Navigating Bidding Wars as a REALTOR®

In hot real estate markets, bidding wars are common. If you’re a REALTOR® aiming to handle these high-stakes scenarios effectively, this guide offers you a comprehensive overview. We’ll review the bidding war rules and expectations from the Real Estate Council of Ontario (RECO), and share best practices drawn from extensive experience managing these situations.

Note: This is a detailed read, but if it helps you secure better outcomes for your seller or avoid potential RECO complaints, it’ll be worth your time.

Topics Covered:

• Core rules of bidding wars
• How to set up a bidding war
• Offer registration process
• Presenting offers
• One-shot offers vs. requests for improvements
• Communication protocols
• Handling pre-emptive offers
• Navigating multiple representation
• Commission reductions

Disclaimer: This guide reflects general practices, but always consult RECO’s standards and your Broker for specific guidance.

The Essentials of Bidding Wars

Per Ontario’s REALTOR® Code of Ethics, you must disclose:

• The number of offers (to anyone who has submitted a written offer)
• Dual representation, if you or your brokerage represents both the seller and a potential buyer (to anyone with a written offer)
• Any commission adjustments from cooperating agents (to anyone with a written offer)
• Process changes, such as when a client changes their stance on reviewing pre-emptive offers (to anyone expressing interest)

Sharing Offer Details

The Trust in Real Estate Services Act (TRESA), effective as of December 1, 2023, permits a new level of transparency in multiple-offer situations. While traditional “blind” bidding (where no details of competing offers are shared) remains permitted, sellers now have the option to disclose key offer terms (such as price, closing dates, deposits, etc.) to other bidders, provided they uniformly share the same information with all offer submitters.

Tip for Buyer Clients: Educate them that offer details might be disclosed to competitors. This could benefit them if they’re outbid but want to make a stronger offer—or disadvantage them if they hold the top offer and others are encouraged to increase their bids.

Setting the Stage for a Bidding War

If your pricing strategy involves attracting multiple bids:

• Select an offer date typically 6-8 days from the listing date.
• Schedule bidding at a time convenient for sellers, keeping in mind limitations if scheduled on holidays or weekends when buyers may face difficulty waiving conditions.

Pro Tip: Avoid bidding dates coinciding with competing listings, as this can split the buyer pool and potentially reduce final sale prices.

Offer Registration Process

RECO’s Bill 55 (2015) outlines that:

• Listing agents cannot claim an offer exists unless they have the signed offer or a Form 801 verifying an offer.
• Brokerages must keep records of all offers and counter-offers or create a summary.
• Buyers can request RECO to validate the number of offers received.

Some agents in Toronto refer to offers as “registered” when they’re ready to present. Although there are no RECO-specific rules on offer registration beyond Bill 55, common practice includes notifying the listing agent or brokerage once an offer is prepared.

Pro Tip for Buyer Agents: Register your offer by submitting Form 801 and notifying the listing agent or brokerage to stay informed.

Offer Presentation and Updates

For Listing Agents:

• Notify all registered offer agents if the number of offers changes mid-process, as each agent should have the opportunity to adjust their offer.

Offer Order: Typically, offers are presented in the order registered. Scheduling each 10-15 minutes apart can help streamline presentations.

One-Shot Offers vs. Requests for Improvements

The seller ultimately directs the process, while you provide strategic advice to help achieve the highest price. After presenting all offers, sellers may:

• Accept the best offer
• Request that all or a select few improve their offers
• Enter negotiations with one offer

Note: If an agent is asked to improve their offer, they can choose to withdraw entirely, so weigh this risk carefully with the seller.

Effective Bidding War Communication

Send an email to all agents who viewed the listing, outlining:

• Submission methods, whether by email or scheduled time for in-person offers
• Preferred closing dates and the seller’s preference for condition-free offers
• Deposit instructions
• Expected response time and communication plans
• Whether initial offers will be final or if top offers will be asked to improve

Pro Tip: Don’t reveal the final sale price until the offer is accepted, acknowledged, any conditions waived, and deposit secured.

Handling Pre-Emptive or Bully Offers

RECO guidelines require you to submit any pre-emptive offer to the seller immediately, unless clear written instructions specify otherwise. Discuss the handling of these offers in advance with the seller and document this conversation.

Multiple Representation and Commission Reductions

Multiple Representation: Obtain written consent from both buyer and seller if you’re representing both sides in a bidding war, and disclose to all offerors if you’re in dual representation.

Commission Reductions: If commission reductions are offered by any party, RECO mandates that these details be shared with all competing offers to ensure transparency.

For any specific questions or additional clarification, consult your Broker.