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May 28, 2024

The Pros & Cons of Preemptive Offers

Multi-Unit Edwardian

Your agent has shown you a great two-bedroom condo in Cole Valley before the first official open house. You love the property and are ready to make an offer, but the sellers and listing agent have already set an offer date. Should you seize the day and submit an offer anyway?

Buyers make preemptive offers when they want to avoid competing with other buyers. And especially around the holidays, sellers may be open to accepting a quick offer if they are motivated to wrap up their sale by the end of the year. Indeed, sellers on two of my past listings agreed to accept extremely strong preemptive offers (both for all cash and with no contingencies).

Though preemptives have their benefits, there are definitely a few buyer-side drawbacks. Before you rush out to write that offer, here are some points to consider:

You might be overpaying. Your preemptive offer has to convince sellers that they won’t get a better deal from someone else. In most cases—particularly in hot neighborhoods where there’s limited inventory—you’ll really have to hit it out of the ballpark on price, or even go above the highest comp. However, there are some instances when properties come on the market with list prices that are closer to the expected selling price. In that case, your price will need to be convincing, but your inspection and financing terms, as well as your close of escrow timing will also need to be tight. Most sellers will be hesitant to accept a preemptive offer that includes contingencies. If you’re planning to pay in cash, that’s a big advantage. But even at that, you’ll need to be strong on price and omit contingencies.

Your offer may be shopped around. Once your agent presents an offer to the listing agent, he or she is supposed to discuss the details of that offer with only his or clients. However, there is a chance that agent could talk about your offer with other buyer agents or buyers who have already also expressed interest. (This is not ethical, but I’ve seen it happen.) Suddenly, the playing field is a bit more level, and you’re not in a great position. You may find that someone else has suddenly submitted an amazing cash offer for more than the price you offered.

The seller can reject your offer. If the sellers feel that they might be able to get an even higher offer by waiting for an offer date, they may reject your bid. Which means the contents of your offer are “out there” and subject to being potentially shared. Rejection typically means you can expect to up your price on the offer date.

You just might get the property. If your offer is solid and sufficiently high in price, the sellers may give it the thumbs up and you can open your escrow. No waiting around overnight for a response, being countered or put in backup.

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