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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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You are “Close”, very Dangerous words in a Bidding War!

May 9, 2017 - Updated: May 9, 2017

You are “Close”, very Dangerous words in a Bidding War!

Right now, the Toronto market is “hot”. It was “hotter”, but we still have bidding wars.

Consider the following situation:

Buyer #1

Mary is interested in purchasing in a certain Townhouse Complex

Mary retains Fred a real estate agent to assist her

Fred does some research and indicates that there are 400 units, and none have sold over $600,000

On bidding war night, Mary submits a bid of $625,000 through Fred

Mary was unsuccessful, there were 11 other bidders

Fred indicates that the property sold for $770,000


Although disappointed, Mary knows that she could not have outbid the high bidder



Buyer #2


Bill was in the market and had hired Barney as his agent


Barney took Bill to this same complex and participated in the bidding war


Bill was pleased since he was the successful bidder



The Bidding Process


Wilma was the Listing Agent, and she said in writing to all 12 bidders, “bring your best”, one round only”


And, later she encouraged the top 4 to participate in a second round, since the Offers were “CLOSE”. This was communicated to all four by text.


The Offers – Round 1


$611,500, $612,000, $613,000, $615,000, $619,054, $625,000, $627, 888, $631,000 $637,345, $645,000, $647,777, $745,000


The Offers – Round 1 and Increases in Round 2


$637, 345             $642,000

$645,000              $651,222

$647,777              $647,777

$745,000              $770,000


The Clear Winner!


Congratulations, Bill was the clear winner at $770,000.


Market Conditions


The market went to Hot from Very Hot. Another unit, in fact, better than the one which Bill just purchased went for $710,000.


The mortgage company has discounted the value of Bill’s unit. He can still complete the purchase but he now has to sell some stocks in order to raise the cash that he needs. What’s more, is that Bill has to pay capital gains tax on his stocks. Overall, Bill is not happy. He gets a new agent and puzzles over what went wrong.


The Lawsuits


Bill likes Barney but has now concluded that Barney was not that competent. The new agent was aware of this bidding war and represented one of the other unsuccessful parties. As luck would have it, that agent knew all the other participants and after a few phone calls was able to reconstruct the Offer and Bidding War process. That’s why we have the numbers!


Bill does not want to sue Barney.


Bill is annoyed at Wilma, for indicating that the Offers were “close” in the first round when clearly, he was already the clear winner by a longshot.


The statement that the offers were “close” was not true in fact, it was simply said in an effort to escalate prices in the second round.


Wilma had some options:


1)    Accept Bill’s first bid,

2)    Signback Bill’s first bid,

3)    Call for a second round.


Now, you will appreciate that if Wilma simply said that “we’re having a second round”, then, that would be fine, annoying, but still fine.


The issue is whether Wilma has breached her ethical requirements or misrepresented the bids. Is this wrong? Is this a breach of ethics? Is this a misrepresentation? If this is a misrepresentation, is it made in her capacity as one who is independently conducting the  process or is this statement made as an agent, and as such binding upon the Seller.


Bill’s choices:


1)    Complain to RECO,

2)    Commence a Civil Suit against Wilma,

3)    Commence Civil Suit against Seller.


Complain to RECO


Complaining to RECO could eventually result in a Disciplinary decision against Wilma. It could take two years or so. There may be a fine, perhaps $2,500 which is payable to RECO. Bill gets nothing. However, he pays his own lawyer for drafting the complaint in the first place.


Commence a Civil Suit against Wilma


This is a possibility. The “close” reference cost him $25,000.


Commence Civil Suit against Seller


This inaccurate misrepresentation did cost Bill $25,000, but if the contract itself could be set aside for misrepresentation, then Bill would save much more. Current prices are $710,000 and falling. So, that would be $60,000 off the top.



“Close” the Meaning


Here are some dictionary definitions:


·        having the parts or elements near to one another,

·        being in or having proximity in space or time,

·        a short distance away or apart in space or time.

·        with very little or no space in between,

·        (with reference to a competitive situation) involving only a small margin between winner and loser.


So, it would be left to the Courts to decide whether $745,000 and $647,777 are indeed close. In fact, the highest first bid was 15.01% higher than the second one. Is 15.01% close when it comes to bidding on real estate? Looking at increases in the GTA prices over the last decade; that would be about one year’s increase in value. Expressed differently, would a one year’s difference in value be “close”?


Interesting, and yet to be determined!


Brian Madigan LL.B., Broker

Tagged with: agents bidding wars lawsuits litigation ontario law
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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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