The Toronto Star has just published a story about “bully” offers. The article indicates that listing agents whose clients accept them could end up paying hefty fines if they don’t play by the rules. So what is a bully offer and what rules apply to them?
Well, let’s assume you’re selling your house. Your agent recommends that you hold off on offers for a few days because the market is very hot. By doing so, s/he hopes to get some excitement going and maybe even multiple offers. You agree; if the strategy works, not only will you get the best price possible, but your home will sell quickly. You sign a Form 244 that says “no offers before Friday, March 3 at noon.” The listing is activated on February 26, with that restriction spelled out in public remarks and in salesperson remarks.
And then, on February 28, your agent tells you another agent has submitted an offer, days before March 3 hold-off. That pre-emptive offer is what’s called the bully offer: “bully,” because it’s strong. It’s meant to push other buyers out of the way. It’s almost always for full asking or even above asking price, so that the seller will seriously consider it. So now you have this bully offer to deal with. Or do you? What are the rules in this situation?
Well, actually you don’t have to entertain it at all. I’ve had this happen to me a few times, and in each case, my client preferred to wait until the time we’d specified. They decided that a buyer that interested will likely resubmit the offer again then so there’s no real downside. In those situations, I’ve simply advised the prospective buyer that my seller has declined their offer. That’s the cleanest, simplest situation. We’ve set the rules: we’re all going to play by them.
But what if you decide you really like the offer and you do want to deal with it? What does your listing agent have to do to avoid problems? After all, you’re about to change the rules mid-stream.
Well, your agent has to take some immediate steps to deal with this situation and if they don’t, they can end up in serious trouble.
They have to contact every single person who has expressed interest in the property and let them know that (a) a written offer has been received and (b) either what the irrevocable period is or when it’s going to be presented. That way anyone who wants to make an offer has an opportunity to do so. That could mean reaching out to dozens of people, particularly if you’ve had an Open House.
Also, the listing has to be changed ASAP to remove the reference to the Friday deadline for offers because that timeline is gone. It no longer applies.
Now I had a listing recently that specified a 48 business hour irrevocable period for all offers; it was an estate situation with an institution acting as executor and they always request that kind of time. We had 30 showings the first day the listing went live and an offer came in later that day. When I contacted my client, it turned out she was available to deal with offers the next day and didn’t need the full 48 hours. Given the activity, I notified everyone who had expressed an interest in the property by email of the time I was going to present the offer. I also put a note in the listing to that effect. As it turned out, we had multiple offers. The property was conditionally sold before the full 48 hours had expired.
I got a call from an agent the next day. He hadn’t booked an appointment to see the property but he was’t happy to find out the property had conditionally sold. He said he’d relied on the 48 business hour notice provision and assumed he’d have time to show it to his client. His error was confusing this situation with the first one.
The irrevocable period in an offer binds the buyer, not the seller. The seller can receive an offer any time in this situation. In our case, we hadn’t held off offers at all; the seller had simply requested a 48 hour irrevocable period so theywould have enough time to deal with the beneficiaries. That request didn’t mean the seller had to wait 48 hours to deal with the offer; only that the buyer had to give them that time if they needed it.
And so in this second situation, the offer that came in was not a bully offer. Everyone who’d showed the property was contacted and kept informed. (I’d kept a list as the showing requests had started to pile up). If this particular agent wanted to be “kept in the loop,” as we call it, he should have told me but since he hadn’t even booked an appointment, I had no way of knowing about his client’s interest.
The important thing in both situations is that whatever rules the seller sets should be clear and any changes to them should be communicated to interested parties as soon as possible. As the Toronto Star story points out, a failure to do that can result in very disappointed buyers and a realtor facing hefty fines, and really, who needs that?