The point of a preemptive offer is to “shock and awe,” to borrow a phrase from recent history. It’s an offer that’s sent in early that is so compelling and convincing that a seller and their agents will forgo the normal marketing period (or a previously set offer date) in favor of going with an offer that exceeds their expectations; it is an offer that is unlikely to be matched.
Some Popular Preemptive Offer Terms That Work
- High Price
- Short Escrow
- All-Cash
- Non-Contingent
- Free Rent-Backs (i.e., sellers can remain at property after close of escrow for free for a predetermined time period)
To assess how a preemptive offer will be received is difficult as information and motivations may be unclear. Usually it’s simple enough: Sellers will want a high price paid for with cash with as little hassle as possible that closes in the shortest amount of time. The choice to accept a preemptive offer for listing agents and sellers may be easy sometimes as the offer surprises and surpasses even the best of price performance predictions. But many times it’s not so clear cut as the opportunity cost question becomes especially pertinent.
- What’s the seller’s exit strategy?
- Why are they selling?
- How long has the property been on the market?
- What about similar inventory?
- Does the seller need a fast or short close?
- How much does the seller owe on the property?
- What was the seller’s purchase price? Initial Basis? (For capital gains purposes)
- What do the comps say?
- What can we do to make the offer and/or offer terms compelling enough?
What a Seller May Consider When A Preemptive Offer Comes In
- Would other buyers pay more with an offer date?
- Would the early moving buyers stay interested or move on to another property?
- Am I leaving anything on the table if I take this offer?
And What If It’s No?
Anecdotal evidence as to what happens if a seller says no is divided. Some early movers are genuinely interested enough in a property to wait and bid on an offer date while other early moving buyers are not. And 2 out of 3 times the offers received on an offer date will exceed a preemptive offer but there are those (painfully) notable times when the preemptive offer was indeed the best offer.
What we don’t want happening is to submit a relatively low offer that gives the seller a baseline price that their agent will now repeat to all the other interested buyers which effectively raises the final sale price for everyone. We should submit an offer if you feel strongly about a property as all agents are obligated to present any offers received to their seller within a reasonable time period (according to professional guidelines) and that even if there is an offer date. But if we do so we must be those people presenting that offer that shocks and awes.