We are finding ourselves in bidding wars with multiple offers being held until a specific date and time. The process feels wrong and unfair. What are the rules?
This is a timely question and one we hear regularly. Many transactions — especially in a fast-paced market — are taking place with multiple competing offers.
When there is an imbalance between supply and demand, things can be more challenging for buyers or sellers, depending on what stage the market is in. If a property attracts 20 offers, your odds of being the successful buyer are not in your favour. Inevitably, there will be 19 disappointed buyers.
In Ontario, sellers always have the choice about how to sell their property. Those represented by real estate brokerages can only accept offers in what is referred to as a closed-bidding process. This means you can’t know how much other potential buyers are offering, or any of the terms or conditions attached.
This approach has been in place for many years in Ontario. Although it may involve uncertainty, and as much as you might like to know what others have offered, it’s also important to ask yourself whether you would be comfortable with the details of your offer being shared with the other buyers. This would create an auction-like process.
Clearly, there are positives and negatives to both closed-bidding and auction-style home sale approaches.
So, what can you expect in a closed-bidding process?
Ontario law requires the seller’s brokerage to disclose certain information to potential buyers in the event of a competing-offer situation, such as the total number of offers submitted, whether any of the buyers are represented by the same brokerage as the seller, and whether there are agreements in place to reduce the commission if their offer is accepted.
The rules preventing sales representatives from sharing the contents of offers in a closed-bidding process were put in place to prevent any improper sharing of offer contents without the buyers knowing when and how these details were being shared — and without their consent.
Before deciding whether to participate in a competing-offer situation, it’s wise to seek advice from experts, such as a real estate salesperson, a real estate lawyer and a mortgage financing professional. If you choose to move forward with an offer, you need to be prepared for competing offers and map out a negotiation strategy.
Your salesperson will need to know what you are willing to offer for the property, what conditions (if any) you may need to include, what terms are non-negotiable, and any other factors important to you in the purchase. Once you submit your offer, the seller might accept your offer, they might reject it, come back with their own counter-offer, or ask you to revise your offer.
Multiple-offer or bidding-war situations can ignite the competitive streak in some people. Try not to let your emotions get the better of you, no matter how much you want the property or want to “win.”
This column is for general information purposes only and is not meant as legal or professional advice on real estate transactions.
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.