What is Phantom Bidding?

Phantom bidding is an unethical tactic used by a few real estate agents so as to provoke potential purchasers to rush into or raise offers. It should be noted this unethical practice is not commonplace, but none-the-less does occur. Under the Real Estate and Business Brokers' Act of Ontario (REBBA), this type of activity is considered a breach of ethics, and realtors who partake in such behavior can look forward to heavy fines.

Last year (2006) 194,793 homes in Ontario were sold. With more than 52,000 real estate agents in Ontario, it is only fair to point out that the unethical practice of "phantom offers", committed by "the few" paints an ugly picture for the many.  The majority of realtors are hard working and honest, and the "few bad apples" who take advantage of people this way are frowned heavily upon by their peers.

Section 26 of the Provincial Code of Ethics stipulates that an Agent or Broker is required to disclose the number of competing offers to every buyer, but that Agent cannot disclose substantial information such as the price of competing offers to other Agents, unless agreed by the seller.

Although the phantom bid ploy is one of the oldest tricks in the book, it often comes to life in a busy real estate market and usually in faxed offer presentations. When there isn't a physical sit-down to present multiple offers, that's when the less than reputable can mislead another agent into thinking there's more than one offer when in fact there isn't.  Misleading buyers into a trumped-up price is a good way for all parties to the transaction to get themselves in hot water. The easiest, if not the most effective way for agencies to protect themselves in a multiple offer scenario, is to disclose, "in writing", the Company and Realtor name(s) of who has registered an offer on the property, and provide these names to the participating co-operating brokers if they request it. However, at this point this is strictly a suggested policy solution initiated by Sale Representatives, Brokers and/or their Brokerage Firms. Although  REBBA considers Phantom Offers a breach of ethics, prevention begins with the individual representatives and their agencies: Disclosing who has registered an offer to fellow competing agents is only fair, and a simple way to avoid an issue.