Fierce competition among buyers during hot markets in B.C. is a well-known motif, even as softer markets are currently at play. However, recent regulatory changes could mean the return of bully offers when markets inevitably rebound.
Effective Mar. 17, B.C. Realtors will no longer be able to use the Irrevocable Direction Regarding the Presentation of Offers (IDRPO) form, according to a Fraser Valley Real Estate Board (FVREB) memo shared with Real Estate Magazine.
The form was originally introduced to create a fairer process for buyers in competitive markets by ensuring all offers were considered simultaneously, preventing sellers from accepting last-minute “bully offers” that pressured them into quick decisions.
In the memo, the FVREB states that the IDRPO was “created to enhance transparency and provide all buyers with a fair opportunity for their offers to be presented.” With this change, DRPOs will no longer be irrevocable, allowing sellers to change their minds about offers at the last minute.
An unintentional conflict of interest
The decision to remove the irrevocable characteristic from IDRPOs follows concerns raised by the B.C. Financial Services Authority (BCFSA) to the B.C. Real Estate Association (BCREA) in Fall 2024.
BCFSA identified a conflict between a Realtor’s duty to act in their client’s best interests under the Real Estate Services Act (RESA) and their obligation to comply with real estate association rules as board members.
“BCFSA confirmed that licensees bound by an IDRPO would face an irreconcilable conflict of interest if their client wanted to reverse that direction. Depending on the circumstances, this could result in situations where a licensee would be required to release their client after an offer has been received, which is not optimal for consumers or licensees,” the BCFSA said in a statement.
Additionally, the BCFSA emphasized that under RESA, Realtors are required to “act in accordance with the lawful instructions of their clients.
“Specifically, IDRPO prevents a licensee from changing their advice on offer presentation as new offers arrive. It also prevents the licensee from accepting new instructions from their client, even if doing so would be in the client’s best interests,” a BCFSA spokesperson added.
REM reached out to Trevor Koot, CEO of BCREA, for comment, but he declined to comment, saying, “BCREA is not in a position to provide a response on this topic.”
Trying to level the playing field
Steve Karrasch, a Realtor with Macdonald Realty in Surrey, recalls when IDRPOs were first introduced in 2022.
During the red-hot market of 2020, DRPOs “have always been a standard form, but they only really (gained prominence) when stuff got pretty crazy in 2020. And that was the result of hot markets,” Karrasch says.
DRPOs were particularly useful when the market was at its peak, ensuring as many potential buyers as possible had an opportunity to view a property before offers were reviewed at a set date.
Following the pandemic-fuelled frenzy and subsequent cooling periods, Karrasch and other Realtors observed increasing buyer frustration due to “bully offers.” These aggressive offers aimed to outbid competitors by pressuring sellers to accept quickly, often with short deadlines and minimal conditions. In many cases, sellers revoked their DRPO to accept a better offer.
“What was happening with these bully offers is the seller, once they get a better offer, they would kind of change the goalposts halfway through…and all these buyers miss out,” Karrasch explains.
B.C. Realtors viewed this as unfair and, in response, amended the Rules of Cooperation. “The three boards got together and said, ‘We will change our Rules of Cooperation so the agent will not participate in bully offers.’ And that’s when they came up with the irrevocable direction of offers,” Karrasch explains.
Concerns on the horizon
With DRPOs once again becoming revocable, Karrasch is concerned about the return of market conditions that led to their creation.
“I don’t know if it’s a year, two years, five years or ten years, but whenever the market gets hot again, we’re going to start hearing all of these horror stories—where houses are being sold and buyers are complaining they didn’t get their opportunity because they were waiting for an offer date…and then it was a bully offer on a different day,” he says.
More troubling, he argues, is the potential damage to the reputations of sellers and their Realtors as short-deadline bully offers become prevalent again.
“And then it’s actually going to damage the reputation of the sellers, and particularly of the agent because buyers are going to think there’s always funny business going on,” Karrasch says.
Indeed, when IDRPOs were introduced in 2022, a previous FVREB memo stated, “This change is designed to increase public confidence in the way our profession handles offers from competing buyers.”
REM reached out to FVREB for comment, but the board did not respond in time for publication.