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TREB to tackle phantom bidding

Use of concocted offers is to be the focus of a newly appointed Toronto Real Estate Board task force

It seems that Maureen O'Neill, President of the Toronto Real Estate Board, who only recently heard about the practice of "phantom bidding" has now made the revolutionary discovery that there should be "more transparency" in the real estate industry practices.

The following article appears in today's Toronto Star:

The head of the Toronto Real Estate Board is striking a task force of industry experts to look at ways to quash the controversial practice of phantom bidding.

"We certainly want more transparency in the industry," Maureen O'Neill said this week.

O'Neill has approached a Toronto broker to chair the committee and another five from across Greater Toronto to sit on the panel.

"I want someone from every corner of the GTA, so there is balance," she added.

The practice of seller's agents concocting fake offers in an effort to boost a home's sale price has caused a firestorm in the real estate industry.

Last month, O'Neill called on the Real Estate Council of Ontario to pull the licence of any realtor caught crafting bogus bids.

Her comments came after the Star revealed in September that RECO fined Kingston Re/Max realtor Bill Batson $10,000 for misrepresenting the existence of an offer to another member.

Batson was also found to have breached RECO rules governing ethical behaviour and duty to a client, and to have engaged in unprofessional conduct and "failing to act in an honest, forthright manner."

RECO spokesperson Sandra Gibney said a number of issues – including how to protect consumers in these situations – are under review.

"RECO would certainly welcome any suggestions that the Toronto Real Estate Board's new task force wishes to offer," Gibney said.

The issue first hit the headlines this summer when Michael Manley, owner of Prudential Properties in the Beach, ran against O'Neill for the presidency of TREB.

Manley vowed to put an end to false offers, which, before the Star broke news of Batson's troubles in September, O'Neill denied existed.

Last month, an informal poll of 30 Toronto-area agents suggested most believed phantom bidding occurred and there is a need for reform.

A Toronto broker told the Star that phantom bidding is "rampant."

"This is a major problem and it's causing a black eye for the real estate community," said the broker, who asked not to be named. "You end up with one man at an auction bidding against himself – it's plain fraudulent."

O'Neill is also urging TREB's board of directors to adopt a new system where "each and every offer" in a multiple bidding situation is registered on MLS.

Broker Ken McLachlan isn't waiting for TREB to change the rules before acting.

This week, McLachlan, who owns Re/Max Hallmark Realty, ordered his 450 agents, to register all offers.

This means that in multiple offer situations where Hallmark Realty agents represent the seller, the name and company of all realtors who have registered an offer will be disclosed in writing to any other involved realtor, upon request.

"We've been waiting for RECO and the board to do something, but they've been too tentative," said McLachlan, who also sits on the TREB board.

Registering bids is a necessary first step toward restoring public confidence in the bid process, McLachlan and O'Neill agree.

"It's a perception; it's the trust issue, and this full disclosure system would even the playing field for the buyer," McLachlan said.

The next step is for the actual bid amount to be registered officially, a practice currently banned under provincial legislation.

"I think the evolution of our business is toward full disclosure," McLachlan added.

O'Neill says she will oppose this because, even without names, it breaches a buyer's right to privacy.

Maybe sometime soon Ms. O'Neill will also learn about the concept of supporting competition in the real estate industry.

October 27, 2007 in Real Estate Practices | Permalink


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