The Canadian snap election is over, and the debate around its need, given the House of Commons remains the same as before, is fading as well. But what is not over and will now knock on the doors of the party forming the government are the aspirations and expectations of Canadians, which shaped their voting preferences.

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These are unprecedented times. Perhaps Canadians read the platforms of political parties more carefully than they usually do during elections. Several pledges by the Liberals concern the housing market in Canada. Among other things, the party declared that a ban on blind bidding during real estate transactions would follow their return to Ottawa. Such bids do not let competing buyers know how much other people are offering for the same property.

Do blind bids exist elsewhere?

In Australia, the house sales process is in stark contrast to how it is in Canada.

For almost two centuries, houses in Australia have usually changed hands in an open bidding process, conducted in an auction style. Prospective buyers gather in the open area outside the house to try and outbid others.

Canada’s housing market is notorious for lack of transparency. Though there are valid arguments in favour of blind bidding, advocacy groups have pinned the blame for the frenzy in house prices on blind bidding. Their argument appears reasonable. A bidder does not know how much the second-highest bid is and hence the highest bid could be tens of thousands of dollars in excess.

That the Liberals’ pledge is a sure-shot way to make houses affordable is debatable. But unfortunately, no reliable study can point toward the advantage of one bidding type over the other.

The argument against open bids is also reasonable on some counts. The auction-style bidding that is famous in the Australian real estate market can trigger impulsive spending by competing bidders. In open bidding with little time to think about the justification for a higher bid, the bidders may speculate higher and higher. Consumerism in advanced economies, be it Australia or Canada, can trigger ego clashes.

Another argument is, what if the seller or the agent unscrupulously manipulates the open bidding war? This might add some tens of thousands of dollars to the final price. And what if the buyers decide to bring down prices of housing assets by collectively bidding at lower-than-justifiable prices? Retail investors in the U.S. did something of this sort to the stock market by artificially pushing up meme stocks like GameStop.

Is it even possible to ban blind bidding?

Experts say that the federal government can do little in this regard because the provinces have jurisdiction over the passing of any such legislation.

Further, the new government will face resistance from Realtors and their associations. For example, the proposal to ban blind bidding met with criticism from the Ontario Real Estate Association and CREA. They say the measure is counter-productive and “criminalizes” families.

Consider this. House prices in Australia are surging at the fastest pace in almost three decades. According to industry experts, house price surges have far outpaced wage growth in Australia. In Canada, both the sales volume and the average price have been falling over the past few months. This is not the scene in Australia, where the price is growing monthly.

No two markets are the same, and no single method of transaction can be the best.

A ban on blind bidding is in no way a guarantee that houses will become affordable. Before Canada embarks on the ambitious yet controversial move to ban blind bids in the housing market, the federal government will likely concentrate on programs to help low-income and first-time buyers.

23 COMMENTS

  1. Tomorrow the CREA will tell the nation

    The Average Sales Price for a Canadian home was $686,656 and that sales had dropped 18%.

    Ask Don, Lawrence and Carolyne, when did the Average Purchase Price become believed to be
    Average House Price?

    I suspect few if any remaining realtors had a Commission Chain of 4 or 5 deals hanging on finding a single first time buyer like those pros would have had decades ago.

    It was called Average Purchase Price for what 5 decades before Klump changed it?

    Bidding Wars…Blind Bidding…$1 Listings…who made up these marketing ploys?

    “Your in Competition” and ” I can Trust Don not to reveal your bid” and ” That’s a REBBA violation ” have all been replaced by practices and narratives to support your local Zero Annual Sales Agent and One Listing Brokerage who appears on BNN or Global News as an expert.

    Don’t you wonder why the Dons, Larrys and Carolynes of the industry never appear on TV speaking wisdom to truth? You should!

    You should listen to the true legends of your industry because your industry is where it is today because most never did!

    • The real estate world is now completely unrecognizable, Ross.

