The property had barely been entered into the MLS (Multiple Listing Service), had been on the market for less than an hour, and had only just debuted when I received a phone call from a well-meaning, but slightly naive Agent asking if the Sellers would entertain a preemptive offer. A "preemptive" offer is an offer that comes in prior to the offer date AND only exists in a seller's market when more than one offer is anticipated.
"Thanks very much for your interest, but we'll be accepting offers a week from Tuesday at noon. Please join us then," was my polite response.
In almost any other marketplace in the United States, offers are presented at will. They're just business as usual and these offers are happily received, negotiated and accepted in due course. Negotiations in other parts of the nation can take days, if not weeks, as Buyers and Sellers seek to find a meeting of the minds, and listings can take months, if not years, to sell as they wait for a willing and able Buyer to arrive on the scene . . . .
That's NOT the case here in the Bay Area. Here, early offers are often held at bay and homes that don't sell in two weeks are considered overpriced, or have other fatal flaws that are not easily corrected or overlooked.
Because we have more demand than supply in the East Bay, we are still in the enviable position of setting a "strategic" listing price, with the goal of attracting several Buyers to the table. Last week, clients of mine bid on a hip, urban residence in the Temescal and were one of 17 offers that day. (Only eight had been confirmed.) That property sold nearly 60% above its list price to Buyers that could comfortably waive ALL of their contingencies, including the loan and appraisal conditions. That's an important distinction as properties that trade vastly above their list price often have a difficult time appraising - especially if the sale sets a new bar for the neighborhood! Higher down payments and ALL-CASH purchases allow the Buyers to comfortably waive their financial contingencies.
Granted, that's an extreme case and certainly a gift for those Sellers, but nevertheless, it's a graphic example of why most Bay Area Sellers choose to wait and run a full two-week marketing period before sitting down to hear offers. They too, are hoping for "the gift" and more often than not, receiving it. "The gift" is the offer that comes in head and shoulders above the others and definitively wins the day. It is usually a sales price far beyond normal expectations; thus, the aptly-named moniker - "The gift."
I'm not suggesting that the preemptive offer isn't a savvy and aggressive course of action by Buyers and their Agents, nor am I discouraging the practice. To the contrary, I have successfully employed the preemptive offer myself, securing houses for my clients before others had a chance to compete. I have also helped Sellers navigate these early offers as well, delivering excellent results on several occasions. Moreover, Cliff and I sold our own much beloved Piedmont property "preemptively" when an offer arrived, unexpectedly, that was far too good to pass up and therein lies the key to a successful preemptive play: a preemptive offer must be jaw dropping! It has to be so strong that the Sellers never waiver, nor wonder if they could have gotten more money two weeks down the road.
Here's what a preemptive offer isn't . . . it isn't an offer below the list price - or even at asking - unless the asking price is well above the perceived market value.
"Would the Sellers accept a full price, all-cash offer today?" came the hopeful request.
(Uhhh, no. What exactly would be the Sellers' motivation accepting a lukewarm offer today when our expectation is that the house will sell for much more, and have priced it "strategically" to attract multiple offers???)
Unless it knocks their socks off: "No, but thank you for asking."
Here's the thing I'm curious about. Why ask? If the goal is to beat all other Buyers to the punch, just write the offer. As Realtors, the law requires us to submit any and all offers we receive to the Sellers within 24 hours (whether or not we've formally set an offer date). If I know your intention is to present early, I'm going to quickly get on the phone and alert everyone else who has requested a disclosure in an attempt to create the very competition you're trying to avoid. In which case, you'll still be bidding against other Buyers.
If, however, the intention is to write an offer that's simply average, hoping a naive Seller will jump at it, you'll be tipping your hand, so don't do it.
BTW, while cash remains king, whether the money is coming from a lender or the Buyers' personal holdings, it's all cash to the Seller at the close of escrow; thus CASH rarely equates to a discount on the sale price. Sellers and their Agents appreciate and like the all-cash offers for reasons that pertain to the loan and appraisal conditions, but I haven't yet met the Seller who won't wait a few extra weeks for a loan to fund, to secure a far higher net result. Have you?
On the presumption that "the early bird gets the worm," you better make sure your bird is a hawk. Otherwise, I'll see you on the offer date where you can expect that your well-intentioned "full price, all-cash offer" will likely be utilized as leverage to accrue a much higher selling price!
How can I help you?
(Not just a Realtor, but a trusted advisor, advocate and resource in all things real estate!)
Julie Gardner, has been writing The Perspective for 15 years and has published more than 600 essays. She is also a frequent contributor to the Sound Off column in the Real Estate section of The San Francisco Chronicle.