Were they ever really a thing of the present to begin with?
Or are phantom offers as much of an illusion in practice as they are by their very definition? That’s ironic, isn’t it?
New legislation is coming into play on July 1st that intends to eliminate “phantom offers” from the world of organized real estate.
Let’s take a look at phantoms of all shapes and forms…
What do you think of when you hear the word “phantom?”
I ask this, because I’m willing to be that you don’t think, or visualize, a definition of the word in the traditional sense of a ghost, spirit, or illusion.
It’s one of those words that has many associations along with it.
Personally, I think of “Phantom of the Opera” first:
In 1991, my class took a field trip to see it.
I hated every minute of it…
If you’re a child of the 70’s and you collected comic books, you might associate a “phantom” with this:
I never read comics.
I collected them, since I was obsessive-compulsive and would have collected Faberge eggs if I could have found an old lady to trade them with, but I never actually read comics as they were intended.
If you’re a movie buff, you might recall this awful, straight-to-video movie starring Mulder from X-Files, and Christof from Truman Show:
Or if you had a thing for older British women when you were 18-years-old (it was just a phase…), then you might remember “Phantoms,” starring a 36-year-old Joanna Going in her prime!
Oh, and it also had a young Ben Affleck. Remember when he was this young:
If you believe that “Star Wars” was actually the fourth episode in the series, and not the first, then you’re also impressed with DOUBLE light-sabres!
And last but most certainly not least, if you’re a rich, white, American oil-magnate, you think “Phantom” refers to this $250,000 Rolls Royce.
And if the photo below is any indication, you’re also pathetic.
You can’t buy a car unless it has a half-naked woman on the hood:
Don’t worry, gents.
We can see the car from different angles…
In real estate, we hear the word “phantom” and we think of something called a “phantom offer.”
A phantom offer, as you might expect, is an offer that simply does not exist.
The presence of the offer is felt by many, and the impact of that offer can be substantial. But the offer itself is an illusion, and was never real.
A phantom offer is created intentionally, with the intention to mislead, and defraud.
A phantom offer does not only occur in multiple offer situations, as many believe. A phantom offer can occur when there are, say, three registered offers on a house, and the listing agent represents that there are four, but a phantom offer can also occur when there are zero registered offers on a house, and the listing agent represents that there is one, or perhaps more.
The impact of a phantom offer should be obvious: the more offers there are on a property, the more money that property will likely sell for.
In a competitive situation, if there are two actual offers, but the listing agent represents that there are three offers (ie. one is a “phantom offer”), then the two buyers with actual offers will submit a price that is predicated on TWO competing offers, not one.
You reach a point, eventually, where the number of offers doesn’t matter. If there are ten offers, or thirteen offers, it likely doesn’t affect the price you, as a buyer, are willing to submit.
But when there are two, one, or zero competing offers, that is where a phantom offer can change things drastically.
Now I’ll be naive and suggest that I don’t think this happens often.
I also simply can’t fathom how a listing agent could blatantly lie and say, “You are competing against another offer,” when in fact, you’re not.
But imagine a condo listed at $439,900, that has a hold-back on offers. On offer night, you have the only registered offer, and you’re ready to go in at the asking price – $439,900. Then the listing agent calls to tell you, “A second offer just got registered.” Now you likely have to go above $450,000 to get the property, and you might go higher. $455K, maybe?
In the event that the second offer is a “phantom offer,” which is a nice way of saying, “complete and utter bullshit shovelled by somebody who should have his or her real estate license taken away,” you’ll end up paying an extra $15,000 for no good reason.
And that is what “Bill 55: Stronger Protection for Ontario Consumers Act, 2013” is supposed to eliminate.
Take a look at this OREA bulletin:
Again, I want to stress that I do NOT believe phantom offers are common.
And if they are, they’re most likely associated with very shady Realtors and/or brokerages. Call me naive, but a top agent is not going to risk his or her career to get a few thousand dollars more for the seller.
There have been times in the past when I’ve been suspicious.
If I have any doubts, I’ll ask the listing agent to prove the existence of another offer, or two, three, or whatever the number is.
I’ll ask for a list of the buyer agents who have registered those offers. If the listing agent doesn’t provide it, I’ll call the manager, or broker of record.
The problem is, as I’ve explained before, there are a lot of very shady brokerages, and many brokers don’t care, or are never on site or involved in the day-to-day activities of the brokerage, and thus don’t have time to care.
“Buyer Beware” rings true in this situation, and if you’re looking to submit an offer on a property that is listed by a brokerage and/or agent that you don’t trust, then don’t offer.
Here’s the bulletin we received from RECO:
It’s sad that we need to explain, “A written offer must be signed to be valid.”
Tell me there aren’t agents out there who believe that a verbal offer, such as, “If the Leafs win the Stanley Cup, I’ll run naked in the streets,” constitutes a true, acceptable offer.
The part that concerns me is, “RECO is developing a process to confirm the number of offers that were received for a property.”
Oh, great, so they don’t have a plan in place yet, and they’re going to scramble to get this done for July 1st. Bravo.
The part that I do agree with, is “The selling brokerage must retain a copy of the written offer for a period of one year.” That means that a listing agent, guilty of creating a phantom offer, can’t claim, “I don’t have a copy of the offer, and I can’t remember who presented it.”
My colleagues hate the above rule, since, well to be honest – we’re all good agents, who are reputable, and play by the rules. It’s like all the kids have to stay inside at recess because the one bad kid threw a spitball at the blackboard.
So on the one hand, we’re placating the lowest form of Realtor.
But on the other hand, we’re taking steps to ensure the lowest form of Realtor can no longer cheat, or at least, can get caught a lot easier when he or she does something shady.
Once again, and at the risk of sounding like a broken record here, I really, truly do not believe that phantom offers are prevalent in the business.
But the issue is that even one example of a buyer who over-paid due to a phantom offer is too many.
If a buyer offered $1,100,000 for a house, listed at $999,000, because there was a competing “phantom offer,” then that buyer was duped for $100,000.
And if it could be proved that the listing agent was guilty of representing a phantom offer, what is the penalty? A $10,000 fine from RECO? Maybe?
How about that agent has to pay $100,000 to the buyers? How about that agent loses his or her license and can never sell real estate again?
The stakes are far too high for this to be taken lightly, even if there are only a couple recorded cases of this every year at RECO, and I’m quite pleased to see that steps are being taken to make brokerages more accountable.