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I honestly can’t remember the first time I heard the term, “bully Offer.”

I know it was before I heard the term “pre-emptive offer,” since the latter was a term invented to soften the concept of bullying in the context of submitting an offer.

Maybe “pre-emptive” was concocted by somebody on the buy-side who wanted to avoid being confrontational with a seller and listing agent, or maybe “pre-emptive” was invented by somebody on the sell-side to try to solicit bids before the offer date.

I’m not sure.

I do remember the first time that I saw an agent advertise, “Pre-emptive offers welcome.”

It was in 2008 after the market had turned.

Up to that point, nobody ever thought to write anything on the MLS listing about bully offers.  We take this for granted today, but back then, the entire concept of a bully offer was foreign to many, hence why it was more effective.

A property is listed for sale on June 10th, 2008, with an offer date set for Jun 17th.  An aggressive buyer submits an offer on June 11th before the scheduled offer date.

(gasp!)

That’s how the bully offer was born.

And when we got used to this happening in the market, we simply acknowledged it as a new technique.

When the market slowed down during the Financial Crisis in 2008, buyers stopped making bully offers.  In fact, many “offer nights” came and went without success.

That’s when I saw, for the very first time, “Pre-emptive offers welcome!”

I thought it was crazy.

It was like a physician giving somebody a pill but telling them it was a placebo.

And again, the process evolved from there.

Now, it was up to the listing agent to outline either if the seller would consider a bully offer, or not.

Today, we fully expect to see this on the MLS listing.  As I said: the process has evolved.

But so too has the explanation on behalf of the buyer agent for making the bully offer in the first place.

In 2007, if you went to make a bully offer, you always gave a nonsense excuse.

“I know your offer date is on June 17th, but my clients are traveling and unfortunately, they’ll be without a stable Internet connection and it’s unlikely that their hotel has a reliable fax machine either.  So we’re presenting this offer to you today, but we we’re so sorry, we just won’t be able to proceed with an offer next week on your offer night.”

Nobody, and I mean nobody, would have submitted a bully offer back then without an excuse.

You had to have some sort of story.

That’s how you were able, in theory, to tip the scales in your favour.

Negotiating is all about leverage, and in any market, the participant who has more leverage usually comes out on top.

In a seller’s market, where you have multiple offers on a listing, the seller always has the leverage.  And lots of it!

A bully offer is a way for a buyer to create leverage, or at the very least, give him or herself an advantage over the other potential buyers in the marketplace.

It’s quite likely that a seller knows this and understands this, and that’s why the buyer has to come up with a story as to why the buyer won’t bring that offer back on offer night.

Think about it: if the offer is really good, and the buyer says, “I won’t be back on offer night,” then the seller has to accept the bully offer ahead of the scheduled offer night, or risk obtaining less for the property on offer night.

Without a believable story as to why the buyer won’t be back, the seller will simply wait.

So what would you do, as a buyer?

What story would you come up with?

In 2006, 2007, or 2008, you could claim that you were “away on business” or “vacationing on an island.”  But in 2023, that just doesn’t fly anymore.

For those who are younger than the rest of us, the world was very different before DocuSign.  In fact, it was different before reliable scanners.  We used to sign offers by hand and then go to the property to present them in person.  So the idea that “going away on vacation” could render a buyer unable to present an offer was actually a viable excuse.

Today, the excuses are basically gone.

I suppose we could try, and we often do, but there’s just no reason to believe that someobdy won’t be back on offer night, unless that buyer or buyer agent is admitting that spite or principal is the reason.

Last week, I experienced two different bully offer attempts with two very differnet methods, and two very different outcomes.

The first one was a listing that a colleague of mine had.

The second one was an offer that I made on behalf of my buyer clients.

Let’s look at the two examples to see how the approaches and outcomes were different.

My colleague had a listing for a west-end house, listed at $1,750,000.

Her target was about $2,100,000 and the house was getting very steady showings, with lots of talk from buyer agents about offers, the offer night, bully offers, the home inspection, etc.

Suffice it to say: this was going to be a great sale and a busy offer night!

On the third day of the listing, my colleague received a bully offer with the following note from the buyer agent:

Yikes!

I suppose that’s one way of approaching this, right?

But man, was this ever aggressive!

First, the agent cites two other properties that had failed offer nights.

Second, the agent says, “If you don’t take our offer, we’re not coming back.”

Lastly, the agent gets out ahead of any sign-back attempt on behalf of the seller (not that there would ever be one) and says, “We will not entertain a sign back.”

