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You are here: Home / Real Estate Classroom / What is a Preemptive Offer on a House?

What is a Preemptive Offer on a House?

May 12, 2017 By Holly Rose Filed Under: Real Estate Classroom

A pre-emptive house offer is an offer made by a buyer in advance of a pre-determined offer date. Buyers use pre-emptive offers to try to dissuade a seller from waiting for other offers.

 

Do pre-emptive offers work?

 
A pre-emptive offer is often an effective strategy in a competitive market. When many buyers vie for the same house, doing something to stand out may be key. If the pre-emptive bid is strong enough, the seller may be happy to say yes and celebrate a quick sale.


Why can’t the seller keep my offer and wait for more offers?

 
A pre-emptive offer will have a built-in deadline, and that timeframe is short by design. If the seller stalls, the offer expires. The seller must choose between the pre-emptive “bird in the hand” vs two or more in the bush at a later date.
 

How often do pre-emptive offers happen?

 
In the San Francisco East Bay area, pre-emptive offers are not the norm, even in a competitive market. Published offer dates often contain the notation “no pre-emptive offers.” Sellers understand that the highest selling price is usually the result of competition.
 

What if there is more than one pre-emptive offer?

 
When more than one Buyer decides to make a pre-emptive offer, a mini bidding war sometimes occurs. The listing agent may decide to notify all other interested parties, and move up the offer date. In this case, the original pre-emptive bidder loses their competitive edge.
 

How do I know when to make a pre-emptive offer?

 
An off-market listing may be a great opportunity, or a situation where a seller needs a fast sale. A seller may set no offer date, so the pre-emptive bird gets that worm. The listing agent may be unfamiliar with local custom, and may tell the seller to take offers any time. It’s important to remain vigilant for any time the door is open to a pre-emptive offer.
 

How do I know when to accept a pre-emptive offer?

 
It’s a good idea to have a “bird in the hand” price in mind before you put your home on the market. That way, if a buyer forces the issue, you won’t have the stress of facing that ultimatum on the spot. If you are midway through your marketing period without much interest, you will be glad for a bird in the hand. But if eager buyers are mobbing your house, it’s a good bet that one of them will pay more than your pre-emptive buyer.
 

What are the risks of making a pre-emptive offer?

 
If the seller accepts your pre-emptive offer, you will never know how much you overpaid. If you had waited for the offer date, would you have been able to get the house for a lot less? And if the seller does not accept your pre-emptive offer, will word get out, so other buyers can outbid you later? The most dangerous risk is alienating the seller or the seller’s agent. If the agent has made it clear that pre-emptive offers are not welcome, insisting is not going to win you any points.
 

Does the listing agent have to give the seller my pre-emptive offer?

 
Yes they do. The listing agent must present all offers to the seller, including pre-emptive offers. This is why it may annoy both the seller and their agent, if you insist on an early submission. A good agent will educate the seller up front about the pros and cons of pre-emptive offers. If you dive-bomb the agent with an unwelcome offer, she will present it to the seller because she must. But if the seller is already resolved to wait, you will get no response.
 

Does it ever make sense to force a pre-emptive offer?

 
Almost never. Over the course of my 25+ year career as an East Bay Realtor, I have created a pre-emptive bidding war exactly 1 time, and it was successful. But buyer’s agents must respect sellers and their agents, if they want to be effective. Nobody likes a bully, and a buyer who uses unclean tactics will not be successful.
 

What is an example of a successful pre-emptive bid scenario?

 
Susie and Joe have been house hunting for 6 months, and they are getting discouraged. They have bid on 4 houses, but they always bid far over the asking price. But they keep losing out to other buyers with more cash. They have a baby on the way, and their sights are set on the Albany school district. If they don’t get a house soon, they are going to have to give up and pay for a pricy private school.
 
Millie Brown has lived in her Albany home for over 50 years. She and her husband raised a big happy family here, but her husband has passed, and her health is failing. She doesn’t like the idea of a bunch of strangers tromping through her house, and neither do her cats. She doesn’t trust real estate agents much, and she doesn’t believe she needs to create a feeding frenzy. Her niece down in San Leandro is a loan broker with real estate license, and that will do just fine.
 
The niece puts Millie’s house on the market, with no offer date posted. Susie and Joe’s agent calls the niece immediately to get more info. “I guess I’ll wait until after the open house and see what happens,” the niece says. Sensing an opening, Susie and Joe’s agent asks if it’s OK to bring a great offer right away. The niece says “Sure, if it’s a good one.”
 
Susie and Joe are ready to pounce. They know exactly what houses are selling for in Albany, and they are happy to bring a compelling bid. They are willing to pay even more than top value, to avoid competing with the cash buyers. They spring into action, and sign the offer that same day, with a 24-hour expiration deadline.
 
Millie and her niece may not know local real estate custom, but they know a juicy price when they see it. They love the idea of Millie and her cats being able to avoid all the hubbub. They also love the fresh-faced young buyers, and the thought of a new baby growing up in the family home. The niece tells Millie to take the offer.
 
Susie and Joe get to secure a home in their ideal location, in a market they feared had shut them out. Millie and her cats get to transition to their next home without stress or worry. Everybody lives happily ever after!
 
 
 
 
 
 

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Holly RoseHello, I’m Holly Rose. I help people buy and sell homes in the East Bay. I specialize in fine old homes with interesting or historically significant architecture.

I have been a top-ranked residential Realtor for 25+ years. I am deeply connected to our local community, and I love my work. Most of my clients come to me through word-of-mouth referral. Let’s talk.

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