Stop me if this sounds familiar: You scour MLS for the semi that will rescue you from a life in a high-rise. Mortgage pre-approval in place, you bid well above asking, because you live in Toronto and that’s how it works. The selling agent comes back and says there’s another stronger bid, and couldn’t you do a bit more? You swallow hard and cough up another $10,000, sealing the deal, and only later wondering if there really was a competing offer in the first place.
It’s tough to know how often this happens, but with interest rates still rock-bottom and bidding wars turning post-war bungalows into million-dollar properties, the Ontario government is bringing in new rules to crack down on unethical real estate agents that try to pump up housing prices with “phantom” offers.
“It’s all in the context of these bidding wars, and the idea is a potential buyer knowing ‘am I in competition, and how many people am I in competition with?’” says Bruce Matthews, deputy registrar of the Real Estate Council ofOntario (RECO), which oversees real estate agents and is responsible for enforcing the new rules.
Matthews says misleading a bidder as to the number or existence of rivals is already against the rules, but that the new standards will essentially force realtors to keep better records that can then be used to confirm that a purchase was above board.
“We’re making it certainly harder to fudge the truth,” he says.
So instead of wanna-be homeowners just throwing big numbers down a hole and hoping a house pops up, someone will start actually taking notes.
Specifically, selling agents will have to keep records on successful bids for six years and on unsuccessful bids for one year. As well, agents will only be able to claim they have other bidders if they’ve received a formal offer in writing.
So if you’re strong-armed to cough up more dough because there’s apparently a higher bid than yours, you can follow up later to make sure there actually was one. If it turns out there wasn’t, RECO can step in and take action, including potentially revoking an agent’s registration.
Of course, this isn’t going to move the needle too far on cooling down the housing market in the GTA and to a lesser degree in places like Ottawa and Hamilton. Agents will continue to list houses low to spur the mad scramble that every seller dreams about.
The most recent data show that Toronto home sales in February grew 11 percent from a year ago, while prices jumped nearly 8 percent. And that was during the coldest February since 1875. So the home buying crowd is a committed bunch.
Matthews acknowledges the housing scene, in the GTA at least, is driven by an imbalance that won’t go away any time soon.
“I think the nature of this hot housing market is very much an issue of diminished supply, rather than just excessive demand,” he says. “So… even in past hot housing markets you didn’t get bidding wars quite to the extent that you’re getting today.”
And with mortgage rates at the bottom end of the historical scale, don’t expect the bidding frenzy to stop any time soon.
But starting July, when the rules take effect, at least there will be a paper trail.