Understanding Multiple Offers and Bully Offers

Multiple offers more common in HRM today more than ever. They can be a source of fear and doubt for many Buyers and Sellers. To reduce that fear, we’ve compiled this how-to guide that aims to clarify the multiple offer process, as well as to arm you with knowledge that will increase your chances of coming through multiple offers with positive results.

What are multiple offers?

Multiple offers are used to describe a situation where when more than one Buyer makes an offer on a property at the same time. Understanding the basics about multiple offer situations and having the knowledge to play the game will go a long way in making you feel more comfortable and help you get what you want.

Who’s in Control

Multiple offers usually are seen in a Seller’s market, when Sellers are in control. A Seller’s market is when there are too many Buyers chasing too few properties.

When to Expect a Multiple Offer Scenario

In the current market, anything is possible. Some hot properties in hot neighbourhoods will generate multiple offers after being on the market only a day or two–and in some cases, in mere hours. For the most part though, when a Seller is trying to generate multiple offers, they will set a specific date to review offers, usually within 5- 7 days from the date they listed their house on the market.

The Seller’s Goal

The Seller’s wants to expose their property to as many potential buyers as possible, then force anyone interested enough to make an offer to do so in a specific timeframe. If the strategy works, the result is multiple offers, and often a selling price above what they might otherwise have received. It’s important to note that not all properties that have an offer date get multiple offers – but it’s best to be prepared just in case.

Multiple Offers in HRM- How they work

In a Multiple Offer scenario in HRM you’ll never know how much any other offer is. Your offer may be $1 below the highest offer, or $50,000 above the next-highest bid.  Only the Sellers know what all the offers are – and only the winning sales price will be made public.

As a potential Buyer, you are entitled to know how many offers you are competing with. When a Buyer signs an offer, their agent submits the offer to the Listing Brokerage. The number of offers may or may not be shared with other Buyers – but never the content of the offers. Buyers and their agents however must be informed if they are in a multiple offer situation

Generally, Sellers will select the best of all the offers that have been presented to them. ‘Best offer’ of course is a subjective decision, based on the Seller’s specific situation, but which is usually a combination of the most attractive closing date, price and conditions. In most bidding wars, Sellers do not negotiate with Buyers, so it’s important that your first offer is your best offer. In some situations, negotiations are necessary. Sellers are only allowed to negotiate with one offer at a time – meaning they can’t counter 2 or 3 offers at the same time, at higher prices, in the hopes that someone accepts it. If two or more offers are very close, potential Buyers may be given one more opportunity to improve their offer.

At some point, the Seller will accept an offer, and all other potential Buyers will be notified via their Realtors.

Bully Offers

Bully Offers are found in a seller’s market where Sellers have advertised that they will review offers at a date usually 5-7 days after listing the property for sale. Sellers want to expose their property to as many buyers as possible during that 5-7 day time frame, and they also want to instill a sense of urgency- thus the short viewing time, with the hope being that multiple offers will drive the offer price up. Bully offers occur when a Buyer tries to bypass the process set out by the Seller and re-take control.

A bully offer often looks like this. They will NOT leave the offer open until such time the seller has requested. They will leave it open for only a few short hours. The seller is forced to have only hours (or minutes) to review and accept. Bully offers are usually with few conditions or contingencies and are almost always over asking – way over asking. In other words, the bully offer is almost too good to be true, too good to say no to.

The Bully Offerer is hoping that:

Not everyone has had the chance to see the house, and those that have will not have enough time to prepare an offer fast enough to compete. Furthermore, the other buyers will not have had enough time to organize their financing or even time to complete inspections!  This makes the bully offer strong or appear to be strong. The result? The seller gets so ecstatic about the high price and so overwhelmed with the process they simply just accept the bully offer to be done with it.

Bully Offer Strategies for Buyers

We represent a lot of Buyers, and an extremely strong bully offer can be a way of getting the house you’ve fallen in love with. It might mean paying more for a house – or it might mean getting a bargain. It all depends on the Seller and the skills of the REALTORS.

