Preemptive Offer

Definition Of Preemptive Offer

In Silicon Valley homes are often offered for sale with a "suggested" offer date. This provides an easy way for the seller to weigh competing offers against each other and for potential buyers to prepare themselves to make an offer. However, the seller may decide to give a purchase offer consideration before the published date. He is under no obligation to adhere to the "offer date". One type of preemptive offer is simply one that is made before the published offer date. "Caveat emptor" applies to any promoted offer date.

After a seller decides to offer his home for sale, several things are done to get the home ready for sale. In Silicon Valley these activities most often include getting home inspections performed, correcting certain conditions called out by the inspections, preparing initial marketing materials, opening an escrow account, getting a preliminary title report, staging the home, etc. These activities often take three weeks or more. During these three weeks, active agents may learn that the property is going to be offered for sale. They may alert their buyers to see if they are interested in making an offer. Such an offer is sometimes made before the property is listed on the multiple listing service and would be considered another type of preemptive offer.

In both instances, the decision to accept or even consider the preemptive offer is made by the sellers, typically after asking the opinion of their real estate agent. Their real estate agent is required to present any offer to the sellers even if it is received before the offer date.

Preemptive Strategy

For a preemptive offer to be accepted it will have to have a strong appeal to the sellers. Generally, this will mean that the offer has very few contingencies and has a very good purchase price. The sellers will weigh this preemptive offer against their expectations and desires. If the preemptive offer has been crafted to meet the sellers' expectations and desires, the sellers can decide to accept the offer, being under NO obligation to stick to any "offer date".

Unless there are compelling reasons, both the buyers and the sellers will rely heavily on the advice given them by their real estate agents. The buyer has decided to make a compelling offer that minimizes his risk without costing more than necessary. The seller must judge any risks in the offer and weigh the price and terms of the offer against possible future offers. The experience and personal network of their agents is very important in both preparing the offer and deciding whether to accept it.

One of the typical contingencies in a purchase offer which must be weighed is either a loan contingency or an appraisal contingency. Even though the buyer may have been pre-qualified or pre-approved that doesn't guarantee that the mortgage underwriting will approve the loan on that specific property. Both the buyer and the seller must judge whether a loan will be approved and consider any fallback plans if it isn't approved. A major factor is the amount of down payment made.

A possible alternative to a loan contingency is an appraisal contingency. If the appraisal performed by the lender meets the specified value, then the contingency does not prevent the contract from being enforced but provides a degree of risk removal for the buyer.

Another typical contingency is a property inspection. Generally, the seller has performed some property inspections before any offers are received. There may have been some issues found which have an unknown repair cost which may need a specialist to estimate. Again, the experience of the real estate agents and their networks are key to judging the risk.