It is debatable whether so-called “phantom bids” are a problem in the worldwide real estate market although this has not stopped the Ontario authorities introducing new regulations. Opinion is mixed as to whether the subject of phantom bids needed to be addressed but there is no doubt that they do rear their heads from time to time. So, what have the Ontario authorities decided and will this make a difference to the Canadian real estate market?
Protection for buyers
There are some unscrupulous real estate agents who like to insinuate that higher offers are required or higher offers have been received. This practice commonly occurs as “phantom bids” where buyers are led to believe other offers have been made as a means of pushing up their own particular offer. This practice has two distinct elements to it in that it creates the impression of a “hot” real estate market and also pushes up the commission earned by real estate agents.
Starting from July, real estate agents in Ontario will be required to possess written confirmation of any offers which they suggest have been made to potential buyers. Any buyer who believes they may have been “misled” by so-called phantom bids will be allowed to contact the authorities who will demand written confirmation from the real estate agent in question. Surely this sounds very straightforward and acceptable?
Improving the trust factor
This focus on so-called “phantom bids” would seem to be a further stage in the quest by the Ontario authorities to improve the trust factor between the real estate sector and investors. This is something which has come under significant pressure over the last few years with suspicions that sharp practices and phantom bids may well have been impacting the market and the intentions of investors. As ever, the practice of phantom bids has been very difficult to prove in the past but these new regulations should at least allay the fears of future investors.
There has always been suspicion between buyers/sellers and the real estate sector amid concerns that prices can be inflated and under-priced to suit a particular purpose. In the good old days when the market was flying high this did not seem to be a major problem but in these times of challenging economic environments every dollar counts.
Real estate brokers who fail to introduce the new rules to their own operations could face fines of up to $50,000 or two years behind bars. They could also be referred to a disciplinary committee and forced to take educational courses or a fine of $25,000. It will obviously depend upon the individual situation as to which particular option is chosen by the authorities but it does at least show there are actual financial penalties.
It is debatable whether the issue of phantom bids is as big a problem as some people are saying but the introduction of these new regulations will at least allay the fears of the general public. Whether they make a difference to this alleged practice remains to be seen but they can only improve the trust factor associated with the modern day real estate market?