I’ll admit it…I’m a news-a-holic. I start my day with BBC, have lunch with CP24, follow up with a few newspaper stories from my twitter friends, squeeze in some “6 o’clock news hour” with Leslie Roberts, and end it with CTV’s local news at 11:30…all of course if time permits! (It usually doesn’t)

In keeping with my newsly-ritual, I tuned into CTV just in time to watch Tom Hayes cover a store on “The Bully Offers”. Now before I get into all that is wrong with the story…I’ll like to say this disclaimer: “I have nothing against the good folks at CTV news, Tom Hayes included. For the most part I enjoy watching their news as they tend to get into more detail than some of the other stations BUT this time they dropped the ball by leaving out a few key points”…now down to the venting!

If you missed last nights story, click here and watch it first!

So? What did you think, kinda scary eh? While you’re planning the placement of furniture in your dream home, some big bad bully and their Realtor are lurking behind the curtains to snatch that house from under you!!! At least that’s how I interpreted the report!

In the last little while, it’s been very common to see a house sell for amounts much higher than the asking price. In a typical example, the seller will price their home at or below market value. They then set a date for when they’d be willing to negotiate with offers…if any. Clearly the Toronto real estate market has been red hot in for the past 8 months so these types of scenarios have been very common and bidding for a property has become the norm. If you or your friends have purchased or sold in the past while, I’m sure you’ve heard of a similar example.

So we know what a bidding war is, but what exactly is a “Bully Offer”. Essentially a bully offer is an offer given before the set presentation date of a multiple offer sale. If the buyer wants to try their luck and avoid bidding for the home, they write up an offer significantly higher than asking and submit it before others have a chance…how a prudent Realtor would handle it is what the story is missing.

In the next clip he goes on to mention that bylaw Realtors have to present the buyers offer to their seller “leaving the rest of the buyers out in the cold”… (More on that later!) Further in the clip, Tom mentions that “because so many people were side swiped by bully offers, agents NOW have to announce when a bully offer comes in”!

Here’s how I see it…Real Estate is an aggressive game and bully offers are nothing new. There’s always someone who tries to jump the line and is willing to pay more to make it happen. Look at a downtown night club…talk to the right person with the right coloured bill and boooom, you’re in before all the others standing in line. Does that always make you the smarter person? NO! It just means you paid more than the rest of the people to get in! Whenever the market gets hot, someone tries to get their hands on it before someone else!

Although Tom says that the rules have changed for how we handle bully offers, truth is, we’ve always had rules in place to handle these types of scenarios. Say I’m working for the seller. I do all the right things to prep their unit for sale, I market the heck out of the property (through all my online ways ;) and because of this another Realtor suggests they want to present a bully offer. Tom was saying that “By Law” I must present this offer BUUUT also by law I’m working for the seller and have to do everything in my best interest of my seller…I’ll like to quote 3 Codes of Ethics from the REAL ESTATE AND BUSINESS BROKERS ACT, 2002:

3. A registrant shall treat every person the registrant deals with in the course of a trade in real estate fairly, honestly and with integrity.

4. A registrant shall promote and protect the best interests of the registrant’s clients.

5. A registrant shall provide conscientious service to the registrant’s clients and customers and shall demonstrate reasonable knowledge, skill, judgment and competence in providing those services.

6. (1) A registrant shall demonstrate reasonable knowledge, skill, judgment and competence in providing opinions, advice or information to any person in respect of a trade in real estate.

(2) Without limiting the generality of subsection (1) or section 5,

(a) a brokerage shall not provide an opinion or advice about the value of real estate to any person unless the opinion or advice is provided on behalf of the brokerage by a broker or salesperson who has education or experience related to the valuation of real estate; and

(b) a broker or salesperson shall not provide an opinion or advice about the value of real estate to any person unless the broker or salesperson has education or experience related to the valuation of real estate.

In order for me to satisfy those codes, I’m not just going to work with the one offer… You better believe I’m going to do everything I can to get a few others in on the action and sell that place as FAST as possible for AS MUCH as possible. After all (in this scenario) I’m looking out for what’s best for my SELLER! Also by law, I MUST inform all other parties that have registered an offer on the property that a bully one would like to be presented. The MLS listing MUST also be updated to show the new presentation date! I often advise my clients to stick with the original offer date and if the buyer wants it that bad, they’ll surely bid when the time comes! So far with all the places I’ve sold this logic has worked! In all cases the bidding has brought a higher price than the original bully offer.

For my buyers, I also don’t advise giving a bully offer… even multiples I’m wary of. My process is simple: I first educate them on what market value is of the property. I then make sure they’ve been pre-approved to give an offer above asking. My final suggestion is to NOT pay an exorbitant amount for something they wouldn’t be able to sell in at least 2 years time. Why two years you ask? Although you should be buying for long term, sometimes things happen and you have to sell sooner than later. If 2 years has past and the market has not caught up to the high price you paid…you’re going to have some problems. Primarily with the bank. Just look down south for an example on the effects of over valuating a home! If after all this they’re still adamant on forking over the dough, then I do my duty and fulfill their wishes by submitting their offer. OF course only after “demonstrating reasonable knowledge, skill, judgment and competence in providing opinions, advice or information to any person in respect of a trade in real estate.”!!!

A few simple things can be done to give you the best shot at getting that home…even if a bully tries to get it before you!

1. GET PRE APPROVED – know how much the banks are willing to lend you before you commit to paying more than you have!

2. If you love the home enough to bid on it MAKE SURE YOUR REALTOR registers your offer with the listing brokerages office ASAP. Once you’re registered, the listing agent will have to notify you if any other offers come in (bully’s included)

3. Write your offer as soon as you decide you want the home! That way, the bulk of the work is out of the way, and if a bully offer comes in you can easily adjust your offer to compete with it!

Happy buying Toronto!!!

Oh and Tom, call me next time!

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