The new Ontario Bill-55 has been created to solve the growing problem of phantom offers in our industry – in particular in Toronto’s hot real estate market.
The thing about phantom offers is they are illegal. They are used strictly to fraudulently drive up the price and conditions of the legitimate buyer’s offer. Most phantom offers involve the seller and are trying to take advantage of the buyer.
It’s a few bad apples (again) ruining it for the entire industry and imposing undue hardship on the sales rep who already has the challenge of the MLS being available to the public, private websites presenting themselves as real estate companies, low commissions, extra paperwork imposed by the federal government to help deal with money laundering and more.
So now, to solve the issue of phantom offers, the buyer salesperson had better not present an offer in person without the new OREA form 801 because the listing salesperson will keep the copy of the offer.
The buyer’s salesperson should keep copies of all offers and all sign-backs are considered separate offers. The seller’s salesperson must keep all offers, all sign-backs (as separate offers) or all 801 forms submitted with every offer. All of the above include unsuccessful offers.
How will that help? The Real Estate Council of Ontario (RECO) will now investigate and demand these documents as proof. RECO better hire staff to do this. This came into effect on July 1 and I heard that on July 2, the first request to investigate came in.
It is interesting to see that at the same time that electronic signatures were approved (to save trees?) all this extra paper is now needed to keep record of a deal/potential deal. The question is, will that eliminate phantom offers?
In my opinion, no.
The salespeople obeying the rules will continue to obey the rules. But now they are burdened with a lot more paperwork. Those who don’t will continue and find ways to go around the form 801 system.
Let me start by agreeing with RECO that keeping good records and notes regarding incoming offers is very good practice and is a must. What is needed then?
First: Better definition and better mechanisms of “registering” an offer. This term has no legal definition. Salespeople use it too loosely. It should be in writing (email is okay) and applied to signed offers only.
Second: The onus to prove the existence of offers should be on the listing salesperson only.
The buyer salesperson is already on the hook when they proclaimed in writing that they have registered (or withdrew an offer).
Third: The listing salesperson only will collect info on all offers, including date and time received, name of buyer (from the offer), name of co-operating broker, presentation time and the result of the presentation.
Forth: The seller signs form 109 for every rejected offer.
By the way, presentation in person eliminates a lot of questions, as the co-operating broker will see how many other sales reps are “sitting in” with them on the presentation.
To give you an example how confusing the new rules are, RECO says in its document dated March 20, titled Bill 55: Changes in handling of offers: “For offers coming from a buyer directly, the brokerage must retain the offers in its entirety.”
I understand “coming from a buyer directly, the brokerage…” as a dual representation situation. That is, the buyer comes to your open house and wants to put an offer, or someone in your brokerage brings an offer. My understanding is that there will be no form 801 option in this case. The full offer must be kept.
When I spoke with an official trainer on this particular issue, I was told that “offer coming from a buyer directly” refers to “posted listings” situations where the buyer deals directly with the seller. This was very surprising to me, that the brokerage will now be involved with offers on these types of listings when initially the broker was asked to only put the listing up on MLS for a fee. Does that mean that those private for-sale companies that do all those posted listings must now ask the seller to give them copies of the listings the seller received? What if they don’t?
What if a dishonest listing salesperson writes himself a low offer with unreasonable conditions, “registers it” and announces that there is an offer registered?
A dishonest salesperson will always find a way to beat the system. The honest salesperson is now paying the price.