Should Bully Offers Be Eliminated?


After last week’s post on bidding wars and news coming out this week that Ontario Real Estate Association (OREA) is going to lobby the Ontario Government to eliminate the practice of Bully Offers, I felt the desire to weigh in.

First off, what’s a bully offer?

Last week we went over bidding wars and how they work most of the time; houses and some condos get listed at an artificially low price, and then all interested parties submit offers at the same time with the hope of driving up the sale price for the seller.

A bully odffer, or Preemptive Offer, is an offer that the seller reviews before the scheduled offer day.

This is where it gets confusing for some people. The seller has announced that they’re reviewing offers at 7 pm at their office on Tuesday, but if the listing says “Seller reserves the right to review preemptive offers,” all bets are off. That means they’ve reserved the right to look at an offer whenever they want.

There are instances of houses going on the market and receiving a bully offer that the seller and their agent reviewed and accepted in only a matter of hours after the house was on MLS.

I have a colleague who tried to book a showing to see a home in Riverdale last fall when the home had been on the market for about 2 hours, and when she called to book a showing, the agent informed her that they had already received an offer and were reviewing it in 30 minutes with no exceptions.

The home sold, albeit for way less than it would have sold for on the designated offer day.

My colleague called the listing agent after seeing the price, asking why they felt compelled to accept such a low offer 2.5 hours after their brokerage loaded it on MLS, and all she could say was that the buyer’s agent was very pushy and told them this would be the only offer their buyer would submit on the home (yeah right!), and the listing agent took the bait - hook, line and sinker.

With 52,000 registered agents across TREB there are a ton of people who have little to no idea what they’re doing, and there are some really good agents who know how to take advantage of a really good situation for their clients.

This was one of those times, and the buyers who submitted the bully offer got a great deal on that home because they found a way to avoid competing with other buyers.

When I see that a seller may review a preemptive offer, I generally need to take my buyers to go see that home as soon as I can because otherwise we risk someone else getting there before us and submitting an offer that the seller might accept.

OREA’s justification for wanting to eliminate bully offers is to make things more fair.

Although I hate the practice of bully offers because I think sellers usually leave money on the table, anyone selling property in Toronto is clearly capable of making their own decisions, and if they choose to accept a bully offer for 10% less money than they’d get on offer night (hypothetically speaking), that’s their choice and I don’t think anyone should take it away from them.

When you sell property in Toronto, you have almost endless possibilities in terms of who you can hire with 52,000 agents to choose from. Some of these agents do a great job and some won’t.

Personally I’ve had several bully offers accepted for my clients.

We go see a house the day it’s listed, and if it checks enough boxes and the listing says, “seller reserves the right to review preemptive offers,” I’ll often tell my guys to go to the bank and get a deposit made up just in case.

We’ll review the pre-list home inspection thoroughly before the showing, and if the place checks out and they love it, we’re signing the paperwork on site and sending it to the listing agent for them to review.

Sometimes they’ll say no, but when you’re giving them a good price, their ideal closing date AND you have the deposit in hand, some agents think it’s too good to be true and the sellers accept the offer.

For my buyers who have tight budgets, this is often their best option when looking for a house in Toronto. Going into an intense bidding war on offer night is usually not a winning proposition, so we’ll seek out properties open to bully offers and try our luck there.

If the option to present a bully offer is taken away, it will be a lot harder for some first time home buyers to find places because 9 times out of 10 there’s more competition on offer night, which means a higher sale price.


My rules to go by:

1. If you’re a seller, rarely if ever is it a good idea to accept a preemptive offer. I think you’re usually leaving money on the table.

2. If you’re a buyer on a tight budget, bully offers may be your best bet at finding a home within budget because you’ll face no or little competition. Go see homes early and do your due diligence before hand so you can act quickly.

People should be allowed to sell their home when and how they want. The government implementing new rules to stop people from making their own choices isn’t something I consider good policy.

The key here, as always, is to use an expert who truly knows the area where your home is located.

Do they know the market? Are they up to date on recent sales trends and practices? Can they properly value your property, so you know when you should and shouldn’t accept a preemptive offer?

If the answer to any of those questions is “no", you risk leaving thousands of dollars on the table.

Real Estate is all about location, location, location. Make sure you’re hiring a profession who knows and works in YOUR neighbourhood to ensure they know the ins and outs of your market so they know when to recommend to accept a bully offer and when to wait for something better.

Jim RobertsComment