Brian Madigan LL.B., Broker

RE/MAX West Realty Inc.,
Independently owned and operated

96 Rexdale Blvd. 
Toronto, Ontario 

Phone: 416-745-2300

Cell: 647-404-8150 
Toll Free: 1-888-507-0817

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Phantom Offers: Are they Real?

April 10, 2014 - Updated: April 10, 2014

Phantom Offers


The real question is: does the phantom offer really exist!


Maybe, and maybe not. 


A phantom offer, of course, is an offer which is make-believe, it’s imaginary, it's simply pure fabrication. The offer exists only in someone’s mind. Now, the question is who? 


With the hot real estate market in the Spring, more and more phantom offers seem to be in existence.  


Phantom offers have been a rather widespread and growing problem. Yes, most agents have heard of them! These are offers that come out of nowhere.  But, in large measure, most real estate agents appreciate that such pure fabrication is unethical and highly improper. RECO does have at least one such case in its disciplinary roster. However, there are fewer “phantom offers” than there used to be.


A prospective buyer views a property and decides to submit an offer. All of a sudden, they hear “there’s another offer”. So now, rather than being able to negotiate they pretty well have to come up with the best overall offer that they can. Often this means deleting any conditions they might have had regarding the purchase including financing and home inspection. There are times when this can be crucial. 


So, a few things happen: 


1) they are told that they are in competition, 

2) both offers are very close to one another, 

3) they should go back, revise their offer, and then re-submit it. 


It has also been rumoured that some agents have arranged for their friends, relatives, and other agents to park their cars outside the house the evening that offers are submitted to create a frenzy of activity. Talk about home-staging, this really takes it to the next level. Stanley Kubrick and Steven Spielberg would be proud to have staged such a production. Personally, I am pleased to say that I have never seen or been made aware of such a practice. And, to the extent that I have heard about it: the matter took place “back in the day”.


Bidding wars have become the “norm”. However, surely not all properties are really worth fighting about. 


And, of course, all these phantom offers are illegal. The present ethical guidelines clearly prevent this sort of tactic. Not only is it wrong and deceptive, it is against the law. There are consumer protection laws in the Province as well as federal legislation in the Competition Act and the Criminal Code which would prevent this type of behaviour.  


If the status quo remains in place, then nothing is going to happen. 


The real problem is that phantom offers, although often suspected are rarely reported. Agents frequently don’t want to become involved in this type of controversy. As a result, it falls to the Real Estate Council of Ontario (RECO) to investigate. And while they will, they first need these cases to be reported. 


Actually, it is a lot like “speeding”. There are already rules against speeding, but if the police never set up radar, then it’s unlikely anyone is ever going to be caught. 


In a hot market, on many occasions, there truly are second, third or multiple offers. But, surely there isn’t always a mysterious second offer that suddenly materializes the same day as the first offer, after the property has been on the market for over 2 months. Naturally, these are not cases where the listing agent has set up the property for a “bidding war”.


Let me suggest the following: 


1) all offers shall be properly registered,

2) the broker is responsible to maintain copies of all offers submitted through his office,

3) RECO shall periodically review the files of a brokerage to ensure that offers were in existence and legitimate in multiple offer circumstances. 

If this is the case, then this is like radar for phantom offers. The perpetrators are caught and punished, then this will deter others and be of ultimate benefit to the consumer.  


The good news is that there is some consumer protection enroute. The Real Estate and Business Brokers Act, 2002 will soon have some regulations related to bidding wars. All offers will have to be in writing. So, no more of this “make-believe stuff”. All listing agents will be required to produce and have available copies of all offers for a RECO audit. The actual regulations on this point are being worked out.


I think that it will actually be the buyer’s representatives who will be obligated to maintain a copy. Buyers don’t really want their offers sitting in a listing agent’s desk. This is for the purposes of confidentiality. That’s not a problem. RECO could get the name of the buyer’s representatives from the listing agent and then retrieve copies as the case may be.


In any event, all of this is being worked out these next few months. By then, the bidding war season will be over, and it won’t matter until next Spring.


Brian Madigan LL.B., Realtor is an author and commentator on real estate matters,


Tagged with: phontom offers bidding wars toronto
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Brian Madigan LL.B. Broker

RE/MAX West Realty Inc. Brokerage

Independently owned and operated

96 Rexdale Blvd. , Toronto Ontario,

Phone: 416-745-2300

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