      I was always so upset when overall Ontario or Toronto GTA averaging reared its ugly head in conversation. Agents would sometimes bring offers reminding my sellers of proof of a lower price shown by the GTA stats. The ONLY charts and graphs stats that matter are ones within a couple of miles of a given subject property municipal address, ideally in the same subdivision, then fine-tuned to match the subject property based on care-condition mostly.

      I vividly remember agents who used the GTA averaging stats when listing a property in Brampton and naturally it sold nearly overnight. Having convinced senior sellers or first time sellers that there was the proof stats saying what sold price should be expected.

      Then I would get called to do a CMA listing presentation nearby and using tight up local info (even comparing municipal taxes), and for example a house that had recently been sold at 350k, I would sell its twin around the corner at 375k. Pretty much the same house. Built at same time, by same builder.

      That’s the sort of situation wherein I could be paid what I was worth. I could prove the value that I brought to the table and where the commission was spent that netted my clients more money in their own pockets with a higher sold price even in quiet markets, sometimes with two or three offers almost identical after colleagues criticized my so-called high asking price.

      It was fascinating. And it had nothing to do with greed, bringing in 6, or 7 points on transactions. All the things I provided such as rotating weekly fresh flowers and available housekeeping, lawn care and colour advertising with professional photography. When buyers who were to be sellers saw what I did, they wanted it too.

      That’s what kept my phone ringing as far back as 1980. Sellers would sometimes say they would even like to buy their own house when I got it organized. Then I knew for sure I had done my job. TV and other media vehicles don’t want to hear the truth. It doesn’t make headlines, or sell newspapers, Ross. Sadly the media is only interested in hype. Often their reports are created in their minds and believed by the unsuspecting public. Check out a firm handshake and eyeball to eyeball contact.

      Carolyne L

      Sent from my iPhone

      • Carolyne:
        Agree that average prices are very misleading to the real estate consumers. Realtors have many tricks to fool the consumers. For example: There is no cost for a buyer to purchase a home. It is a FREE for buyers to purchase a home. Carolyne, I have been focusing on this one issue for some time on REM since I believe it is a major issue for consumers. Sellers should NOT be setting the buyer agent fees. Why should the sellers be setting the fees to be paid to their competition. Very anti-competitive. D

        • It’s just my personal opinion of course, but I don’t believe that sellers or their agent “are” setting the fees for co-op agents.

          It’s just a quirk of the forms system paperwork. No where that I’ve ever seen has the provincial ministry (but I understand that in MB the real estate system works under a different system) suggested that a seller “dictates” that the co-op fee must be accepted by the buyer agent. The field in the listing form is simply an “offering” as to what amount the seller is prepared “to contribute” to the numbers, as to math.

          The co-op agent will be paid according to his buyer broker contract stating that he will accept being paid whatever the listing contract via the seller’s contribution as is offered or he will paid by the buyer’s topping up the amount he requires to keep his business doors open.

          See my several posts on the topic of how (co-op) buyer agents get paid, or should be. It’s not rocket science, further confirmed at time of offer presentation by additional forms cross-referenced to confirm and meant to support whatever is stated in the buyer broker contract, detailing how much in fact the co-op buyer agent will actually get paid, and how.

          Will someone support getting rid of the term “co-op” on real estate listing forms which casts a shadow from sub-agency days? And leading to comments such as that the seller and his agent are determining how much the buyer brokerage agent will be paid.

          The buyer agent will be paid whatever the buyer agent determines his worth, according to whatever his buyer agrees to pay and signs when accepting and signing his buyer contract (and it is a separate contract) agrees to pay his buyer agent. How much is to be determined in “that” contract accepting whatever is offered by the seller portion standing alone, or boosted to top up that amount, billed as an adjustment through the seller’s lawyer invoicing or paid direct on closing by the buyer. Spell it out loud and clear to prevent any misunderstanding.

          Make sure the buyer contract says the buyer agent will be paid by his brokerage and that the buyer provides a certified cheque on closing if there is a top up differential involved.

          Provide the buyer’s closing law office with a copy of your buyer broker, buyer-signed contract as well as attaching a copy sent to the listing brokerage, billing for the portion the seller agreed to offer.

