The pros and cons of pre-emptive offer

The pros and cons of pre-emptive offer, GTAHome.com

The pros and cons of pre-emptive offer

Reading time: 3 minutes

Contributor: Yan Zhou from GTAHome.com Real Estate Team

Tags: pre-emptive offer, bully offer, offer presentation, bidding war, real estate

 Pre-emptive offer, some buyers may call it bully offer. A pre-emptive offer is an offer made on the property before the offer presentation date indicated by the listing agent. People often asked if they should submit a pre-emptive offer to avoid the bidding war and secure the property they like. There is no straight answer to that, and it depends on several factors. Today we are going to talk about the pros and cons of pre-emptive offer.

For the buyer:

Pros:

  1. Yes, you may be able to avoid the bidding war which the bidding war may potentially drive the final sales price even higher.
  2. Even the seller does not accept your pre-emptive offer. Your offer still gets noticed by the seller since the listing agent is obligated to present any offer that receives. Your offer may get noticed ahead of other offers. 
  3. You will learn more about the seller’s motivation and the listing agent’s personality. You can always improve the offer to accommodate the needs of the seller. 

Cons:

  1. You could be overpaying. As I always said, don’t fall in love in a house. There will most likely be similar properties on the market sooner or later. You don’t know how long the property will be on the market. Longer days on market for the property, it gives pressure to the listing agent and the seller. The seller may reduce the expectation and you may end up save some money. 
  2. If your pre-emptive offer is well below the seller’s expectation, the listing agent may think buyer is not financially strong enough to afford the property. So even you improve your offer later, it may already give the listing agent a bad impression. Your improved offer may be rejected if there is a similar offer since the listing agent needs to ensure a smooth transaction.
  3. You may not be able to avoid a bidding war. Since the listing agent is obligated to inform other real estate agents who showed the property about your offer, you may still end up having a bidding war.
  4. You may have to submit a pre-emptive offer without conditions (such as mortgage, home inspection, lawyer review) which gives you uncertainty and unwanted risks. 

For the seller:

Pros: 

  1. You can skip the marketing and reduce risk of getting covid. You don’t have to leave home for the open house. 
  2. You will have peace of mind knowing your property is sold so you can move on. You will know the exact budget to buy your next property.
  3. A pre-emptive offer can be very aggressive. You may not get the same price on the offer presentation date. 
  4. Buyer with pre-emptive offer is often highly eager to purchase your property. Other than the price, the buyer may be more willing to accommodate your desire closing date.

Cons:

  1. When the real estate market is crazy hot like in 2021, you may get the offer that will blow your mind on the offer presentation date. The pre-emptive you are thinking to accept may not the best offer you will receive at the end. 
  2. Even you accept a clean pre-emptive offer, the buyer may not be able to close the transaction due the mortgage approval. So you should have an idea about the buyer and ask for their bank pre-approval letter.

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