Urban myths have a way of creating and sustaining their own lives. An urban myth, urban legend, urban tale, or contemporary legend, is a form of modern folklore consisting of stories that may or may not have been believed by their tellers to be true, and often possess horror implications that are believable to their audience.
Phantom Offers fall into this category. A phantom is offer in real estate is an offer you are competing against which may not exist. We have all heard stories about house that sell with 5, 10, or 20 offers. Sometimes people think the other offers are fictional and made up just to inflate the purchase price. I am not saying phantom offers don’t exist, just they are not nearly as pervasive as people think. The Toronto Real Estate market is very much a Seller’s Market with inventory levels about a 1/3 below where they should be in a balanced market. That means more people trying to buy fewer houses. With 5 or 10 or more offers, the actual number no longer matters, what matters is that you are competing. And when offers are presented in person, you and/or your agent will see the other parties physically present and waiting just as you are. But not all offers are presented in person. Sometimes offers are presented via email.
What has happened in the past is an agent (let’s call her Mary) will call another agent (let’s call him Bill) and tell Bill she is bringing in an offer. To be fair to everyone, Bill will text, phone or email anyone who has shown the property or expressed interest and tell them that he has an offer “coming in”. A date and time is set for offers, maybe 24 hours later. Then, the next day, Mary phones to say her client has changed her mind. Was Bill pulling a fast one to sell the house more quickly and for more money? Did Mary’s offer ever exist? We simply don’t know. Maybe. Maybe Mary’s client found another house or the client got cold feet about spending a certain amount of money. Its open to conjecture. Perception? Reality? In some circles Perception IS Reality. But, the perception is that something nefarious has happened. The public sometimes thinks the selling agent is trying to inflate his commission. Actually, even if the purchase price were $100,000 more than list, the selling agent would only pocket an extra $2,500. The homeowner pockets the lion’s share of $95,000 (based on a 2.5% service fee to each of the listing and cooperating brokerages).
Remember, a verbal offer is not worth the paper it is printed on.
The Real Estate Council of Ontario (RECO) is charged with regulating the real estate industry in Ontario. Legislation goes into effect on July 1, 2015 that no longer allows offers to be communicated to the seller’s agent unless the offer is in writing, signed, and in the possession of the agent making the offer. And the listing agent cannot communicate he has an offer on a property until he (or she) has that offer in writing, signed and in his possession. No more verbal offers.
My brokerage, Chestnut Park, is not waiting until July 01. All offers we receive are documented either through an Offer Summary formed created by OREA (Ontario Real Estate Association) or by keeping a copy of the offer itself. This Offer Summary is signed by the buyer making the offer.
Now, if someone is unhappy with the way a transaction went on a property, they can contact RECO and ask how many offers were received on a property. RECO will contact the selling brokerage and ask for the documentation on that transaction. The brokerage will turn over the offers or the Offer Summary sheets to RECO. RECO will then contact the petitioner and confirm the number of actual offers received.
So, now the guesswork is gone.
I don’t think this will make a substantive difference with me or Chestnut Park Rea Estate, because we pride ourselves on doing business with trust, integrity, knowledge, discretion, and expertise. But if keeping some additional paperwork makes clients feel better and more empowered, then it is well worth the effort. More than ever, our clients can buy with confidence that they are well represented.
– Chip Barkel, Toronto Real Estate. Extraordinary Service. Top Results.
Carolyn Ireland from The Globe and Mail and I had a chat about the changes coming into effect July 01 and she wrote about it in her column “New rules aim to shed light on real estate bidding process”