First bidding war leaves homebuyer bloodied
Realtors need better rules for doing business, she says
Vanessa Gallant just stepped onto the bidding war battlefield a month ago — in the relatively quiet community of Vaughan — and already she’s feeling bloodied.
So bloodied she recently filed a formal complaint with the regulatory body for Ontario’s 58,000 realtors, the Real Estate Council of Ontario. She’s wondering why RECO has launched a new ad campaign telling buyers to beware when realtor practices are, she believes, driving up emotions and prices in an already frantic sellers’ market.
“The process is flawed,” says Gallant, 35, a teacher who with her fiancé is a first-time homebuyer.
“It’s taking away any power that the buyer has. I think it is unfair and unethical.”
Gallant thinks RECO should be reviewing what have now become commonplace practices in the GTA: brokers “underlisting” properties for far less than their market value and then holding off accepting bids until there is a frenzy of demand that many believe has helped fuel the bidding war frenzy and driven up prices.
Bidding wars are no longer just a City of Toronto phenomenon, according to a recent Remax study. They are impacting househunters in suburban areas, as well as some cities in Manitoba, Alberta and Nova Scotia.
“I’ve gotten to the point where if they are holding back offers, I won’t even bother to go see the house,” says Gallant, who has been looking with her fiancé in earnest for a month now in the Vaughan and Newmarket areas.
Their first bidding war came as a shock: Their agent prepared them that they would need to bid over asking if they hoped to get a simple, three-bedroom semi in Vaughan listed for $419,000.
They saw it on a Saturday, but bids weren’t being accepted until Monday. By the time they registered their $430,000 bid, there were 13 offers.
That night the owners signed them all back.
“I just felt it was putting people in a bidding war twice when the offers were already over asking price.”
The couple abandoned their bid. The home sold for $457,000.
“I really feel that this way of soliciting multiple offers gives only the seller power,” says Gallant in her complaint to RECO.
Concerns and confusion around multiple offers have spiked across the GTA in the past six months in particular, now accounting for 30 per cent of the 15,000 inquiries the council has had in the last year, says Bruce Matthews, deputy registrar in charge of complaints for RECO.
“Some agents may be taking advantage of the current supply and demand imbalance (continued high demand and unusually low supply) to leverage what’s in the best interests of their clients,” says Matthews.
“But we need to take a step back here. We’re dealing with a free and open marketplace. Both the buyer’s and the seller’s agents have a responsibility to promote and protect the best interests of their clients.”
He stresses RECO has no regulatory power over buyers and sellers and, ultimately, can’t stop sellers if they want to reject offers or seek higher bids.
Veteran Beach realtor Al Sinclair calls the current bidding system “democratic.” Holding back offers doesn’t always ensure a bidding war, he says, adding he used that tactic with two east-end properties recently, only to get one offer on each at the asking price. Realtors are finding this “frenzied” market almost as frustrating as buyers, says Toronto Real Estate Board president Richard Silver. The market is so fast-paced right now, with many buyers willing to pay whatever it takes thanks to low interest rates, that determining fair market value is actually becoming more difficult, says Silver. “There’s no way to regulate this market. It’s about supply and demand. It regulates itself. “Right now there are more buyers than sellers and when it changes — and I think it will as we get into May and June — the market should return to more balanced territory.”