In this post I will attempt to explain how multiple offer situations work in the current real estate market and why I am a proponent of so called ‘bully offers’ or ‘pre-emptive offers’.

I will start with a classic example of a property listings I see all the time in the Ottawa market:

3 bedroom 2 bath townhome in XYZ area of Ottawa. Beautiful hardwood, renovated kitchen and bathrooms. No Conveyance of offers until March xx, 2021 at 6pm.

List price $499,000

Market price: 605,000-625,000 (let’s assume the neighbor a few homes apart sold last week for $605,000) Our sample listing is a bit better maintained so I am valuing it at over $605,000.

Let’s break it down:

• What does no conveyance of offers until March xx, 2021 at 6pm mean?
  • This means that the sellers have instructed their real estate agent not to convey (tell them about) offers before a specific date and time. In this case March xx, 2021 at 6pm.
    • The seller can change their mind at anytime. A competitive pre-emptive offer has a good chance of doing just that.
  • What happens on March xx, 2021 at 6pm. The real estate agent representing the seller(s) sits down with their client(s) and goes over the offers they have received for the property.
  • Usually they will receive a lot of ‘hopeful offers’ between 499,000-600,000 and only a few competitive offers over 600,000.
• But since it’s essentially a blind auction a serious buyer has no way of separating hopeful vs competitive bids thus creating a situation where on the surface it looks like there is more demand for the property than there really exists due to the existence of these ‘hopeful offers’.
  • The selling agent will update all buyer agents with the number of offers in play. So for example at 5:30pm on March xx,2021 the selling agent will let the buyer agents know that they are in possession of 9 offers.
    • The content of the offers is not allowed to be disclosed.
    • Since the property was listed way below market value some or a lot of these 9 offers will not be competitive.
• Buyer agents will then have the opportunity to re-submit their offers based on this new information before 6pm.

There are many reasons to avoid this type of a situation as a buyer. But I will leave that for another day. Below I will explain how a real estate agent can use pre-emptive offers to somewhat level the playing field.

 

What is a pre-emptive offer?

• A pre-emptive offer is an offer that is submitted at anytime and has an irrevocable before March xx, 2021 at 6pm.

Why do I favor competitive pre-emptive offers as a strategy to level the playing field in a sellers market?

• Working with the example above a serious buyer and their agent would be wise to submit a strong pre-emptive in order to achieve a few goals
  • Not waste their clients time with multiple offer situations.
  •  Receive a result (yes or no) on their offer within a few hours.
  • Nothing is lost, if the offer is not accepted then March xx, 2021 at 6pm is still on the table.

How would a pre-emptive offer work using the example above?

• A good real estate agent will know that the home in the example above will sell for over 600,000 unless something drastically has changed in the market.
• In that case, it makes sense to submit a pre-emptive offer in the range of 605,000-615,000. This is a strong offer that the sellers would have a difficult time passing on.
• Using this strategy your buyers will know fairly quickly if they have or do not have an accepted offer and can then decide to show up on March xx, 2021 at 6pm or not. This strategy can also be used on a few homes until an offer is accepted.

To wrap it up:

Instead of waiting for March xx, 2021 at 6pm and being part of a blind bidding process where the selling agent hold all the cards, a strong pre-emptive offer has the ability to short circuit this process and get you and your buyers a clear answer within a few hours.

There are no guarantees that the selling agent and seller(s) will look at or accept your offer. But if it is a competitive offer, there is a good chance that it will be given consideration. It is always harder to turn down a ‘real’ competitive offer when it is in front of you and expires in 2-3 hours. The seller has no guarantees as to what will happen on May xx,2021 at 6pm.

 

I hope this post gives you some insight into the Ottawa real estate market and how offer dates work and how competitive pre-emptive offers can be used as a tool to give buyers a more level playing field.

I am always available to answer question via email (kiril@sutton.com) or telephone (613.263.7883). I am also happy to provide a complimentary home valuation if you are looking to sell your home in the near future.