Understanding real estate rules on transparency
I’ve lost out in a couple of bidding wars by small amounts, and I would have paid more had I known what the other offers were. Why can’t we see the bid amounts from each offer?
When you’re involved in a bidding war for a home and you lose, it can be frustrating and discouraging — even heartbreaking. Especially when you find out that the house was sold for an amount that was only a little bit more than your offer.
However, in Ontario’s real estate market, there are legal rules that brokerages and salespersons must follow when a seller receives multiple offers.
One of the rules is that other bidders are not able to see the contents of the other bids. This is because Ontario’s real estate legislation — written by government — is based on a closed-offer process, which means offers handled by real estate people remain confidential. Only the final sale price eventually becomes public.
There are other laws that real estate people must follow around multiple offers, record keeping and disclosure that promote transparency in the offer process.
For one, brokerages must keep copies of all offers received in their files for at least one year.
If an unsuccessful bidder wants to confirm the number of other offers, they can ask the listing brokerage to disclose that, or they can ask the Real Estate Council of Ontario (RECO) to seek that information from the brokerage on their behalf.
Other rules that come into play in a bidding war involve proper disclosure of information.
For example, if a brokerage is servicing multiple parties — both buyers and sellers — it must disclose this in writing to all parties involved in the transaction.
This scenario is called multiple representation and it is legal in Ontario so long as the listing bro- kerage properly discloses its relationship and obtains written consent from the affected parties.
A second rule of disclosure involves changes to the commission that is offered by the seller.
If the brokerage representing a seller agrees to reduce the commis- sion amount that is stipulated in their contract, that information must also be disclosed in detail to all parties of the transaction so that one buyer doesn’t have an unfair advantage over another.
All of these rules — and there are others in Ontario’s real estate legislation — are intended to promote transparency in the real estate market.
So, while it is disappointing for you not to have put in a winning bid on a home, you should know that there are safeguards in place to ensure the bidding process is fair and transparent.
The best advice I can give you is that the next time you bid on a home, put together the most attractive offer you can, keeping in mind that if someone outbids you, another opportunity will become available in the future. Joseph Richer is registrar of the Real Estate Council of Ontario (RECO). He oversees and enforces all rules governing real estate professionals in Ontario. Email questions to askjoe@reco.on.ca. Find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at youtube.com/RECOhelps.