Over the past few years, particularly in unusually hot markets such as our own here in Southwestern Ontario, buyers and sellers alike have become accustomed to multiple offer scenarios.

While the concept of multiple offers is simple enough on its face, there are myriad of underlying factors and dynamics that can make it a potential minefield for both buyers looking for the best possible deal, and for sellers and their agent in avoiding legal trouble. Complete transparency among agents who are dealing with offers on a property in a multiple offer scenario is critical.

In order for the process to be fair for everyone, disclosures are required each time a new offer is registered and all parties must be made aware of precisely when a Seller is planning on sitting down with their Realtor to review the bidding and, ultimately, to decide on which offer they will accept or continue to work with. One of the factors I mentioned above which can complicate the process is that unhappy phenomenon colloquially referred to within the industry as the “Bully Offer.” To explain things in simple terms, I will lay out a brief scene for you.

Firstly, let’s suppose that a Seller and their agent have listed a home for sale at a price intended to generate multiple offers. Prior to listing the home in this case, the Seller’s agent has included a form called the ‘OREA 244 – Seller’s Direction’. This form, signed by the Seller, sets out in no uncertain terms that they will not be reviewing any offers until a certain date specified on the form. Typically, this is to encourage as much interest in the home (showings, open houses, etc) as possible, before bidding can begin. Now, you’d be excused for assuming that this instruction would be taken at face value by everyone involved, and all offers withheld until the specified date… but you’d be wrong.

As things stand right now in Ontario, a Seller is permitted to change their mind at any given time and look at a pre-emptive offer, or a “Bully Offer.” This is an offer submitted before the date specified on the Seller’s Direction, with the intention of nabbing the property before other offers can be made. They are almost always submitted on terms very favourable to the Seller – a high price and few if any conditions.

While the Bully Offer has traditionally been regarded as a normal (if somewhat underhanded) strategy within the industry, it has faced growing criticism for a number of reasons. Most obviously, many buyers and their agents who are following the ‘rules’ can feel rightly cheated out of a fair shot at pursuing the home. Secondly, and perhaps somewhat counter-intuitively for some people, the bully offer can also be harmful to the Seller. While on its face a Bully Offer might seem to be an irresistible price to the Seller, its entire purpose is to pre-empt the multiple offer scenario and the possibility of a bidding war. This means that the Seller, in looking at a Bully Offer, could well be leaving money on the table in the form of even more favourable offers.

In response to this criticism, the Ontario Real Estate Association (OREA) has recommended the banning of Bully Offers across the Province in a new report just submitted to the Ontario government (Link to the full article here)

To quote OREA’s press release at length:

“If a home listing includes an offer date, that’s the date on which all offers should be considered; an offer made before that date, which is known as a pre-emptive, or ‘bully offers’, should not be allowed,” said Karen Cox, President. “This 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.”

The proposal is not without criticism of its own but, by and large, I feel that this is the right move to protecting the interests of everyone – buyers, sellers and their agents alike. After all, as licensed and regulated industry professionals, our highest duty is to you, our clients.

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