With warm temperatures returning to Greater Toronto, chances are you may find yourself resuming your real estate hunt to take advantage of the “spring market” — when many owners list or re-list their homes after leaving them off the market for the winter.
However, in a competitive market like ours here in the GTA, chances are you won’t be alone. In fact, with demand for GTA low-rise homes higher than ever, it’s best to be prepared for multiple other offers to be submitted on the same home you’re interested in.
The Offer-Making Process
When a buyer makes an offer on a home, they are generally doing so with the guidance and assistance of a real estate sales representative, with whom they should already have signed a Buyer Representation Agreement.
The Code of Ethics accompanying the Real Estate and Business Brokers Act (2002) dictates that as soon as your written offer has been submitted to the seller’s agent (or to an appointed representative, if he/she is unavailable), that agent must inform their client (the seller) of your registered offer as soon as practically possible. This way, each buyer can have added peace of mind knowing that their offer will be considered by the homeowner directly.
However, not all offers are the same — they may have different terms and conditions, including such factors as price, closing date and deposit. Because those variables are dependent on the situation, it is very important to rely on the help and guidance of your buyer’s representative when drafting an offer on a home.
On July 1, 2015, Ontario’s offer process was subject to a major regulation update (Bill 55) implemented by the Province of Ontario. In order for an offer to be considered registered, it must be made in writing and signed by the party making the offer. Verbal offers, or those offers made in writing but not signed by the party making the offer, are not considered registered — and therefore, the seller’s agent has no obligation to present them.
How are offers submitted under the new rules? Your buying agent must submit the complete offer in writing, signed by you (the buyer). Alternatively, you may complete an Offer Summary Document (Form 801) which can be prepared by your agent. This form is for those buyers who wish to register their offer, without revealing the details or contents of the offer before presentation time.
A listing brokerage has always been required to disclose the number of registered offers, although prior to 2015, there was some confusion as to which offers are considered “registered.” Under the new rules mentioned above, buyers can rest assured that the number of offers provided by a brokerage will only include offers that are legitimate and complete – with the necessary forms and documents signed and prepared. However, buyers are not entitled to see the specifics of those offers — just the number of offers that exist, and are actively competing, for the property in question.
A Quick Primer on “Bully Offers”
In today’s competitive market, it is common for a home seller to set a specific date for the submission of offers on that property. This allows the seller to go over all of the property’s offers at one time, and get a better idea of how much buyers may be willing to pay.
The term “bully offer” (AKA pre-emptive offers) simply refers to an offer that is made before the offer date initially set by the seller(s) and their agent. Generally (but not necessarily), bully offers present a sum higher than the asking price, and are submitted by competitive buyers with a serious interest in the listed property.
While the term “bully” can carry a negative connotation, bully offers are legal and, in some cases, may even be beneficial for both the buyer and seller. The best way of knowing whether or not to make one is to ask your real estate sales representative – they have the experience and expertise to be able to read the situation, and figure out when to time submitting your offer on a property.
The same advice applies to sellers, who should check with their agent before setting an offer date, and before choosing to entertain any offers that come in earlier.
For detailed information on the regulations regarding competing offers, conveyance of offers, and the changes to the offer process effective July 2015, we encourage you to check out the official Real Estate Council of Ontario (RECO) website at http://www.reco.on.ca/.