The Marin County real estate market is hyper-competitive with an incredible surge of people interested in buying properties and relocating to more suburban areas.  In a hot seller’s market such as the one in Marin County, you may find many buyers undergoing a bidding war and more often than not, having their offers beat out. 

Due to the COVID-19 pandemic, open houses are no longer an option. Buyers and their agents must book an appointment in advance to see a property. To allow for adequate time for appointments to take place and the house to be shown, listing agents will often set an “offer date.” The goal is to create a window of time that allows interested parties to see a property, review disclosures, inspections, and can prepare an offer if they choose to do so.  Offer dates are often posted on MLS, and when they are, there is an unspoken agreement that all interested buyers must wait until the designated offer date to submit their offers.

However, the pandemic has further intensified the market, and there is significantly more demand than there is supply, especially in Marin County. This increased pressure, along with the difficulties around seeing properties due to COVID, has caused many buyers to shift towards using more aggressive strategies to help get their offers accepted. That’s where preemptive offers come in.

What is a Preemptive Offer?

A preemptive offer occurs when a listing agent sets an “offer date” for a property, and a buyer submits an offer prior to the agreed-upon offer date. 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

 

 

When would someone submit a preemptive offer?

Simply put, an effective preemptive offer is often hard to refuse. 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.

 

When would a buyer not want to submit a preemptive offer?

From a buyer’s standpoint, preemptive offers are risky.

 

Risk #1. 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.

 

Risk #2: Your offer may be shopped around. If you submit an offer pre-maturely, 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 still happens.  

 

Risk #3: You may accidentally purchase a house that’s a “money pit”. Even in a healthy market, reviewing disclosures, reading reports, and doing your due diligence on a property takes time. You want to make sure the house you’re purchasing Is a good investment. However, many preemptive offers waive all investigation periods. Meaning you take on the house no matter how many hundreds of thousands of dollars it may cost you.

 

Risk #4: 

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 we didn’t follow the rules.

 

What are the pros/cons from a seller’s standpoint?

The goal of a seller is to get the best offer for their home, and getting the best offer requires deploying the right strategy. As one of the highest producing Real Estate teams in Marin County, we pride ourselves on our ability to help navigate our sellers through these tricky decisions. We use our relationships with other agents to help gauge the market’s response to a listed property before going forward with setting an offer date. A well-received property is an indication that the seller will get multiple offers. In those cases, our sellers almost always get the best offer when they wait until the designated offer date, and we advise them to reject any preemptive offers.

 

“One of our recent listings was showing to be extremely popular, so we counseled our sellers to set an offer date after 6 days on the market. Just a couple of days later, we received a preemptive offer.   It was an extremely enticing offer for our seller, 200k above our list price, all cash, 5 day close. It was a tough situation because this was a really strong offer. But I felt strongly that given the level of interest, it was in my seller’s best interest to reject the offer and wait until the offer date. Thankfully, the sellers took my advice. We ended up receiving 5 offers, including the preemptive offer who decided to resubmit. We accepted a different offer that was 280k above asking price, and my sellers were extremely thankful they waited.”

–    Liz McCarthy

 

“One of our other listings received a preemptive offer that wasn’t very strong. 25k over asking, loan contingency and an appraisal contingency. My sellers felt content with the offer, and worried that this was a sign that the property wasn’t going to go very high. I asked them to trust me, and to wait until the offer date. We ended up receiving an offer that was 400k over asking! The offers exceeded our expectations, and it was a great lesson to trust the process.”

–    Shenna Moe