Ministry Seeks to Regulate the Bidding War Process
Bidding wars in real estate transactions have become quite common. The process as I have previously described it, is just like the “wild west”.
To help regulate it somewhat, the Ministry of Consumer Services has sought to eliminate some of the worst problems.
On the scale of what’s wrong with this process “phantom offers” would have ranked at the highest. These are offers that really don’t even exist. There is no offer, and there is no potential buyer, and no one ever proceeds with the presentation.
However, let’s consider that particular issue. It’s wrong, it’s a lie, it’s false pretenses under the Criminal Code of Canada. So, there’s really no need for the Ministry of Consumer Services to step in. There is already appropriate legislation in force today to prevent this. That, of course, assumes that the law was being enforced.
Here’s the invitation from the Ministry to participate in the process:
“The ministry is seeking input on proposals that strengthen the transparency of real estate bidding practices
Both the Ontario Real Estate Association (OREA) and the Toronto Real Estate Board (TREB) have published their submissions. They are generally in agreement, with the exception that they both submit that the Buyer’s real estate agent should retain the Offer, and not the Seller’s agent (the Listing agent).
A year or two would be a sufficient length of time to hold copies of documents.
The problem here is more than just phantom offers. There are fewer phantom offers today than several years ago.
It was often something that someone just made up, and said “there’s another offer”. It wasn’t true, now there were a few people who had seen the property but none of them liked it enough to submit an offer. Nevertheless, just the fact that “there may be another offer” was enough to get the one real buyer to increase his bid.
Everyone knows: you can’t just make things up, you can’t lie, you can’t deceive, you can’t fraudulently induce someone to act to their detriment.
The “real issue” in the bidding war game is the UNFAIR advantage of:
1) the listing agent,
2) the listing brokerage and
3) other agents with the listing brokerage.
Yet, it is the outside involvement of others that is required in order to have this system (as broken as it may be) continue to operate and thrive.
What do we need to level the playing field:
1) outside supervision,
2) no access to confidential information,
3) full disclosure of the number of bids (and the withdrawal of bids),
4) full opportunity to participate,
5) opportunity to advance in the process, and
6) a clear set of rules and guidelines for everyone to follow.
I fear that these “real issues” will be ignored while we find an answer and restore faith in the system by addressing the phantom offer issue from 4 years ago!
If you wish to participate in the discussion, submit your concerns, asap, to the Ministry of Consumer Services.
Brian Madigan LL.B., Broker