First of all, happy Halloween! Though I’m sure many of you celebrated last weekend. When it comes to Toronto real estate, I can’t think of anything much spookier than entering a blind bidding war.
I read in a recent CBC article that the Ontario Real Estate Association is calling for a change to the Real Estate and Business Brokers Act to allow for a more transparent bidding process. Currently, agents are allowed to share a competing bidding price if all parties agree to the transparency. Of course, this is rare.
OREA is taking it a step further, saying the Act should be revised to allow for not only the sharing of competing bids, but also closing dates and any other conditions of the offer. At the moment, no other provinces allow for details other than the price to be shared during the bidding process.
The way I see it, there are pros and cons to both an open auction and a blind bid, and I believe the seller should have final say. If buyers want to play ball, they should play by the seller’s rules (as long as those rules abide by the laws of Canada and the province, of course).
The pros and cons of blind bidding
The obvious pro for sellers is that buyers don’t know if their offer is the best or highest, so those with no will power often find themselves exceeding their budget to get the home, and maybe they didn’t even have to. This is obviously a con for buyers.
Another con is that constant speculation can fuel an already hot housing market. When someone reads a headline about the average price of a single-family home in the Greater Toronto Area hovering above $1 million, they may automatically think they need to bid high, even if the valuation is under the average. Hopefully, a good realtor would guide the buyer’s decision making in the right direction.
We’re also seeing more offers with zero conditions, which is crazy to me. I’m not buying a home unless it’s inspected and I know I’m not buying a money pit. People submit offers with no conditions in order to increase their chances of being the most enticing option. I’ve seen sellers choose a lower offer price with no conditions because the higher offer had too many conditions.
The pros and cons of an open auction
The con that comes to mind first is that sellers don’t have the luxury of nervous buyers over-bidding blindly. But have you ever been to a live auction? People are excitable. Knowing exactly what the leading offer is means buyers can comfortably make a well informed decision on how to proceed. It can even make buyers more comfortable going over budget, not that I’m recommending it.
My opinion, full transparency is always better, especially when it comes to the largest purchase you’ll ever make in your life. You shouldn’t have to waste time in a bidding war when it’s obvious to the seller that you can’t match the leading offer.
You should do your research, set your budget and conditions (possibly dependant on the home in which you’re interested), get all the details you can, and then start submitting offers.
I’m not sure when and if the Act will be revised with OREA’s recommendations, but either way, I believe you should always do what’s best for your family when it comes to a home purchase, and that means sticking to your budget and finding the right neighbourhood for you.