Monday 29 June 2015

Curbing Fake Bidding Wars in Ontario

In such a hot Seller's market, it seems that some Sellers' agents are encouraging Buyers to bid up the price of a property by pretending to have other offers on the property.  I haven't yet experienced the worst of the phantom offers yet, because in the case of multiple offers I always ensure to be physically present; in all bidding situations I've been involved in I have seen the other agents.  RECO plans to make it harder for agents to fabricate bids by requiring listing agents to keep copies of all offers received on file for at least a year.

In July, Ontario's regulator of real estate agents RECO (the Real Estate Council of Ontario) will be introducing new rules for how agents must handle multiple offer situations.  First, let me say that I like these rules - not that I think they're necessary, but they're a good business practice that any professional and ethical realtor should already be following.  I always keep all offers that I receive on a property because that's just a good business practice in case anything pops up later in relation to the transaction.

Some inexperinced realtors may have bought into the media hype of the super heated market and the horror stories of Buyers losing dozens of bids due to bidding wars.  In my opinion this would only happen in the case where an inexperienced agent doesn't know how to properly value a property.  If you know what a property is worth and only offer that much, plus a small premium to win the bid, the offer presentation isn't that difficult.  Otherwise the agent may have you overpay due to a lack of knowledge - or worse, just to get your deal done and collect a commission cheque.

In a hot market where mistakes can be made and easily exploited by someone who has more knowledge than you, it's best to have an experienced professional in your corner.  You may still lose some bids due to people with either deep pockets or poor representation out bidding you, but you will waste less time with counter offers and waiting around to see what happens.  You might even skip some properties that aren't worth your time.
The new rules won't really change much in my opinion, because the good agents are already following the mandated practices to some degree at least and unscrupulous agents who fabricate offers could still get a third party to tender offers that they have no intention of following through on.  However, I do think that the new rules are good to have, because it brings awareness to the situation and now people will have to go one step further if they really want to exploit the system unfairly - meaning that there's a better chance that unscrupulous agents will get caught.