          There’s various ways to organize how the invoicing can be done. But for agents to say they work for buyers for free is misleading and probably illegal. And might find such a comment challenged in court. It doesn’t need to be complicated. But for some reason the listing contract seems to be misleading as you clearly state. No, the buyer agent provided service is not free.

          Carolyne L 🍁

          • Carolyne:
            Here are just two comments from Realtor websites. If you do a random check of websites you will certainly find many examples of misleading info on fees. The real estate industry certainly believe by their comments that the seller and listing agent set the fees for the buyer’s agent. Quotes:

            “The Seller decides how much commission to offer the agent who represents the Buyer; this is referred to as the ‘cooperating commission’. The amount of the cooperating commission is set out in advance and is used to encourage or entice other agents to sell the home.” 

            “When the home is first listed, the seller and realtor enter in to a listing agreement in which they agree to a gross commission, listing agent commission, and buyer agent commission.”

  2. I think if the provincial government allowed an auction it would be that they would say that the seller can choose an auction or blind bidding option. As a realtor, I am working for the SELLER to get them the most money for their home not another agent’s buyers. People have to remember that!! People try to take some moral high ground bashing realtors for getting the most they can for THE PERSON WHO HIRED THEM. When people make such comments I simply ask “ok, so if I list your home you want me to get you $10,000 less than I could have received for you????” After their stunned look and pause they say well of course not, end of story. Also not all agents charge the higher commissions. I have been around 17 years and only charge 3.5% to sell total. Most of my clients are repeats and referrals for doing a great job and saving them money. Yes there are many way underqualified people doing the job and trust me we hate it as much as the public does as we have to deal with their nonsense!!

  3. If there are 50000+ Realtors in the Toronto Market Area and only 8000 -9000 sales per month you can bet that there will be more than one buyer for every house sale. The existing real estate model will continue to disadvantage real estate consumers particularly the BUYERS. As long as there are offices with hundreds or maybe thousands of Realtors, the bidding war problem will continue to survive. No Government will be able to solve the problem. The solution WILL come when the housing market crashes and Realtors start to drop out of the business and brokerages start to suffer. There needs to be some pain and suffering before the real estate industry will make any changes. I’m not sure when that day will come, but hopefully sooner than later. When do you think the next housing crash will come?

  4. Blind bidding. Who thought up that term.. just to try and buy votes the government wants the seller to lower the price of there home so someone can buy it for less than its worth… that really makes sense…
    Here’s a thought what If Canadian Tire advertised lawnmowers for $299 and you went to the store to buy one and they said no we will not sell it for that you have to pay more. That price was just meant to get you to come and make an offer…..well that’s what most of the agents are doing with low listing prices. Maybe this is the practice that should be stopped. Not sure how.
    There are $1million houses listed for $799k and the seller has no intention on selling anywhere near the list price. and then buyers get mad when they get out bit when someone pays what the market value really is a..$1million. This is only happening because of the demand. The market will change just like the weather. Governments need to focus on how to bring to market more building and housing creation that the private sector can do quickly. With that said I can not see anything changing soon. It’s all blah blah blah..watch the government come after the private sector with more taxes on the taxes and more frustration

  5. You have to understand, we are moving towards a society where we take from the have’s that have worked very hard and must give it to the have not’s. We we really need to do is ban government spending or even better term limits. Lack of term limits breeds corruption. Equalization equals equal at the lowest common denominator. Quite often you hear me say “be careful what you ask for” because you just might get it and more.

  6. Thanks for all the comments. Looks like we are all over the map.
    As Brokerage and Realtors in Canada working in a professional business we have been given the rights to provide the public with the true price of a clients Real Estate. It may be land or a building the type of building will give value to the value of the Real Estate alone with zoning and uses.The responsibility of the Brokerage and the Realtor is to provide the Buyer or seller the value of the Real Estate .If The Brokerage and the Realtor are wrong about the value. The Brokerage and Realtors shall be responsible to the seller or to the buyer under the client contract. an Aprasial must be provide to Buyer and to the seller for the property that is being sold or purchased. we can take from here.

