I heard there are new rules about how real estate professionals handle offers. How will this affect me when I buy a home?
Competing offer situations—commonly referred to as bidding wars—are common in some areas of Ontario. As of July 1, real estate professionals across Ontario have new rules for how they handle offers. The Government of Ontario has brought forward these rules to bring more transparency to the offer process. Before I get into the nuts and bolts of what has changed, I’d like to give you an overview of how a competing offer situation works from a buyer’s perspective.
Under existing Ontario law, there are only certain pieces of information that the seller representative’s brokerage must give to potential buyers in a competing offer situation:
- the number of offers that have been submitted;
- whether any of the buyers are represented by the same brokerage as the seller;
- whether the seller’s brokerage has an agreement to reduce their commission for buyers who are represented by a certain brokerage.
Sellers who are represented by real estate brokerages in Ontario take offers in a closed bidding situation, so you won’t know how much other buyers are offering, or any terms they’ve included in their offers.
To make a bid, you would typically consult with your real estate representative to put together your best offer, and hope for the best.
The seller can choose to accept your offer, reject it, or make a counter offer. Sometimes a seller will give one or more buyers a chance to “improve” their offer, but you may get only one chance.
In a hot housing market, when there are more buyers than sellers, it’s understandable that buyers can become frustrated, especially if they have submitted unsuccessful offers on several homes. In some cases, buyers may question how many other offers the seller actually received.
New rules that came into effect on July 1 provide buyers with a way to get an answer to that question.
As a result of changes by the Ontario government, all offers need to be in writing and signed, and the brokerage working for the seller must keep a record of those offers on file for a year.
Here’s how that may assist you as a buyer. If you have been involved in a competing offer situation, and you want to make sure that the offer process was conducted fairly, you or your representative can ask RECO to confirm how many offers the seller’s brokerage received. RECO will contact the seller’s brokerage, and may also ask for supporting documentation for each offer. Once RECO has determined the number of offers they will tell you or your representative.
It’s important to note that you won’t find out any details about the offers—only the total number received. Also be aware that it will take RECO time to process your request.
The new rules can provide some extra assurance to buyers, but my advice for multiple offer situations is still the same: think carefully before waiving conditions like a home inspection, and plan ahead so you know how much you can afford. If you know your maximum price and stick to it, there should be less chance for regret later.Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps.