What Is a Preemptive Offer to Buy a Home?
A preemptive offer, also known as a "bully offer," is a strategic move in the competitive San Mateo County real estate market, allowing buyers to submit an offer before the published offer date. For sellers, the goal is always to maximize their home's sale price, and they typically wait to compare multiple offers. But sometimes, an early, strong offer can sway them to sell sooner than planned.
Why Do Buyers Make Preemptive Offers?
In fast-paced markets like Silicon Valley, timing is everything. Buyers may submit preemptive offers to secure a property quickly, especially if they're worried about losing out to another bidder. A buyer might make this move if they feel confident about their understanding of the local market and want to bypass the competition on offer day. Often, they are on a tight timeline—perhaps another property’s offer deadline is approaching, or they need to close quickly due to relocation or personal reasons.
Do Preemptive Offers Work?
Preemptive offers can be effective if they meet or exceed a seller’s expectations. To be successful, these offers often include:
Competitive price: The offer must be strong enough to convince the seller to forego additional market exposure and potential bids.
Minimal contingencies: Removing contingencies, such as financing or inspections, makes the offer more appealing.
Proof of financing: Buyers should present a solid down payment and a clear commitment from their lender, showing they are ready to close.
While some homes are sold through preemptive offers, most properties still go through the traditional offer process.
When Should You Make a Preemptive Offer?
Timing matters. If a property is listed at an attractive price and the seller is aiming for a quick sale, a well-timed preemptive offer can catch their attention. However, it's crucial to gauge the situation carefully:
Is the home listed low to encourage multiple offers?
Do you have other homes you’re considering? A preemptive offer could help you move quickly if your first-choice property is likely to generate a bidding war, allowing you to focus on a second option if necessary.
It’s also essential to consider any guidance from the listing agent. Even if a listing states "no preemptive offers," situations can change. Having a knowledgeable agent who understands how to navigate these dynamics is critical.
Buyer Considerations Before Submitting a Preemptive Offer
Some buyers worry that preemptive offers lead to overpaying. It's true that making an early offer eliminates the opportunity to bid lower. In highly competitive markets like Silicon Valley, buyers are unlikely to "steal" a property below market value, whether it’s through a preemptive or traditional offer. In fact, the risk of overpaying is present in both scenarios, as there’s often no way to know how other buyers will bid.
However, submitting a preemptive offer does increase your chances of securing the home if it meets the seller’s needs. If it’s rejected, the seller may view you as less serious when reviewing offers on the set date. To avoid this, work with an experienced agent who can present your offer in a way that builds rapport with the seller and listing agent.
Risks of Making a Preemptive Offer
There are always risks involved with preemptive offers:
Rejection: If your preemptive offer is rejected, the seller might use it to negotiate higher bids from other potential buyers.
Perception: A low preemptive offer might lead the seller to view you as an insincere buyer, weakening your chances in future negotiations.
Limited time: If multiple preemptive offers come in, you’ll be in a fast-paced bidding situation, giving you little time to weigh your options.
For Sellers: Should You Accept a Preemptive Offer?
Sellers should carefully evaluate a preemptive offer by considering several factors:
Buyer interest: How many buyers have viewed the home online, requested showings, or downloaded disclosures? Strong interest may indicate higher offers could come in on the set date.
Personal circumstances: Are you facing a tight timeline due to relocation, pregnancy, or job changes? Accepting a preemptive offer could simplify the process.
Market competition: Is the local market flooded with new listings, or is inventory low? Understanding what other options buyers have can help determine the strength of the preemptive offer.
If you decide to entertain a preemptive offer, look at the numbers and feedback from potential buyers to judge whether it's the best decision.