Bidding wars are a common side effect of hot real estate markets. Whether you’re bidding against one or five buyers, the situation is always tense. It’s often an all or nothing offer – go big or go home. When multiple offers are on the table, the only strategy is to aim high, which is great for sellers. So great, in fact, that some sellers are trying to profit off of “fake” bidding war situations.
A Toronto realtor is calling for tougher bidding war rules after her client was duped into paying $90,000 over asking for a midtown home. The couple believed that they were in competition with three other bidders for the property, when in all actuality they were the only interested party.
Realtors like Stern are calling for stricter rules in regards to bidding practices, including making it mandatory for listing agents to provide potential buyers with the contact information for all brokers and agents making offers on the same property prior to the offer presentations.
Call for Action
Stern isn’t the only one angry about this kind of buyer abuse. The Real Estate Council of Ontario, the province’s regulatory body, has received a ton of requests and complaints concerning this issue – from both bidding winners and losers. Currently, the Council is reviewing whether legislative changes are needed.
Under the current RECO rules, selling agents must disclove how many offers there are on a property. However, a lack of oversight in this area has lead to the emergence of “phantom bids” whereby agents claim there are non-existent bids on a property. As of today, only four agents have actually been disciplined for this unethical activity, however agents like Stern believe that there are many more offenders out there.
If legislation were changed, it’s important to note that bidder lists would only be used in cases where RECO officials are required to launch an official investigation around a sales process. The lists would therefore not be used to provide best rate mortgage holders with a inside look at the competition.
Homebuyer frustration in Toronto has been compounded by an overheated market. Best rate mortgage seekers have witnessed home prices practically double over the last decade, fuelled in part by low interest rates and increased housing demand. While the bidding is fierce in areas like midtown, many suburban GTA municipalities, like Richmond Hill and Pickering are also staring to feel the pinch.
Phantom bidders aren’t the only shady characters in the Toronto real estate market. Buyers and sellers alike are also frustrated with so-called “double-end” deals – transactions where the agent is representing both the buyer and seller. It is believed that, in bid situations, it would be fairer if the conflicted agent presented his or her offer first, so that the buyer would be at the same disadvantage as every other bidder.
Have you been blind sided by a bidding war in Toronto’s hot real estate market? Let us know about your experience by leaving a comment.