Pros & Cons of Preemptive Offers

As San Francisco’s housing market has heated up over the past year, we’ve seen a number of preemptive offers in the market. Sometimes buyers will make an offer on a property before it even hits the market, in the hopes of getting a good deal. Other times, buyers will make preemptive offers after they’ve toured a property, in the hopes of beating other offers on the property. The strategy can be a powerful way to secure a home, but it also has some drawbacks.

 

 

A preemptive offer is a bid made on a property before it hits an official offer date or is even before the property is listed on the MLS. These offers often come with an expiry date that pushes the seller to make a quick decision and we always recommend our sellers have a “sell it now” price in mind. While preemptive offers can be frowned upon by sellers’ agents, realtors are legally obligated to present any offer that a seller receives.

 

 

Successful preemptive offers often have one or more of the following:

 

• Significantly over asking (in a hot market like the Bay Area the median list to sale price has been hovering around 12% or above
• All Cash
• No contingencies (such as loan, appraisals, or inspections)
• A quick expiration period (see above)

 

 

If it’s a great offer, it’s your choice to accept it. The problem with a preemptive is it’s only until you see multiple offers from competing buyers do you get a true sense of what the home is currently worth. 

 

 

Accepting a preemptive offer is a good option if you don’t want to prepare or stage the home, or have time for open houses.

 

 

If you want to sell quickly, it can be a good option. However, if the deal falls through you are back to square one without a backup offer.

 

 

The biggest drawback of accepting a preemptive offer is you may never know the potential of fielding multiple bids after the home has been fully staged and is ready for showings. In addition, if the deal falls through, you are back to square one.