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Bidding wars – how to protect yourself

By Robert Hof

I have never liked bidding wars but one has to accept the fact that sometimes they do happen. Mark Weisleder has once again written an excellent article. Robert.

One of the best-read Moneyville stories last week was the article about the couple who bid $90,000 over the asking price on a $1-million Toronto home in the belief that they were in a bidding war. They were shocked to find out they were the only bidders.

The seller was eventually persuaded to accept half that — $45,000 over asking, but the question remains: how did this happen?

According to the law, in a bidding war, the agent must tell everyone how many offers have been received for house. But the agent is not allowed to give out the buyers’ names or say how much they have bid.

In Toronto, a practice has developed whereby the buyer’s agent calls the seller’s agent and tells him that they plan to bring in a formal offer later that day. But that doesn’t mean they have to do it. If the would-be buyer changes his mind, he doesn’t have to bid.

What this means is that the seller may get a handful of these so-called “registered offers” during the day — with no guarantee any will be actually presented later. Even so, the listing agent, to create a sense of urgency, will usually tell potential buyers he is expecting offers.

Buyers should understand this and safeguard themselves.

I developed a bidding war clause a few years ago that is widely used. The clause says the buyer is presenting his offer based on the assumption that multiple offers will be presented to the seller that same evening. The clause goes on to say that if the seller receives no other offers by a certain time, say 10 p.m., the buyer can change his mind, cancel the deal or change the price.

If the seller accepts the buyer’s offer, he must provide the buyer with proof he has received another offer. This means providing, at minimum, the name, address and phone number of the real estate agent who presented the rival offer.

By using this clause, the buyer has assurance that if his offer is accepted, the seller will have to prove that he indeed did have at least one other offer available.

If this kind of clause had been used in the recent case in which the buyers offered $90,000 over the asking price, then the buyers would have been able to cancel their offer once they found out that no other bids had been received.

So could these buyers have complained about the behaviour of the seller’s agent?

In my opinion, if the seller’s agent knew that other offers were not coming in and that the buyers mistakenly believed that they were in a bidding war, that’s unethical. You cannot mislead a buyer just to get a higher price.

Could the buyers have cancelled the deal? This is a difficult area of the law. If the buyers could prove that the seller misled them, maybe. Or if it could be proved that the seller knew the buyers were mistaken when they presented the offer, it is possible the buyers could claim this was a legal mistake. However, this will involve legal fees to attempt to sort it all out.

In this recent case, the parties settled the matter by having the buyers agree to pay $45,000 over asking. This was probably better than paying lawyers to figure it all out. Still, by using a bidding war clause whenever you are suspicious about the possibility of a bidding war, you can successfully avoid this happening to you.

– Mark Weisleder is a Toronto real estate lawyer. Contact him at

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