What is a Pre-Emptive Offer? | San Francisco Real Estate Podcast
What are your feelings on writing or accepting a Pre-Emptive Offer?
What is a pre-emptive offer?
As of May 2018, the San Francisco real estate market is in such high demand that bidding wars between buyers occur if a house is priced correctly, or priced slightly under market value. Sellers will typically set a certain date and time to receive and review offers, called a due date. By setting a due date, usually anywhere 7-10 days, this gives the seller's home time and exposure on the market to be seen by more potential buyers. Sometimes a buyer's real estate agent will send in a buyer's offer before the due date, hence the name Pre-Emptive Offer.
How can a pre-emptive offer benefit a Buyer?
If a buyer writes a pre-emptive offer so good that, the seller can't refuse it, this can potentially benefit a buyer by getting their offer accepted and having the sellers take their home immediately off of the market. This can be a big win for a buyer.
How can a pre-emptive offer benefit a Seller?
If an aggressive buyer, (sometimes over-emotional buyer) is willing to offer a seller, an offer that the seller can't refuse, then sometimes it's in the seller's best interest to accept it.
Why do Listing Agents not like pre-emptive offers?
While a seller's acceptance of a pre-emptive offer is 100% legal, the majority of listing agents (agents representing sellers) do not like, and highly discourage the writing of this type of offer. Most home sellers and listing agents both agree that by exposing the property to the widest market possible through, internet marketing, videos, open houses, social media marketing and the press, will help bring more potential buyers to the table and to create multiple offers on the home. Without full market exposure, it's impossible to test the market to see if another potential buyer will make a bid higher than the original pre-emptive offer.
Listing agents can also receive a bad reputation in the real estate agent community for their sellers accepting pre-emptive offers. One thing to remember is that a listing agent is contractually obligated to submit any offer (pre-emptive or not) to a seller, once it has been received. It would be unethical for a listing agent not to submit an offer to a seller. The seller is the #1 decision maker and they get to decide who ultimately purchases their property.
How can a pre-emptive offer negatively affect a Buyer?
Offer dates are set by the seller for one main reason, to give all buyers a fair chance at seeing the home and to create a fair playing field for everyone involved. Some listing agents and some sellers will take a pre-emptive offer as a sign of, "the rules don't apply to me" type of attitude and will look at their offer as if those buyers are "cheating the system". This can look very bad for a buyer and a buyer's real estate agent. Sometimes a pre-emptive offer will go to the bottom of the pile of offers for these reasons.
I would love to hear your thoughts. Have you been in this situation before? Have you gotten a pre-emptive offer accepted or have you been beaten out by a pre-emptive offer? Let me know in the comments section below.