This is three layers of aggressiveness, and it’s all over email instead of on the phone.

It’s wrong on so many levels and the buyer agent should know better.

But many buyer agents don’t, and that’s what’s fascinating about this business.  Every agent is his or her own business, does things his or her own way, and has his or her own processes in place.

The sellers literally laughed at this email and noted that the two houses that the buyer agent cited as not selling on the offer date were not comparable in the slightest.

The offer was rejected, and that was that…

…until it wasn’t.

Three days later, the buyer agent emailed the following:

Let me explain.

Registered offers are tracked through the BrokerBay system.  Any time an offer is registered, it’s noted in the system, and in certain cases – a notification is emailed out to all the other agents who have shown the property.

But there is a MAJOR distinction here, and it’s important:

If a bully offer is received and the seller wants to accept it, then the listing agent would email out the notification to all other buyer agents.

If a bully offer is received and the seller does not want to accept it, then the listing agent wouldn’t register the offer and email out a notification.

Why?

Because if you have a listing that notes, “Offers on July 24th” and then you email forty-six agents at 10:00pm on Friday, July 21st that there’s a bully offer, but you do not end up accepting it, then you have confused forty-six agents as to what the hell is going on with your listing.

Did the property sell?

Is it still available?

Are you sticking to the original offer date?

The questions will start pouring in!

That’s why, as a listing agent, when you receive a bully offer that your client isn’t going to accept, you simply leave it, and do nothing.

In the case above, the buyer agent was asking my colleague why he or she didn’t email out a notification.  Either the buyer agent doesn’t understand how things work, or she does, and she’s just trying to stir the pot.

In any event, that buyer agent noted multiple times that her client wasn’t coming back to the table on offer night, so it’s a moot point, right?

Except, sure enough, on the day of offers, my colleague received this email from the buyer agent:

No kidding.

And over email again, which is the weakest form of communication.

Pick up the phone, explain yourself, be courteous, and try to work things out.

The original bully offer, by the way, was only $1,900,000.  The property ended up selling for $2,150,000 on offer night, listed at $1,750,000, so the bully wasn’t very good, but even worse is that this buyer agent came back at the exact same price!

The one takeaway from making a bully offer is that you gain insight as to the price expectation of the seller.  If your bully offer is not accepted, then at least you know what price will not work on offer night – when there are nine competing offers, as there were in this case.

My second story involves me, and how I approached things.  And I’m not writing this blog to pat myself on the back or anything, but rather to show how the approaches differ.

There was a house that sold in April of this year for $2,530,000, listed at $2,299,000, which was scheduled to close in May.

The sale did not close, unfortunately.  Well, unfortunately for the seller, who now has to re-sell the home, and the buyer, who is going to be sued, but fortunately for my clients who were now in the market.

This time around, the property was listed for $2,400,000, which I found curious, since it was higher than the original list price, but still lower than the original sale price.

There were a lot of elements to this story, such as the fact that the seller was elderly and valued a quick closing, and the listing agent was related to the seller, and the market for that particular property had dried up, etc.

But my clients saw this as an incredible opportunity to get a second kick at the can!  They weren’t in a financial position to buy this house in April, but they sure were now!  They had driven by this house many times and thought, “Boy, we missed out on that one,” only to see it come back up for sale again.

The only problem was: my clients were maxed out at $2,400,000.  Clearly, the seller wanted to obtain the $2,530,000 he got for the house in April, and it’s tough for people to come around on the idea of “losing” something, even if it was never theirs.

So we decided to submit a bully offer on the property, but with one caveat: it would only be for the list price.

I have never done this before, by the way.  A bully offer at the list price?  It sounds crazy!  It’s the kind of thing I would make fun of on this blog!

But those that are following right now understand that this situation is different.

The property isn’t severely under-listed like most listings that get multiple offers on a scheduled offer night, and we were now in the summer, for which this area does not sell well, at all.

So we obtained a bank draft for $250,000, knowing the seller would feel, “Once bitten, twice shy” with respect to the first buyer who did not close the transaction, and we submitted an unconditional offer with a 30-day closing date.

How could the sellers say “No” to this?

That’s seemingly rhetorical, but it’s not.  Don’t ever underestimate a seller’s greed, unrealistic expectations, or ability to get out of his or her own way.

I called the listing agent and I was very level with him.

I said, “I know this is ‘only’ your list price, but you raised your list price from the first sale in April.  The market has softened in this area, as you know.  It’s summer.  Nobody is looking.  I have a deposit cheque for more than 10%, and I know that’s important to your seller.  We close in thirty days.  We have no conditions.  This is a dream scenario for your seller.”

