Preemptive Offers- To Be Offering ot Not To Be Offering , That Is The Question
The Marin Real Estate market is hyper competitive and has only gotten more so in 2022 with a scarcity of inventory and several interest hikes.. In this super charged seller’s market , you may find many buyers undergoing a bidding war and more often than not, having their offers beat out.
What’s a buyer to do? Sometimes, a buyer and their agent will decide to submit a preemptive offer. What’s a preemptive offer, you ask?
A preemptive offer occurs when a listing agent sets an offer date for a property and posts it in the MLS, Often, the listing agent also posts that the Seller requests “No Preemptives” further clarifying the wishes of the Seller. Yet, the Buyer decides to submit a preemptive offer anyway.
Preemptive offers are typically
· Competitive offers (many times they are all cash)
· Significantly over asking price
· No contingencies (including loan, appraisals, inspections)
· Have a quick expiration period
A buyer submits a preemptive to try and leap frog over the competition. The goal is to formulate an offer that will convince the potential seller that he/she will not get another offer like this. Buyers usually do this when they really love a property and want to avoid going against the competition.
But here’s the risk to the Buyer:
You might be overpaying. By submitting a preemptive offer, you may be jumping the gun by assuming that the property will be more sought after than it actually is. You don’t allow yourself or your agent enough time to feel out the competition and get a sense of how many offers you’re competing against, and run the risk of paying much more than you need to.
Your offer may be shopped around. If you submit an offer prematurely, a listing agent may use it as leverage for other buyers to submit higher offers, and thus, create a bidding war. Though the practice is not ethical, it can happen.
You also run the risk of upsetting the listing agent. When they indicate that no preemptive offers will be entertained but you submit one anyways, it puts a lot of pressure on the sellers and in the end can backfire because the listing agent will be upset that the buyer didn't follow the rules.
And what are the Seller Risks:
The goal of a seller is to get the best offer for their home, and getting the best offer requires deploying the right strategy. A well received property is one that is well prepped and priced and the response from the market is often immediate. If a property is well received, that is an indication it will receive multiple offers. In that case, it is usually best for the seller to wait until the designated offer date to review all the offers and let the market take the property where it should land. Also, by waiting until the offer date, the seller will truly know what their property is worth. There won’t be any question from taking a preemptive of “did I leave money on the table”. And, that preemptive offer? Well, if they were the best offer and wanted the property that badly, they would wait like everyone else and make their offer on the offer date.