In Canada homebuyers have been blind bidding against each other for decades, but other countries around the world have their own way of selling houses. For instance, in Australia, the process is transparent. On bidding day, typically a Saturday, interested buyers gather on the sidewalk outside the home and place their bids out in the open, in an auction led by the seller’s agent. As homebuyers become frustrated on being out-bid for homes and not knowing why, a system closer to the Australian method is beginning to gain traction. Some real estate agents believe that transparency may make house prices more affordable.
“Currently in the multiple offer process in Ontario, offers are submitted to the seller, and only the seller and listing Realtor know the content of all the offers, as Realtors are prohibited by law from sharing details of any offer with other buyers bidding,” says Philip Kocev, managing partner at iPro Realty in Toronto.
Kocev knows buyers are frustrated at having to “guess” what price to offer to win the bidding war and sellers are often also frustrated that they can’t ask a buyer if they are willing to beat the current best offer. “This problem is compounded when a listing agent has their own offer and therefore knows the details of all competing offers. Even if they are acting 100-per-cent ethically, this scenario fosters mistrust and suspicions when a listing agent’s buyer is the successful buyer. There have been increased calls to implement a transparency model, where all buyers bidding on a home would know what the best offer is and are given the opportunity to beat it.”
Kocev says it could be argued that the process has “added to the excessive price growth we continue to see in many areas” in Ontario.
Recently iPro Realty asked consumers and Realtors in the GTA for their thoughts on offer transparency. More than 1,000 Realtors and 150 consumers responded, with the following results:
- 88 per cent of consumers think transparency should be allowed
- 72 per cent saying it should be mandatory
- 89 per cent of Realtors think there should be transparency
- seven per cent are undecided
- only 11 per cent say no to offer transparency
- 75 per cent of Realtors surveyed agree it will bring greater credibility to the offer process.
- Only 41 per cent of Realtors and 34 per cent of consumers think implementing transparency may have a cooling effect on the market.
“With the Ontario government reviewing our current real estate legislation, now is the time for Realtors to be bold and provide input. We can help ensure that as many people as possible realize their homeownership dreams and that they are protected in the process of doing so,” Kocev says. “Allowing the option for offer transparency doesn’t have to be complicated. Sellers, through their listing agent, should be allowed to disclose the best offer on the table to all competing offers, with all participants given an opportunity to resubmit their offer or walk away.
Kocev says, “What we are talking about is not an auction process (although we feel those should be allowed also, the more choice for consumers the better). What we are suggesting is keeping the process the same as it is today, but allow Realtors to disclose the top terms of an offer to competing buyers – as long as personal information about buyers is kept confidential (unlike today where we can’t say anything about another offer.
“If we don’t get involved now and help shape the offer process, government could impose changes upon us that may not be in the best interest of our industry or consumers,” Kocev says.
Tim Hudak, CEO of the Ontario Real Estate Association, says sellers in the province can opt for the auction process now, but it’s not a popular choice.
“This very private personal information, like how much you can afford to pay, how much you’re going to have to borrow – not every buyer wants to sell that kind of personal information,” he says.
Hudak says OREA is in favour of more transparency, but cautioned against mandating any one system, such as the open-bidding auction process.
“We believe we should give people a choice,” he says. “Fundamentally, buyers and sellers should decide if they want the traditional offer process, (or) do they want to have an open option.”
Hudak says an open system wouldn’t cool down the market. Instead, it could result in “auction fever” that could drive up property prices. “That fever catches on and it can drive to higher prices at the end of the day,” he says.
“With transparency, the best offer always wins,” says Kocev. “Even if the best offer is not the highest price, the listing agent is currently not allowed to divulge the terms which the seller finds more attractive than price.
“The results of our survey clearly indicate that both Realtors and consumers want change. As the ministry conducts its review over the next few months, we call on our fellow brokers, boards and associations to join us in providing input into this important legislative change.”