Are Bully Bids The New Normal in the GTA?
All throughout this year, including just last week, The Weir Team’s Cameron Weir and Scott Hanton have had to deal with more instances of bully bids. This is not just a downtown Toronto issue. Buyers and their realtors are using this tactic from Riverdale to Leslieville to Pickering to Ajax to Whitby.
Most recently, our listings at 55 Kerr Road, 12 Walpole Avenue, 109 Riverdale Avenue and 30 Chatfield Drive in Ajax were sold thanks to anxious buyers who refused to wait for the scheduled offer day and dangled a very big offer in front of the seller.
So what is a bully bid, also called a pre-emptive offer?
When sellers list their house for sale, the seller can choose to entertain offers from buyers at anytime, or hold-off offers for usually a week or so to allow for enough exposure to the property. Holding off offers is something that is usually done when the house is clearly going to attract a lot of attention or when the local market is very much a seller’s market, meaning there are way too many buyers and simply not enough “good” houses to buy.
Usually the list price is set at just below market value and then after a week’s worth of showings it is up to the buyer to decide and dictate the value for the house. It’s not unusual to have anywhere from two to twenty-two competing offers on a house all over Toronto and well into Durham region. And this is where the bully bid comes in.
If a buyer does not want to wait to compete and very much wants the house, the buyer can opt to offer the seller an excellent pre emptive take-it-or-leave-it offer that they must quickly decide upon. The offer is usually much, much more than the asking price and should have no conditions at all. As well, a smart buyer will have the Bank Draft as a deposit ready to give to the listing brokerage.
Sometimes the offer is so good that a smart seller can see that they really should just take it and sell their house firm, on the spot, without waiting any longer.
However we are seeing time and time again, nervous sellers accepting great offers but then losing out when we know for a fact other buyers would have offered much, much more.
In just the past couple of months we’ve seen sellers in Riverdale recently lose $200,000 because they didn’t wait for the scheduled offer day and instead foolishly accepted a late night pre-emptive offer without even giving a head’s up to other buyers that were still scheduled to tour the home. My buyer in Durham region lost out on a house in the Amberlea neighbourhood in Pickering because the seller thought a bully bid of $500,000 was good enough. However that seller didn’t know my buyer was fully prepared to offer $525,000. That nervous seller lost $25,000, possibly more if there were other buyers out there waiting as well.
Often it’s not just the sellers who lose but often all of the other buyers. It can be very frustrating for buyers who are playing the game of waiting for offer day only to find out that the house was sold out from under them because the seller decided to take a bully bid at 10pm the night before.
Ultimately though, it is all up to the seller. The seller has the right to take whatever offer he or she wants, whenever he or she decides. And when things are extremely competitive in the Toronto, Pickering, Ajax and Whitby real estate markets like they are today, it often makes sense for me and Cameron to suggest trying a bully bid.
There is an art to winning a house with a bully bid and skillfully done offers are needed to be done by seasoned realtors like The Weir Team. There’s no doubt the tactic can be sneaky and unfair… but if you’re our buyer and you really, really, really want a certain house, why shouldn’t you be able to do whatever you need to do to get it? And why shouldn’t the seller be able to accept it? Many will certainly disagree.
Bully bids a clearly a debatable and frustrating tactic in a very competitive game for sure. All the more reason to have experience realtors guide you through it.
Written by Scott Hanton, Broker for The Weir Team, Updated November 2015