  7. Thought provoking article, but our governments are partially to blame with lack of transparency in our daily lives, with so many privacy laws and covering up official documents that affect all of us.
    This is really the pot calling the kettle black.
    Auctions are not the answer, can you remember your first time bidding at an auction? Highly tense, hard to hear, fast moving, and not really knowing if the bids being made were from bona-fide bidders ( yes, they do sometimes use shills). As a young newlywed I was so excited, I didn’t see my husband put up his hand first and outbid him on a new bed! A mistake on a new bed is one thing, the family home another….. The difference between pennies and $20s.
    I was watching the news last night and heard that last year the feds entrenched the right to housing in our laws, food is coming next and a guaranteed income. I don’t begrudge anyone a place to live or food, but even the tribes of cavemen would not feed anyone who would not pull their own weight. No hunting – no steak. If you don’t contribute form your own tribe.
    We are providing funds to people for doing nothing, while businesses are shortening their hours and service due to staffing shortages. And, we have the Liberals and NDP to thank for this – both provincially and federally. Thank you Cerb! What’s next? Can someone move into your home when you go away for vacation? Your rental between tenants? Can they steal groceries from your cart while you load them in your car? Because they just don’t feel like working, or would rather shoot-up than pay for the necessities of life?
    This is not a stretch of the imagination.
    We already have ordinary people dying in our province waiting for an ambulance of heat stroke and heart attacks because there are too many drug overdoses being dealt with.
    Our country has slowly been turned upside down over the past 5 years, and not for the better.
    So why let the donkeys be the logistics experts?
    Realtors know how to deal with real estate best and our associations need to inform government that this is the case. The leaders of the boards have not done a good job of this in the recent past.

  8. I disagree with all who say gov’t intervention is needed – what we need is for the government to get out of regulating and social engineering housing for political reasons. We need to end the NIMBY influences that create significant time delays and additional costs which gets passed on in higher prices. We need to understand that 80% of families want to raise their families in ground based housing with yards and not 750 sq ft 2 bedroom condos. Yet the political flavour is no expansion of greenfield development. Combine this with a government that has flooded the market with printed money to cover its deficits and the devaluation of the dollars purchasing power has been a travesty. The govt solution to print money instead of creating policies that create additional production and supply of goods and materials is headed to the same place that every other country doing the same has ended up.

    I say to the government – get your house in order first and stop messing with our homes
    ! If they don’t house prices will double in next 10 years as we see an additional 8 million new Canadians competing for homes at a time the supply has not increased enough to meet demand.

  9. What an idiotic attack on the real estate industry. One question i have for any government official who tries to put these restrictions on the industry. Will the government be implementing the same practices on it own dealings? I mean each time a project is tendered will the government let each one know what the other is offering before granting a project to a particular contractor. We live in a free market system and all i hear is coddled young buyers screaming at the prices they created in the first place. Supply and demand dictates value and any attempt to change that will only create additional problems down the road.

  10. Simple! I would end the unscrupulous lies of the listing agents who tell the lone over ask offer “we have some very strong offers, are you sure you don’t want to increase yiur offer”. And the poor sucker did, another $20K or $25K unnecessarily. Yes the lies and BS are driving prices up.

    • In BC all offers must be in writing and retained for inspection.
      And no one seems to want to discuss other aspects of an offer besides the price.
      In an auction, what happens to dates, conditions, terms. Are there not value in those to a buyer ?

  11. I agree that the best scenario lies somewhere between blind bidding and an auction, where all parties to the transaction are on a level playing field by having all the information they require to make an informed decision about what to offer in a home.

    • I have so much difficulty relating to an offer price that someone else thinks a house is worth. Whose business is it except those directly involved: owner, his agent, and buyer and his agent. Releasing offer amounts that might never be accepted by owners could be very dangerous?

      And faxed offers permit whoever happens to be at the fax machine to know all sorts of things that are not any of their business.

      Just one example might be that another agent with a buyer contemplating an offer might be ill-advised, provided information that turns out to be misleading. And in my opinion none of anybody else’s business.

