Will Banning Blind Bidding Lower Real Estate Prices In Canada?
Thursday Jan 13th, 2022
First let’s talk about blind bidding. What that means is that when you submit an offer, you don't get to know what the other offers are if you find yourself in a multiple offer situation...which at the moment is happening more often than not. So when you find a property you like, you put together an offer with your agent, and you're going to make your best educated guess of what you think that property should actually sell for and then cross reference that with what you can actually afford. The proposal is that you will now be able to see all of the other offers. What is unclear in this proposal is if you will get to see the terms and the dates or just the offer price? And then remember of course the other side of that situation is that the other buyers will also get to see your offer. The thought behind this is that if everyone sees all of the other offers that there will be no crazy high offers put in and everyone will be able to make a good, educated decision and because everyone is making good rational decisions, that will mean that nobody will overpay for a home and that will bring house prices down.
Before we get into this, I want to first make it clear that I do not enjoy the blind bidding process whatsoever, in fact, I don't think many agents do.....trying to guess where a home is going to sell based on how badly another buyer may want the home and not on actual facts is nearly impossible and it is frustrating to the buyer and frustrating for us as agents as well. I also want to make it clear that when you see homes selling for $100,000-$200,000 over the listing price 9.9 times out of 10, the home was listed $100,000-$200,000 under what it was actually worth in today's market and ended up selling for market value, not $100,000-$200,000 more than it was worth. It sold for market value! These headlines can be very deceiving because when you compare the sold price of some of these properties that made the headlines to the comparable properties in the neighbourhood, the actual sale price was comparable to the other homes that have sold, not $100,000 more so just be careful when you hear those headlines. Do buyers emotions sometimes get the best of them and they overpay slightly for a home? Absolutely! But my concern is that now this will essentially become a live auction and once you can see someone else's bid, are you not going to keep going up and up and up in price and still let your emotions get the best of you? Maybe even more so and end up paying more than you would like to anyways. I often have buyers who missed out on a property and then when they find out what it sold for, they say to me "Ah, I would have paid more than that"....so on the flip side of some buyers overpaying, there are a lot of buyers out there right now who tell me that they don't want to be the person who overpaid and so they go in reserved and then when they find out the sale price, they are upset they didn't go higher.....even though I always tell them to put in the price that they won't be upset walking away from if they don't win, because they wouldn't have gone any higher, but they are still upset! So the flip side is that the homes could sell for even more because now you do know how much it's going to sell for and you do have the opportunity to go higher. In some of the other countries who do use an open bidding system, it has driven the prices up.
Do I personally think that it will lower prices? No I don't, the statistics also show that open auctions and blind auctions tend to result in similar sale prices and CBC also put out an article not that long ago that talked about all of the other experts who are skeptical that it will lower prices as well. I do agree that we need a solution to even out the market and slow the steep increases in prices each year and I also agree that we need more transparency because I know that sometimes buyers suspect that they are the only bidder in a blind auction — an experience that makes them feel like the practice is dishonest so we definitely need some changes for sure, but not many people agree that banning blind bidding will make any difference in home prices. I'd love to hear your thoughts on this so drop your comments in the comment section.