The concept of preemptive offers a fun, interesting, and exciting topic within the real estate industry. Many sellers aren’t aware of how offer review periods work, which means that they quickly jump on the first good offer that they get for their home. Preemptive offers have been quite popular here in the Bay Area for quite some time, and they quickly gained steam in the rest of California. Now the rest of the country is picking up on the idea of preemptive offers, but as I always say, as California goes, so goes the rest of the world.
If you’re not familiar with preemptive offers, I’m going to cover a variety of topics today. What are they? Are there different kinds? Should you accept a preemptive offer if you receive one?
When you meet with a realtor to discuss selling your home, he or she will probably present you with a marketing plan. This plan covers a wide variety of topics, ranging from their online marketing strategy to the details of how they will uphold their end of the contract.
Within that marketing plan, the realtor that you’ve chosen should present you with the date that the two of you will sit down and review any offers that you’ve received on the property. When the property “goes live,” which is the term that refers to when the home is listed in the local MLS, offers will start coming in, especially in a market as hot as the market in the greater San Francisco Bay area. On the review date that you and your realtor have agreed upon, he or she will sit down with you and start looking at the offers that you’ve received up to that point.
There are actually three different types of preemptive offers. The first kind, which is certainly the most common, refers to offers that are reviewed before the review date that you and your realtor have agreed to. It’s not uncommon for buyers or their real estate agents to reach out to the buyer’s agent and ask if the agent and the client can review their offer, even if the offer review date hasn’t arrived.
The other type of preemptive offers is those that are received before the house officially hits the market. Within this type of preemptive offer, there are actually two subcategories. It’s recently become popular for realtors in the Bay Area to leak information about a listing to other brokerages in the area before the home officially hits the market. In general, this is done to create some kind of buzz among agents who are representing buyers that may be looking for a home like the one that’s being listed.
The second subcategory here refers to deals that can be reached between a seller and a buyer before the realtor has an actual opportunity to list the property. It’s not uncommon for someone who is selling a home to make a listing appointment, receive an offer on the home from someone they know, and then take it.
There are downsides of preemptive offers for both the seller and their agent. Obviously, if the property is sold privately, the agent gets cut out of the deal, but that’s not the biggest threat to agents. Realtors in California and across the country are bound by the National Association of Realtors’ Code of Conduct. One of the clauses in that code of conduct is to be “clear and honest in all communication.” When the agent publicizes the offer review date and starts reviewing offers before it, it could easily be argued that he or she is not being “clear and honest.”
However, the biggest danger of preemptive offers is to you as a buyer. When you sell your home before you’ve had a chance to review all the offers, you run the risk of not getting as many offers as you would like, and the price may be lower than one of the offers that you failed to review.
In virtually every case, I tell my clients to avoid accepting preemptive offers. Obviously, I want to do everything to abide by NAR’s Code of Conduct, and when I put offer review dates on my listings, I believe in abiding by that. However, my biggest reason for advising my clients against accepting preemptive offers is for their own good.
I recently closed a transaction in which I represented the buyer. She found a home that she loved, and we put in an offer on it. Shockingly, the seller quickly accepted the offer. I say that it was shocking because I truly believe that the seller could’ve gotten far more out of his home than my client offered. However, he was determined to sell the home quickly and took the offer.
Instead of accepting a preemptive offer, view it as an opportunity to counter the buyer’s offer. If the potential buyer is putting in an offer and asking for a quick review, it’s obvious that he or she loves the property. With that in mind, consider the risk that you’re taking by accepting this offer. There could be dozens of other offers coming in, and those offers could be for more money. If you’re truly interested in the preemptive offer, use it as an opportunity to get more out the buyer instead of signing off on it.
As long as there are homes for sale, there will be preemptive offers. People will always want their offer reviewed before the review period, people will always try to make an offer on a home they like before it hits the open market, and people will always try to pay as little as possible for the home that they’re buying. Instead of jumping on these preemptive offers and costing yourself money, talk to your REALTOR® about how to wait things out and review all of the offers on your Bay Area home.