in order to outdo their competitors.
Now that we’ve got that covered – how do we deal with a ‘holding offers’ date included a listing, in order to get the best possible deal as a buyer?
One effective strategy is to employ a bully offer. In this scenario, the buyer essentially disregards the instruction to submit their offer at the requested time and registers their offer early. This is meant to ‘bully’ the seller into accepting the deal, but it most be done correctly.
Here’s how it works:
First of all, the offer must be free of buyer conditions like financing, home inspection, etc, as in order for it to be effective, the deal has to be firm and the property sold outright if the seller accepts. This is the ‘lure’ of the bully offer for the seller; they have a binding offer in their hands that would allow them to sell their home and be finished with the process simply by signing.
The other consideration is that the bully offer price must be high enough that the seller fears that by passing it up and waiting until their chosen ‘offer date,’ they will wind up with no higher offers. This makes taking the bait even more alluring for the seller, because they feel like your firm bully offer may be the best one they’re going to get.
An effective bully offer usually has a price which is near the top of the expected reasonable price range based on comparable properties, but is lower than the buyer fears he may have to bid if in competition with a number of other hungry buyers. Because of this, a well-executed bully offer can keep you from having to compete for your dream home and will often save you a bit of money as well by avoiding price-inflating multi-bid scenarios.
Do you have any questions, or would you like to get started on your house hunt? Call me and I’ll be happy to get you started on the right foot.
Until next time,
Shaun Nilsson
1-888-712-7888
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@ January 15, 2010 at 1:51 pm
Meiky Hekom says:
Intersting…