During the snap election of 2021, many of the proposed changes surrounded efforts to improve the real estate market. This involved everything from increasing the number of houses to changing the way we buy and sell. The latter of which I’d like to discuss. I’ve discussed this topic during episodes of KT Confidential, mentioned it in several posts on Instagram Stories and TikTok, and it’s still a topic of discussion, stumbling across an article about it just a couple of days ago.
The Liberal campaign included several real estate-related proposals, including the introduction of mandating open bidding (yes, making it ILEGAL to utilize any other method of selling).
What is open bidding?
Open bidding is a style of bidding that requires disclosing information about the content of offers to each of the competing bids. This generally means that any information in an offer that could provide one offer with an advantage over another must be disclosed. For example, the apparent details to disclose would include the offered price, the deposit and the closing date. The not-so-obvious information could be the list of chattels included with the purchase, whether or not somebody is assuming existing rental contracts, and the various conditions contained in the offer.
What current system of bidding is utilized in Ontario real estate?
The current method typically utilized is closed bidding. Closed bidding is where no information about an offer may be disclosed to a competing offer. The only information that MUST be revealed to each registered offer is the number of offers, whether or not the brokerage representing the seller also represents a buyer, and whether or not there are special remuneration arrangements.
Will open bidding cool the market?
No. The method in which we buy and sell real estate has no impact on the state of the market.
Are Realtors in Ontario Opposed to Open Bidding?
No. Well, I’m not. Provide a good salesperson with the rules, and they’ll work with them to produce a successful outcome for their client.
Why was Open Bidding proposed?
The people who seem to complain about the blind bidding process typically convey two things; one, they believe more transparency in the bidding process is due; and two, it will prevent people from overpaying.
Transparency is great, but there’s more to it. Closed bidding is used in many other industries; companies bid for government contracts this way, vendors bid for work with corporations, etc.
The key is to have proper representation (find a great real estate agent) and know your financial limits and qualifications.
Open bidding may seem like a good idea at first, but it’s more complex than you’d think. I can recall many times while representing a seller where if the top few bidders knew each other’s offer details, they would have continued to bump their price to outbid the next. At what point would that end?
The only thing that will cool the market is more inventory, and that is a much longer conversation than my fingers are prepared to type.
What are your thoughts on open vs. closed bidding?