Juliana Lee Team

Preemptive Offer To Purchase

Silicon Valley Real Estate | JLee Realty

What Is A Preemptive Offer To Buy A Home?

There is no way to determine with certainty the highest price, that a home can be sold for. Homeowners, of course, want to get a high price when they sell their home. They don’t want to “leave money on the table”. Often, they will not accept a good offer shortly after listing their home for sale because they aren’t certain it is a good offer. They want to compare offers.

An agent representing the sellers will often publish an offer date on the MLS so that the homeowners can compare multiple offers. This helps reduce the hesitancy of the sellers to accept an offer that is good. A published offer date helps provide guidance to both sellers and buyers as to when the home is likely to be sold.

An offer to purchase the home made before a published offer date is a preemptive offer.

What Is The Purpose Of A Preemptive Offer?

A homebuyer may believe they understand the local real estate market and want to make a strong offer before the published offer date. They may choose to do this because they want to quickly find out if they can buy it: perhaps the offer date for their second choice is soon, or perhaps they have time limits for their purchase. The preemptive offer may be made in the hope that the buyers will have a better chance of buying the home of their dreams..

Do Preemptive Offers Work?

A preemptive offer should present the seller with an offer that the sellers judge to be at least as good as they anticipate. The goal is that the sellers will accept it and forgo both additional market exposure and the offers expected on the offer date.

A preemptive offer must have an attractive price. Generally, the buyers should not have contingencies for their purchase. The buyers should have their deposit ready and show they are confident in their financing.

A significant number of homes are sold to preemptive offers but most homes are sold via a non-preemptive offer.

How Do I Know When To Make A Preemptive Offer?

If the home is advertised at a low price, the sellers and the listing agent are probably hoping to achieve a quick sale. A strong preemptive offer would provide the desired quick sale. However, the seller is taking steps to get the best quick sale so don’t assume they will accept a weak offer.

If you have two or more homes you are seriously considering, knowing whether you can buy a particular home may provide the opportunity to make an offer quickly on your second choice. (You probably don’t want to be pushed into buying two homes at the same time by having two outstanding offers accepted.)

Often a preemptive offer will get more attention. If you can offer conditions of importance to the sellers, they will consider those conditions.

A listing may state “no preemptive offers”. When your agent talks to the listing agent, they may be again told they do not want a preemptive offer. However, no one is ever under an obligation to wait until the offer date. As much information as possible needs to be gathered, and a judgement made.

Every situation is different, every market is different, and every seller is different.

What Buyers Should Know Before Submitting A Preemptive Offer

You may have seen claims that making a preemptive offer increases the odds that you will overpay.  Yes, a competitive preemptive offer will forgo the opportunity to make a low offer and having it accepted, but the odds of “stealing” a property in Silicon Valley are extremely low. Realistically, you will almost never know what other homebuyers are going to offer. However not knowing what competing homebuyers are likely to offer can lead to overpaying whether it is a preemptive offer, or an offer made on the offer date.

Although a properly written preemptive offer will typically have a quick expiration, the listing agent may alert other prospective buyers they need to submit their offer right away. You may end up in a competitive offer situation.

Placing a preemptive offer can increase your chances of succeeding. If you meet the sellers’ expectations, you will be reducing their uncertainty and the disruption to their lives. If the seller rejects your offer, you can come back with a better offer on the offer date. However, if your preemptive offer was low, the sellers may believe you are an insincere buyer and judge you inferior to other similar offers made on the offer date. Your agent needs to know how to create a favorable opinion of you as buyers.

A sincere, well presented, preemptive offer can discover additional criteria important to the sellers.

Often buyers doubt their choices if the results seem too easy. They may even regret having their preemptive offer accepted. You must put in the effort to understand the Silicon Valley real estate market and you must have an experienced real estate agent providing advice you trust. Otherwise, doubts can make you believe you paid too much and regret your purchase. 

A couple key points from the California Department Of Real Estate

  • A broker or salesperson must present all offers as instructed by his or her principal.
  • A seller and/or broker is not required by law to respond to and/or reject an offer, either verbally or in writing.

(from https://www.dre.ca.gov/files/pdf/reb/rebfall_13.pdf)

What Are The Risks When Making A Preemptive Offer?

Buying a home is a very emotional process for most homebuyers. Not being adequately prepared when making a preemptive offer can leave you unhappy.

If your preemptive offer is rejected, the listing agent can tell new prospective buyers that the seller already rejected an offer above what they are proposing, reducing uncertainty, and often leading to stronger offers.

A rejected preemptive low offer may create an impression of you as an insincere buyer.

In some areas, a preemptive offer is also called a “bully offer”. As the words imply it may offend either the listing agent or the homeowners. Although an experienced agent is very good at focusing on business as a business and leaving personal emotions out of it, one of the agents may be inexperienced or may not eliminate their emotions. The sellers rarely have much experience selling homes and may be offended. Emotions can lead to unnecessary costs. However, it is also an opportunity for your agent to build trust in the eyes of the listing agent and the sellers.

What if there is more than one preemptive offer?

  • You will be in a fast-paced competitive offer situation with very little time to weigh your options.
  • Multiple preemptive offers will build the sellers’ confidence in their price.

As A Seller, How Do I Judge If I Should Accept A Preemptive Offer?

What are the numbers saying?

There are many numbers that roughly indicate how much interest potential buyers have in your home.

  • How many buyers looked at your home online?
  • How many have marked your home as a favorite?
  • How many agents have scheduled a showing?
  • How many people have downloaded disclosures?
  • How many people reached out to your listing agent?

How are showings going?

  • What feedback is your agent getting from agents who have shown your home to buyers?
  • Are agents having a hard time showing your home?
  • Can any issues be efficiently fixed or are they insurmountable (ex: location)?

What is your listing agent finding out at open houses?

  • Few people come.
  • Everyone mentions the same problem or everyone mentions a different problem with the home.

Do you have to sell your home by a certain time?

  • Already bought a new home.
  • Moving to a new job.
  • Pregnancy or health.

How annoying and costly are open houses and showings to you?

  • Do you have pets or special needs that require sacrifices every time someone visits your home?
  • Is your home or its contents at risk of damage or theft?
  • Are you paying mortgage on a vacant house?
  • Are you trying to sell a rental property that the tenants don't keep in pristine condition?

What other options do buyer have right now or might have in the near future?

  • Are buyers making offers on other homes with a lower listing price?
  • Are homes being newly offered for sale or are few choices available?
  • Is your home going to be much more desirable to just a few buyers who have a special interest in something unique about hour home? Was the offer from that right buyer?