But then I had to do what we always do when we send in bully offers.

I said:

“And just so you know, we won’t be back on offer night.”

How did I explain this?

Did I say we were going on vacation?  Did I say we would be in a cave, on the moon, with our eyes closed?

No.  I made something up.

“My buyers are getting assistance from both sets of parents.  The parents are calling the shots here.  Not me, not them, but the parents.  They said we get one shot at this, and if it doesn’t work, then we’re moving on.”

If you ever want to gain leverage in a negotiation, tell the other side that you’ve lost control.  It might make you look weak, but it leaves the other side without the ability to negotiate with you any longer.

Later that night, the listing agent sent out an email notification that said, “Offer Registered, Presenting 10:00pm Tonight.”

If you’re a buyer agent, you love seeing that!  This means, or at least it should mean, that the listing agent is going to work with the offer – as I explained above.

I waited eagerly by my phone but I didn’t get any subsequent emails about additional registered offers.

This means that no other buyers were interested in competing.  It meant that we were the only game in town.

I was convinced that I would get a phone call saying, “Congratulations, we’ve accepted your offer,” but that call didn’t come.

Instead, I got a call saying, “Against my own advice, the seller is going to wait until the offer date.”

Damn.

It was worth a shot, right?

But did we snooker ourselves?  Could we go crawling back on offer night?

Five days later, on the scheduled offer date, my clients were gung-ho to register their offer first thing in the morning, and ensure we got our foot in the door.  But having already been through this exercise and having seen zero competing offers materialize after the listing agent sent out the notification, I thought there was an outside chance that we would be the only offer.  So I told my clients to wait.

And wait, they did.

From 9:00am, through the morning, past noon, into the afternoon, and well into the evening.

Offers were supposed to be registered by 5:00pm to be presented at 7:00pm.

But by 7:00pm, there was nothing registered.

I called the listing agent at 7:30pm and simply said, “What’s going on?

I’ve been in his position before, trust me.  When you’re struggling with a listing on offer night, and the phone rings – you get elated!  Especially when it’s from a familiar face.

“Well, I don’t have any offers,” the listing agent told me.

“Yeah, I figured,” I replied.  “And remember, I told you that this was going to happen,” I added.

He said that the seller still wanted his price, but I replied that the seller didn’t really have a leg to stand on.

Sure, the seller didn’t “need” to sell, but the listing agent had sent out offer instructions earlier in the day which noted any offers with a closing date after September 1st would not be considered, so he played his hand with respect to “needing” to sell, in that they simply did.  It was quite obvious.

I feigned, “I can try to get my offer back on paper, but you’d have to guarantee me that it would be accepted,”

He said, “I would try my best.”

I told him that wasn’t good enough and that he should have a conversation with the seller and get back to me.

But before that could happen, he did receive an offer on the property, which he registered through BrokerBay.

In most situations like this, the listing agent now has leverage.  He can call me and say, “I have a great offer, you’ll really need to sharpen your pencil,” to encourage me to put a better offer on paper.

But this wasn’t like most situations.  The leverage had been turned upside down.

He called me and before he could say anything, I said, “We’re not looking to compete, I told you from the beginning when I brought that bully offer, so we’re out.”

Now, if you’re sitting on a poor offer that has a meager price and three conditions, what do you say, as the listing agent?

“David, bring me back that offer, please,” he said.

So I did.

Except this time, I only gave him and the sellers 45 minutes on the offer.

And this time, it was accepted.

Could I have gone back lower this time?

Yes, in theory.  But in practice, the seller was already accepting $130,000 less than he had received for the property in April, and in my experience, it’s really, really hard for sellers to accept a “loss,” whether what’s lost was theirs to begin with, or not.

This seller wanted $2,530,000 and wasn’t going to take less.  So if we could get him to accept $2,400,000, it was a win for us.

Especially because my clients really, really wanted this house.

Without making that bully offer to start with, we wouldn’t have got the house.  There’s just no way.

So while the bully offer itself didn’t work, it set the table perfectly for the “offer night,” which didn’t bear the bounty of fruit that the seller was counting on.

My story and my situation aren’t like the first one, nor am I suggesting that I possessed magic powers that got me this deal.

But there is a way to come back after having uttered, “We’re not returning to the table on offer night,” and sometimes you can make it work in your favour…

The post “We Will NOT Be Coming Back On Offer Night!” appeared first on Toronto Realty Blog.