Why Ontario Real Estate Wants to Ban Bully Offers
Not all offers are the same when it comes to real estate, especially in a hot market like Toronto. There are many different types of offers, but not all of them are as controversial as bully offers.
A bully offer is one that is made preemptively, before a seller’s offer date. This means that a buy submits an offer before the seller officially starts accepting them so that they never even consider competing bids. These deals are often significantly above asking price and include no conditions so that sells feel they have to accept.
The Ontario Real Estate Association (OREA) believes these types of offers are unfair and wants to ban them in order to level the playing field for all home buyers. According to OREA president Karen Cox, banning bully offers “will ensure that all interested buyers of a particular home get a fair shot at making an offer. For sellers, it means they will have a chance to work with their Realtor to carefully and thoughtfully consider all offers without feeling like they are in a pressure cooker”.
Bully offers are a practice that frustrates buyers and their real estate agents. Many of whom have already spent time viewing a property and preparing an offer in time for the pre-determined time. These types of offers aren’t great for sellers either. It means they don’t have the chance to consider all the offers on the table. If a seller has an agent unfamiliar with bully offers, they may receive poor advice on whether it actually is a good deal or now.
Eliminating bully bids is only one of the 28 recommendations the OREA is making to the government in hopes of modernizing Ontario’s Real Estate Business Brokers Act (REBBA). Another practice that OREA is recommending banning is escalation clauses.
Escalation clauses are when buyers submit an offer that states they will bump up their offer to top the current best one by a certain amount. According to Cox, this means, “the realtor that works for the seller has to reveal private financial information like what is the highest price and that violates our code of ethics.” Currently, the REEBA has no clause to prohibit the use of escalation clauses, a sign of its age.
OREA is also asking the government to alter the consequences of breaking real estate rules. They want the government to take the financial incentive out of it, by a process called “disgorgement”. This means that people that break real estate rules or ethics will be forced to pay back any income they obtained through unethical or illegal means.
These new proposed updates are great for home buyers and sellers in the GTA. It means that the regulations around real estate will be updated for the modern age and reflex fairer practices. If you’re interested in buying or selling a Richmond Hill home, please contact one of our real estate agents!