The Ontario Real Estate Association is lobbying the provincial government to prohibit bully offers, citing its desire to enhance professional standards in the industry.
“We’re asking not to allow bully offers or pre-emptive offers to create more fairness in the home buying process, and it’s just one of the 28 recommendations we have outlined for a modern vision of REBBA,” said OREA’s President Karen Cox.
Cox added that the Real Estate and Business Brokers Act was created in 2002 and the time is nigh to adapt it to the modern world.
“By modernizing the rules, we’ll make sure all real estate agents at (consumers’) side have the highest professional standards during the biggest financial transaction of their lives.”
Typically, eager buyers submit bully offers before the advertised offer date or before the listed sell date.
“But it doesn’t mean it’s the best offer the seller will receive,” said Cox. “They don’t know that because they haven’t received offers from interested parties and that really frustrates buyers because they haven’t had a chance to participate and that’s why we’ve recommended ending bully offers.”
Daniel Johanis, a mortgage broker with Rock Capital Investments, says that he has seen realtors raise commission rates before making bully offers—a practice he says is, at best, questionable.
“I’ve seen this happening before, especially through my relationships with some solicitors in the city who have seen their commission get bumped up to 3%, 4% on a successful bully offer,” he said. “It happens here and there.”
Moreover, Johanis says that buyers often relinquish some, or all, conditions, like home inspections, financing clauses, reviews of the status certificates and more.
“On some of the deals I’ve worked on, bully offers have come in and I don’t think they should be completely banned, but some regulations should be put in place,” he said. “When you have a window of six hours to turn something around, that isn’t enough time for both sides to properly review an offer.”
Ron Butler of Butler Mortgage supports OREA’s bid to have bully offers proscribed during the home buying process because it’s akin to conducting business in bad faith. He additionally noted that mortgage brokers are subject to stringent restrictions and there’s no reason realtors shouldn’t be either.
“Under our new regulators, we’ll be required to show three different quotes on a mortgage,” Butler said of the Financial Services Regulatory Authority of Ontario. “We’ll be under that kind of restriction to prove we actually went out and got multiple rates instead of just saying, ‘I looked all over and this one is the best.’ True protection of the consumer requires a very big degree of transparency.”