If you’ve falling in love with a house or condo and don’t want to get into a bidding war on the offer date, here’s how to make a bully offer work for you:

Keep Quiet! – Bully offers are most successful when they take the Seller (and their agent) by surprise. Other provinces are more highly regulated regarding bully offers, but here in Nova Scotia the only requirement of a listing agent is to notify ONLY the other parties that have already submitted an offer, of the existence of the bully offer. It is never identified as such, however. The only thing the buyer’s agent or the buyers will know is that there is another offer that has been submitted that the sellers are considering. Even if the listing agent has stated in the showing instructions that offers are to be left open until such a date in the future, the seller can, and may do whatever they want. This means that even if they previously stated all offers to be left open until a date in the future, they do have the right to exercise the option of accepting an offer prior to that time frame.

Act quickly! –You want to make that offer within a few days (or hours) of the property being listed for sale, before the Sellers start feeling too confident due to multiple showings and lots of interest.

Make the offer unconditional – meaning you’ve taken care of getting your financing in order and you’ve satisfied yourself with a home inspection before you actually make the offer. The goal is to give the Seller comfort that you can’t (and won’t) change your mind.

Offer a price that will tempt the seller to take your offer as opposed to waiting with the hope of multiple offers on the last night that offers were scheduled to be received.   Bully offers aren’t successful unless they really WOW the Seller. It’s not unusual in HRM to see bully offers that are tens of thousands of dollars more than the asking price (and often higher than what the comparable sales suggest is the market value of the home.) The key is convincing the Seller that they won’t get this price in a multiple offer situation.

Make the closing date amenable to the Seller – as well as any inclusions/exclusions. Basically: you want to seem like the easiest most agreeable Buyer ever. Now is not the time to ask them to throw in extras. Negotiate these after the deal is firm.

Give the Seller a short time period to take it or leave it. If you make a bully offer and give the Seller hours or days to drum up competing offers, the strategy won’t work. Strong bully offers usually expire in a few hours to put pressure on the Seller.

Don’t get cocky. If your offer isn’t great, you might just be encouraging other good offers to the compete with you and you’ll lose the house. If you can’t go big, it might be best to wait until the multiple offer deadline and hope that the competition isn’t too big.

Work with an agent who is experienced with bully offers. This is an advanced negotiating tactic and requires your agent to have a strong relationship with the agent who represents the Seller, and experience in knowing how to make it work for you.

Accept that you might be overpaying for the house. In a bully offer, you’re essentially competing and bidding against yourself because you think the property will get multiple high offers on offer night. Recognize that it’s possible that nobody else will ever offer and that you may have gotten the house for less money.

Bully offers are about the certainty of getting the house – not about getting a good deal on it. Only make a bully offer when you’re really in love with the house!

Bully Offer Strategies for Sellers

Convenience may also be a reason for Sellers to accept a bully offer too. For some Sellers, it’s not just about money. They may have kids or sick relatives living in the house and don’t want to deal with showings for a week, or they may just not want the worry and uncertainty of waiting until the final date that was stated for accepting offers.

Home Sellers: Should You Accept A Bully Offer?

We always counsel our Seller clients who are trying to get multiple offers  to resist the urge to consider offers prior to the advertised open for acceptance date. We know that Bullies are trying to circumvent the process and are hoping to get the house for less money than they might in a bidding war. In almost all cases, if a Buyer is ready to make an offer today, they’ll be there on the date advertised to all agents. What’s good for the Bully is rarely good for the Seller.

In some cases, it does make sense for Sellers to consider or accept a bully offer: lifestyle reasons, slower-than-expected showings, a neighbour listing their similar home for sale at the same time, etc. That will be a discussion between you and your REALTOR.

If you decide to consider a bully offer, you’ll want to make sure it:

• Doesn’t have any conditions (financing, home inspection etc.)
• Is at a price that’s worth circumventing your pricing strategy
• Has a closing date that works for you

An experienced REALTOR can guide you through the process and ensure you don’t leave any money on the table.