      Buyers need to offer what they can afford and prefer to spend on a given day relative to a particular property of interest. What someone else thinks the property of interest is worth is not of any interest or possible consequence. It’s just a purveyor of gossip.

      The seller might make his acceptance decision of what offer to accept not at all based on price. All that needs to be known is that there are legitimate multiple offers that if needed to be authenticated, can be. All that is needed is the multiple offer agent and brokerage ID.

      Respectfully
      Carolyne L 🍁

  12. Despite Trudeau’s knee-jerk response that government intervention is clearly the answer, there is no obvious or easy solution to this situation.

    The harsh truth is we live in a free market, where principles of supply and demand, not a socialist-controlled oligarchy, are at the helm. Nobody enjoys having a market dominated either by supply or demand. But it’s a hell of a lot better than having some pretend government dominating how citizens should behave and influencing the value of what people own.

    Make no mistake: This misguided and misinformed liberal idea is designed to make sellers sell for *less* than market value. That’s the intention, to artificially weaken prices. In a strong buyers’ market, we can assume then that Trudeau would demand that buyers pay *more* than market value. Wait. That’s not fair. In a Socialist county it is.

  13. I enjoyed reading this article as I found it to be a relatively well balanced discussion of the various views (journalists of the world take note) although I do have concerns with at least one or two of the premises of statements made.
    For example, to say “Canada’s housing market is notorious for lack of transparency,” is a statement I questions the premise of. “Housing” is not a national issue, rather a regional and, more accurately, local one. Markets and regulations change from location to location. In our market (Edmonton) we have what I consider to be reasonable disclosure regulations in multiple offer situations, including the names of the agents involved.
    Secondly, what is the rationale for making such a bold statement? Notorious in whose eyes and by what generally accepted standard?
    So many of us cry transparency when we don’t even have a definition of what exactly our version of “transparency” consists of. Additionally, while transparency is one of those motherhood and apple pie words, it is only one consideration of many in arriving at fair and equitable practices.
    Anyways, overall I enjoyed the article as it stimulates us to look at all the angles. I do not believe the government’s solution will change anything, and it will certainly not improve anything. Housing markets are very complex creatures in very complex economies and the method of acquisition of a home was never listed as a factor in housing prices in my economics courses.
    How homes are purchased in Australia or Budapest or Kalamazoo, Michigan has no bearing on a fruitful discussion. We can always find “that place” (usually somewhere far away so we can make assertions without too much worry about fact checking) to illustrate our point. It is more accurate to study the process across multiple markets and multiple time frames in unbiased statistical analysis to gain useful information.
    I most certainly would not want to purchase a home in an open bidding process. I think perhaps that would in fact contribute more to higher prices. You get two people who want the same home and the war is on. If I heard that someone else bid a certain amount but it wasn’t proven (like in blind bidding) I would be more likely to question that assertion and walk away.
    Anyway, that is how I see it. Best wishes to all.

  14. Whenever this particular topic comes up, especially after it was a platform item for the Liberals, it’s positioned as either ‘Closed-bidding’ or ‘an auction’.

    Is there no middle ground? I haven’t seen anyone actually suggest they want to go to an auction format, they just want the prices to be disclosed to other competing parties.

  15. Watch the show Luxe Listings Sydney if you want to see how the auction style works. Very interesting for sure, not all listings are sold that way.

  16. Transparency is the issue here. I think many would participate more readily if they felt protected by full disclosure rather than bidding in the blind.
    Words I have always dreaded: “well, there are five others at the table, so if you really want this house, give me your best number because you’ll only have one chance”.
    Any market will be affected by several factors – supply & demand, interest rates, elections, inflation, unemployment, social assistance, the list is long, so we cannot point a finger at ‘blind bidding’ as the only factor.
    But, as an industry, surely we can see what’s happening around us: That living on the information highway requires a more open approach to both negotiating multiple offers and releasing sold prices. Why are we so backward?
    I have spent thousands of dollars on membership dues (crea, orea, oreb) & replied to dozens of surveys explaining our need to enhance transparency and improve credibility. And yet, here we are!

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