One of our reasons for launching realosophy.com was to educate consumers about some of the not so nice things that can go on in the real estate industry. One of the things we have been educating consumers about is something called a fake or phantom offer.
When there is more than one buyer putting in an offer on the same house, the buyers have to compete blindly against each other. They know little if anything about the other party putting in an offer and they typically have to offer their best price from the outset in order to try to beat out the other competing offers.
When offers for a property are being presented via fax, there’s no way for a buyer to really know if the listing agent is telling the truth about the number of offers for the property. The listing agent does not have to disclose any information regarding the competing offers which makes it impossible for buyers to confirm whether or not the listing agent is in fact telling the truth. Buyers could find themselves competing against phantom offers, offers that don’t really exist, when they bid their maximum price for the home they want.
The multiple offer process received quite a bit of press last year because of the lack of transparency with the process. As a result the Toronto Real Estate Board launched a task force to “thoroughly investigate all aspects of the multiple offer system”. The task force was made up of TREB members and some of the top brass from the Real Estate Council of Ontario.
What did they find? The Task Force concluded that the multiple offer process is fine the way it is and aside from adding a few new courses for realtors, had very few suggestions on how to improve the process. TREB president Maureen O’neill wanted the task force “to report facts and statistics and not hearsay or assumptions”. As a result their conclusion appears to be based on the fact that RECO had only 1 Phantom Offer complaint last year and 37 complaints regarding the multiple offer process.
Unfortunately the Toronto Real Estate Board and their Task Force are missing the point. This issue is not about “facts and statistics”, it’s about perception. Phantom offers are really not a major issue in the real estate industry, but the fact they are possible and incredibly difficult to prove damages consumers perception of our industry.
But not all industry insiders agree with TREB’s official position. My brokerage, Prudential Properties Plus has developed their own Offer Registry System to add more transparency to the multiple offer process. Ken McLachlan , broker owner of Re/Max Hallmark grew tired of waiting for RECO and TREB to lead the way so in October 2007 he set the following company policy for multiple offers:
In Multiple Offer situations when we are representing the seller, it will be the company wide policy of RE/MAX HALLMARK Realty Ltd. and it's Realtors to disclose in writing, the name and company of all Realtors, who have registered an Offer on the property. This disclosure will be made, upon request to all co-operating brokers involved in the process, and will be provided either before offer presentation or after.
This disclosure is critical for consumer confidence because it gives consumers the opportunity to follow up with the other realtors to confirm that there are competing offers.
At an absolute minimum the Task Force should have recommended that this type of disclosure be mandatory for all realtors. The Task Force’s goal should not have been to report facts and statistics but to foster confidence and uphold integrity in real estate transactions. Telling consumers that the multiple offer process is fine the way it is falls short of that goal. Making the multiple offer process more transparent by disclosing all the realtors involved would have helped to restore consumer confidence in our industry and in the multiple offer process.
TREB President Maureen O'neill's statement is below.
Special Presidential Report
Findings of the Multiple Offer Task Force
July 11, 2008 -- A year ago there was considerable controversy surrounding the issue of “the multiple offer process” and whether situations presented themselves to accommodate “phantom offers”. As some of you may remember, this became a controversial topic in the press. In the court of public opinion fueled by unsubstantiated data in the press, and an unprecedented hot market where supply and demand dominated the sales…all of these factors led to disappointed consumers and REALTORS ® alike questioning the fairness of the multiple offer environment.
As some of you may remember, at that time I took a firm stand with the press assuring the public at large I had personally seen little evidence, an opinion backed by statistics and information given to me by the Real Estate Council of Ontario, that would substantiate the existence of what was coined as “Phantom Offers”. I was firm in my resolve to report facts and statistics and not hearsay or assumptions.
For the sake of consumer protection and to address Members’ concerns, when I took office my first order of business was to create a Task Force with a clear mandate to thoroughly investigate ALL aspects of the multiple offer system. I also launched an e-mail survey to our entire membership asking for specific feedback where any of our Members may have encountered any questionable offer presentation situations.
The Task Force had such an important responsibility that it was crucial that the appointed Members’ findings would be beyond reproach. For that reason the Task Force was comprised of experienced sales people and broker owners, TREB Legal Council, Paul Stoyan, Tom Wright, Chief Executive Officer of RECO, Alan Johnson, Registrar, Larry Bremner, RECO Director, RECO’s legal council, Heather Fuller, Chair, John Meehan, Roberta Case, Julie Kinnear, Christopher Slightam, Paul Maranger, Angel Mealia, Jerry England, Carole Murphy.
After six months of exhaustive research and extensive investigation the facts are now in. Since we were looking for transparency in the multiple offer process it seems only fair to apply the same transparency in publishing the full text of the Task Force report in its entirety.
As you will see in the report, every aspect of the multiple offer situation was reviewed, and I want to emphasize the following findings.
- The term “Phantom Offer” is a misconception in itself. Anyone representing an offer that is non-existent is committing a criminal act. It is misrepresentation and fraudulent.
- There exist presently stringent RECO rules and regulations to convict such actions.
- These actions are under the jurisdiction of RECO not TREB.
- In 2007 with a record number of 87,000 sales, RECO received a total of 800 complaints dealing with all real estate matters. Only 1 complaint (in Kingston) was received regarding a “Phantom Offer” and 37 complaints were pertaining to the multiple offer process (Section 26 of the Act). The majority of the responses from our e-mail survey at TREB complained about the multiple offer process, which is covered in Section 26 and if not complied with, is subject to severe penalties.
If ever, any of you or your clients encounter questionable practices pertaining to a multiple offer situation it is incumbent upon you to document this, and submit it in writing to RECO for a full investigation.
To follow up the Task Force’s recommendations, TREB will be publishing “best practices” for the profession and offering the following education sessions.
- Multiple Offers: The Seller, the Buyer and You
- Multi Offers: Risk, Rewards
- Legal Concerns for residential properties
- Realistic buyer representation
- RECO will be publishing a brochure on the offer process which will be available to consumers
- TREB’s outreach program, which is delivered in your offices, will be offering 2 courses (A) Best Practices when dealing with clients and customers (B) A comprehensive review of the MLS rules.
I now respectfully submit the Task Force’s report.
July 15, 2008Market |