Photo: James Bombales
As of July 1st, new rules put forward by the Government of Ontario will come into effect in an effort to exorcise phantom bids from the home buying process. Bill 55 will require listing agents to maintain written offers on every bid and counter bid on a property. Agents can’t tell realtors they have another offer unless they have it in writing.
This way, unscrupulous realtors who talk up non-existent offers in an effort to snag higher bids will have to have proof in their paperwork. The Real Estate Council of Ontario (RECO) will enforce the new regulations.
It’s a way to bring transparency to a process that can feel a bit mysterious to buyers going through the very emotional and expensive process of buying a home.
“Right now, your options are: call the office and hope that they register offers; you can call the agent and hope they’re being honest with you about how many offers there are; or you can do my favourite thing which is, when you’re presenting the offer, ask how many offers they’ve received, look them in the eye and see if they’re being honest with you or not,” said Melanie Piche of the BREL Team at Sage Real Estate.
But watching out for shifty-eyed realtors only goes so far. Piche’s firm has also added a clause in client contracts that stipulates offers are conditional on the fact that another offer actually exists. Once the dust settles on a transaction, their brokerage has the right to find out the name of the agent and brokerage who had the competing offer on the following day.
Piche has never come across any signs of foul play since adopting the clause about a year ago.
“This isn’t something we’re seeing. I think the concern is that people wonder, ‘Am I the only person here?’ Sometimes the listing agent is looking at me like I’m crazy for having this clause, but it’s a way of at least giving some accountability, and giving the buyer some comfort.”
Ralph Fox of Sage Real Estate has been working in the Toronto market for nearly 10 years and has yet to encounter even the shadow of a phantom offer.
He has, however, been in scenarios where the listing agent was also representing a buyer, an uncomfortable situation in a city where low-rise homes near the core are in high demand and frequently fetch multiple offers.
“You can’t suck and blow at the same time. It’s difficult to negotiate as hard as you can to get as high as a price possible for your selling client and then at the same time, try and negotiate to try to get the price lower for your buying client. To my mind, it’s a conflict of interest,” he said.
Though he believes the new rules are a step in the right direction, they’re not addressing the bigger, and what he says is a more common problem — dual representation. It’s a sentiment that other realtors, including Piche, share.
“Is it really going to change things? No, but at the end of the day having a greater level of transparency isn’t necessarily a bad thing.”
Adam Brind of Core Assets Realty has experienced the frustrating situation before. When one of his clients, Jonathan James, was up against a buyer whose realtor was also the listing agent, the situation was understandably distressing for both of them.
There was, however, a silver lining to the tense transaction as it spurred them to work on a solution to the problem in the form of a new web application called Dealdocket.com.
“That’s when it clicked for me. It wasn’t so much about winning or losing the bid. In a lot of cases, there’s not enough assurance for the buyer to walk away and say, ‘I lost, but I lost fair and square,” said James, who has a background in software development.
He and Brind teamed up with Drew Donaldson of Safebridge Mortgage as well as software developer Herman Chan to create the online platform.
In a nutshell, Dealdocket.com attempts to standardize the whole bidding process, which each realtor basically runs his or her own way right now. The online platform stores the many documents that realtors are required to hold onto starting this July, but it will also verify each offer in real time, time stamp each bid and create an auto summary of all offers.
Should a would-be buyer lose out on a bid, they’ll be able to log into the site, see each offer that’s been registered, plus the name of the broker and brokerage.
Dealdocket.com, which is set to launch at the end of April, attempts to go further than the new Bill 55 rules by presenting the offers as they come through.
Right now, a listing agent can have access to multiple offers and if one of the bidders is known to them, he/she could potentially tip off a friend about how much to offer,
“That’s what we’re trying to build — a way for people to feel assured when they walk away from a home that the process was done with integrity and all checks and balances were in place,” said Brind.
The other issue is storage. Dealdocket will use the same type of encryption software banks use online and store docs in cloud in an effort to cut down on the faxes and printouts that tend to stack up in the industry, and will only grow in volume come July.
“A lot of trees are going to die,” joked Fox.
“As a listing agent you’re affected because you’ll definitely have more documents. Is it really going to change things? No, but at the end of the day having a greater level of transparency isn’t necessarily a bad thing.”