What Is An Exclusive Listing?
If you’re a buyer seeking a home in Toronto’s current red-hot real estate market, you might have heard the term “Bully Offer” or “Pre-Emptive Offer” tossed around out there more than once. And, if you’re not familiar with this particular real estate lingo – you’re not alone! It’s a confusing subject matter with a lot of subtleties and nuances involved! In light of this, we will break it down for you step by step, so you’re a “Bully Offer Expert” by the time you read to the end!
In Downtown Toronto, it’s common practice for a Seller to list a property on the MLS System and market the property for an entire week before they [the Sellers] accept offer submissions on their home or condominium. Generally speaking, the Seller and their agent have listed the property below its market value to attract a sizeable potential buyer pool in hopes of receiving multiple offers on their home at a predetermined date and time. This strategy ensures that interested parties have enough time to see the property and perform sufficient due diligence in advance of offering on the property.
The Seller’s preferred date and time to accept offers are indicated in the Broker’s Remarks on the MLS System. These details are not available to the general public via Realtor.ca or other home search tools. The same Broker’s Remarks may or may not indicate whether the Seller is willing to review a Bully Offer (or, this may not be indicated at all). See below for some examples.
The Seller is willing to accept offers on the property on Tuesday, March 9th at 6:00 PM. Kindly register offers by 5:00 PM. The Seller is willing to review Bully Offers.
The Seller is graciously accepting offers by email on Tuesday, March 9th at 12:00 PM. Offers registered at 11:00 AM. No Pre-Emptive Offers.Please be reminded that the Broker Remarks are only available to agents, and it’s best practice for instructions to be shared with buyer clients if interested in a particular property. As a buyer, you should know the date and time the Sellers are reviewing offers and if the Seller has indicated anything related to Bully or Pre-Emptive Offers in their instructions.Now, if you’re still confused, that’s okay. Right now, we’re just establishing the rules of engagement!
A seller’s market happens when there’s a shortage in housing or more potential buyers than homes. On the other hand, a buyer’s market occurs when there is a surplus in housing or more homes for sale than buyers. In Toronto, we’re currently in a cut-throat Seller’s Market with just over one month of supply available. When market conditions are tight, Bully Offers are more commonplace, and we’ve been seeing them left, right and centre these days!
Simply put, a bully offer is a pre-emptive offer. The purpose is to ‘bully’ other buyers out of the buying process. You do so by making an aggressive over-asking offer in advance of the prescribed offer date indicated in the Broker Remarks. This way, you can potentially avoid the competition by offering a “sweet deal” that the Seller cannot turn down.
The analogy I like to use when working with buyer clients is that it’s like going to a nightclub. There’s a lineup outside that runs down the street and around the corner. So, a nightclub goer who’s tired of being in the cold chooses to pay the doorman “a premium” to bypass the line. In the same way, many buyers fed up with being out in the preverbal Toronto real estate cold (after losing out on several properties in bidding wars) sees the long-term benefit to paying a premium for a property.
As a rule of thumb, a bully offer is generally significantly over the list or asking price. It’s almost always a firm offer, meaning no conditions. And it is presented with a sizeable certified deposit cheque. For a bully offer to work, the offer price has to be so enticing to the Seller; they fear losing the opportunity to sell at a premium. There is often a misunderstanding that a bully offer means being the “first buyers to offer” on a home. This is inaccurate. Instead, a bully offer is a head-strong kick-ass offer that the homeowner would have a tough time refusing!
1/ Just because you’re bullying – does not mean you won’t compete against other buyers. In Ontario, agents need to make their best effort to notify all interested parties that a bully offer is registered on the property. Generally, this means that all agents that have booked a showing will receive a communication that a bully offer has been received in advance of the indicated offer date.
A bully offer does not guarantee you exclusive rights to bid on the property. In fact, your Bully Offer can trigger more offers from other interested buyers, and you still have the potential to be out-bid.
And? We have also seen many scenarios when the Listing Agent does not inform interested parties of the Bully Offer, and other buyers miss out on the opportunity to submit or compete in its entirety. This is a very frustrating aspect of the offer process for the buyer’s in Toronto right now – and it’s undoubtedly unprofessional conduct for Listing Agents to lack the courtesy to communicate what’s shaking down behind-the-scenes.
2/ Many buyers assume that their Bully Offer will be presented to the Seller. However, the Seller can sign written direction indicating that they do not want to be notified of any offers registered on the property before the pre-determined offer date and time. Sellers can provide this direction by signing OREA’s Form 224 in advance of their listing date. If this form is signed, your Bully Offer will not be presented to the Sellers.
Typically, these situations move very quickly and do not leave you (the buyer) a lot of time thinking things over or organizing yourself. Before you can realistically consider moving forward on a bully offer, you should be very familiar with the process, paperwork, and commitment level. There is little time for second-guessing and almost no chance of turning back. As the buyer, make sure you’re knowledgeable about pricing in the immediate area. This way, if you are, in fact, overpaying to get what you want, you know by how much and that you’re okay with that on a multitude of levels (emotions included). Because these types of offers generally have no conditions, you have to be 100% clear on your financial situation as a buyer. You must be able to firm up on closing with no issues or concerns. It’s essential to have a contingency plan if any issues surrounding an appraisal were to arise. Should there be any doubts with regards to financing, it may be best to wait until you get your ducks in a row and submit an offer on the considered date.
A well-executed bully offer considers the following nine components:
As a Toronto buyer, before you can indeed be in a position to submit a bully offer, you need to complete your due diligence upfront. We cannot stress this enough. See many homes, understand market value, learn about pre-list home inspections, public school districts and the costs involved in owning a house or a condominium. Bully offers are always a simple strategy. It’s a misconception that a “bully offer” is easy to pull off (and they’re not). It’s imperative to have a tenured agent or broker by your side – one that will give you an honest opinion and understands pricing, negotiation, neighbourhood insiders and is trustworthy and transparent from the get-go. Your agent should always have your best interests at heart – whether you choose to bully or not to bully at all!
This article was written by Kori Marin, Managing partner here at Fox Marin Associates. For high-energy real estate aficionado Kori Marin, a well-lived life is achieved by maintaining an “all-in” attitude that realizes every last ounce of one’s full potential. This mindset has driven successful results in every aspect of her life – from her corporate sales and account management experience to her international travels, to her years of fitness training and leadership – and is the hallmark of the exceptional work that she does on behalf of her clients in the residential real estate sector in downtown Toronto.