What does blind bidding mean?
The Federal Liberal Government recently announced its plan to put forth a buyer’s bill of rights that would ban the practice of blind bidding in real estate. On the Surface eliminating blind bidding would probably seem like a good thing but would it really be? In this blog I’ll explain what blind bidding is, and the pros and cons for each side.
In Ontario sellers can opt to sell their home however they choose, through blind or open bidding, with the majority of sellers choosing to sell with the blind bidding method. With the blind bidding process nobody is allowed to know anything about the other parties’ offer, this includes price, terms and conditions. The only thing that a buyer can know is the amount of offers they are competing against. So buyers will put out their best bid on a home and hope that it is higher than the other offers. A buyer could pay 200k more than the next best offer and they would never know it; so the reason why there is much talk of banning the practice is to avoid buyers from drastically overpaying for a home which in turn should cool off home prices.
Is this really a good idea?
Privacy concerns – from a strategic standpoint the price is not always everything that will win an offer. There are so many other factors that can affect what offer a seller will choose; conditions, deposit, closing date. There are a lot of grey areas here. Does the seller have to pick the highest price or will they be able to choose whatever offer they want? What about an offer that has a condition upon selling their home and wants to pay more?
Seller rights – We live in a free country and sellers should not be told how they can and cannot sell their homes. What is being proposed is to amend the criminal code so that you must sell through an open bid strategy.
Will it actually help cool prices? Most advocates for this think that opening it up would create an even playing field, however could it do the opposite? In parts of the world where they do open auctions it often creates a frenzic chaotic environment that is easy to overspend in. Australia uses an open bidding process and often holds auctions on the front lawn of the home. Australia is currently in the middle of a huge housing price boom and also sees homes go over the asking price. It’s arguable that a blind bidding system allows buyers a calm environment to determine what they are willing to pay for the home.
Finally, not every home gets multiple offers, in fact prior to COVID hitting the majority of homes outside the GTA did not get multiple offers. We have a housing supply problem in Canada that has been accelerated during COVID. The only 2 things that are going to slow prices down are building more supply and raising interest rates. In my opinion opening up the offer prices is not in the best interest of the buyer or the seller.
For more info check out my video below: