The Ontario Real Estate Association, (OREA) is calling on the province to ban the bully offers from the super-heated market.

A bully offer is one where a buyer submits an aggressive bid, prior to a property being officially listed on the market.

In fiery markets like Toronto, rising home values have made residential properties not only a cherished possession but also a solid investment as well. With inventories shrinking and demand exploding, some buyers adopt the strategy of bully offers to be the first — and hopefully the only offer a seller might see.

The Ontario Real Estate Association (OREA) hopes that legal action ending this practice will add more transparency to the Greater Toronto real estate market and beyond. OREA president Karen Cox has asked government officials to review bully offers, which she feels removes fairness and competition from the buyer's side.

What's the Issue with Bully Offers?

The OREA has a big beef with bully offers. It feels the strategy gives home buyers an unfair advantage, to the detriment of sellers who can't assess the best bid for their property through one offer. And with realtors obligated to bring every offer to their clients, a professional has a duty to present all bids received, including ones made before other buyers even view the property.

Of course, a home seller holds the power to simply ignore a bully offer. But it's difficult to discount a seemingly strong proposal that comes in as the for sale sign hits the front yard. On the buyer's end, these tenders do serve to crowd other interested parties out of the market and create an unfair balance in the industry.

What Is a Bully Offer?

The best way to explain a bully offer is through an example. Consider the hot Toronto real estate market where buyers often outbid each other for homes and in the process, drive offers beyond the list price. A seller might instruct their realtor to open the home to showings for three days before they'll entertain or accept any offers. This is so a large number of buyers can view the home and with any luck, that crowd will yield a respectable range of offers.

Bully offers suppress fair competition when a buyer makes a bid on a home before the realtor shows the property to anyone else. That might not seem out of place until you consider how this early offer might not necessarily be the best one. So, the seller has a choice: Accept a front-running offer or pass up a chance to quickly sell the home.

Conclusion

Everyone wants the highest dollar amount possible for the home they list. Jumping on a bully offer can be very tempting but it does put the seller at risk by not being able to assess every proposal that has yet to be submitted. Sometimes, the best action is no action – and in most cases, the OREA agrees. When shopping for mortgages and for pertinent real estate-related news, Rates.ca has you covered on both fronts.

RATESDOTCA Team

The RATESDOTCA editorial team are experienced writers focused on sharing stories and bringing you the latest news in insurance and personal finance. Our goal is to provide Canadians with the information and resources they need to make better insurance and financial decisions.

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