re: Are phantom bids legal (real estate)?

Good advice above, how badly do you want the house? If not that badly, re offer the same or lower. Play the game just the same.

FWIW this happens fairly often with investment grade properties. There's investors that tell realtors they are interested at price $X and the investor fades away waiting for the price to drop. When a legit offer comes in, the realtor calls the investor and they make an offer also.

Those offers are not always legit, sometimes they are low and often times the offer is just there until the investor determines they really want the property by doing a further inspection or whatever. Then they drop out.

ETA: For example on foreclosures, banks have a time frame to list a property before lowering the price. Some banks/ bankers list for 30 days some 60 or whatever. Investors know this, and they'll often wait 29 days to make a low ball offer right before the bank is about to drop the price. It seems very low, but the bank was about to drop anyway so they'll accept.