The Big Bad Bully Offer… May Disappear?!

Published on 15th May 2019

I’ve worked with many clients from different countries and over the years, I’ve learned that there are different ways in which real estate is sold. I can’t say which way is the better way because I’m limited to the parameters of how to trade within our region. However, what I can say is that our system is quite problematic when it comes to understanding how the market behaves, especially those who have not transacted in our market before.

Creative Selling – The very standard procedure (and what most people know) is to list the property at a reasonable market price, expect offers and then to hope that the property is sold at full listing price. However, the problem that we face (and has occurred) is such that when the inventory is low and the prices get heated, it results in a heavy seller’s market. All of this leads to really strange, and creative, ways in which a property can be sold, especially the second case below:

  1. Under-pricing the property and holding offers.
  2. Under-pricing the property, holding offers, and taking preemptive offers.

Proposal Pitched – Combined with the fairly useless training that you get as a Realtor before you get licensed (Realtors are a dime a dozen, need I say more?), the second case above creates a world of chaos. This is why the Ontario Real Estate Association (OREA) is proposing an elimination of preemptive offers. My thoughts are aligned with the elimination of preemptive offers.

In reality, preemptive offers are just a fancy, politically more correct, term for “bully offer”. It’s like the Raptors saying that Kawhi Leonard had “load management” instead of resting him “just because”, to avoid a fine from the league (for context, he didn’t play for a number of regular season games, which ultimately paid off because his healthy state helped us win game 7 in the second round of the playoffs!). Preemptive offers and bully offers are the same thing, but the former is just wrapped up in a nice ribbon. The elimination of this sugar-coated strategy is a good thing in my opinion.

The Big Bad Bully – A bully offer is one of the most frustrating things for buyers because if you’re represented by a Realtor who doesn’t fully understand the ridiculous process of navigating through a property listed in such a manner, you would generally end up being very disappointed with the whole experience.

How could you not, right? You see a beautiful property for what you think is a steal of a deal. You prepare to submit an offer that is slightly over what they are asking for, but then you find out, a few days before the listed offer date, that it was sold even before you had a chance. This is extremely frustrating as a buyer, especially when non-ethical listing Realtors are not notifying all of their potential buyers about the offers being submitted (usually, they do this because they are looking to double-end the deal, that is, earning both sides of the commission – the buy and the sell side). Yes, there are some fairly “corrupt” Realtors out there, unfortunately. That’s why I’m all for the elimination of bully offers by OREA.

Say What… Disgorgement? This proposal, however, seems a bit late because this was a huge issue in the overheated markets of 2017. In the current market though, I don’t really see these practices all that often anymore. That said, this proposal is still a good step towards creating an ethical buying process overall. The proposed punishment will be a fancy term called “disgorgement,” which basically means that whoever is executing a bully offer, both buy and sell side could lose their commissions earned.

The Wrap – This is a great step towards providing a more transparent buying process. Next up on OREA’s agenda should be better and more practical training to be licensed as a Realtor. Currently, new agents getting licensed know almost nothing about actually transacting, but that’s a topic for another day!

Until Next Time, Happy Real Estate-ing,
Zhen

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