What You Need to Know About Pre-emptive Offers
In today’s hyper competitive market, there is a resurgence of buyers eager to get a leg up on competitors by presenting what’s called a pre-emptive offer. Pre-emptive offers are presented before or within days of a property being listed, usually significantly above asking price, and may contain no contingencies for things like inspections, loan approval and appraisal, as well as promise a quick close.
In several San Francisco Bay Area Cities, Realtors would typically place properties on the market for two full weekends in order to expose them to the widest possible number of buyers and publish an offer date in the MLS so people can prepare their offer, review disclosures, inspection reports, etc.
However now that housing inventory is very tight in the mid-range (between $500,000-$800,000), there are many buyers who have lost out on several properties and are increasingly fatigued by the seemingly never ending cycle. They become desperate and simply want the whole process to be over.
This is disrupting the real estate marketplace. Working with a local real estate professional with a deep network of connections can really pay off as you look for you next home or want top dollar when you sell your current home.
So what is the process for making a pre-emptive offer?
You and your Realtor must be at the ready so that when something does hit the market that looks appealing and generally fits your “must haves”, make arrangements to see the property right away, before any open houses, or even before the sign goes up.
If you decide you like the property enough to make an offer, your Realtor will contact the listing agent to ask if the sellers would accept a pre-emptive offer. If the answer is yes, your agent will have to quickly assemble a clean, well-written offer with a price and terms that will convince the seller that they are getting somewhere near or surpassing the price which they were expecting in a competitive bidding process. This is a onetime shot, so make sure this is your “best” offer.
From a seller perspective – The key is knowing the local real estate market and your home’s true value. The first offer is usually the best, but make sure your home will appraise and the buyers are legitimate. This is why you have a Realtor to vet the pre-emptive offers & buyers. A potential downfall for the seller, is without going through the 2-week marketing cycle and it becomes publicly known that a pre-emptive offer has been accepted, it is very difficult to attract any back up offers should the buyers not perform or decide they don’t want the property after all. Your property has essentially been off the market for several days, has lost its initial luster, and then will go back on the market, which may not attract the price sellers were hoping for, in addition to making potential buyers weary of making an offer, fearing there might be something wrong with the property.
As always, discuss the pros and cons of this phenomenon with your Realtor so you are fully informed before making a decision that you may regret in the future.