Starting July 1, the Real Estate Council of Ontario will be enforcing new rules that place strict criteria on what constitutes a bid on a residential property.The goal is to crack down on the elusive phantom bid, which some homebuyers suspect occur in bidding wars, but are unable to prove.The scam involves a sales agent hinting to prospective buyers there are other bids as a way to coax them to bid higher. “You say, ‘We’re expecting another offer. I do have another offer. You may want to go back to your client and make sure this is their best offer’,” says said Joseph Richer, registrar of RECO. “You are suggesting there might be competing offers when there may or may not be.”With the new rules, “You cannot suggest or even imply that you have an offer unless you have one in writing, signed sealed and ready to be delivered,” said Richer, while adding there have been very few formal complaints about phantom bidding over the years.
Richer doesn’t say fake bids are not part of the real estate landscape. Instead, he suggests they might be a bigger problem in some municipalities than others. “When I have been out at different boards and associations, some have said, ‘It’s not an issue, but it does happen every now and then,'” he said.
You cannot suggest or even imply that you have an offer unless you have one in writing, signed sealed and ready to be delivered
The current rule is clear that no offer is valid until it is signed. The new rules will force brokerages to keep an offer, or an equivalent summary (basically, a list of buyers and contact info with name of broker, date and time), on record for one year.
However, no amounts will actually be included in the history, and suspicious buyers will only be able to find out if there were truly other offers after the bidding, through a complaint to RECO. In which case, a realtor found guilty of creating a phantom offer would be committing a provincial, though not a criminal, offense.