If you’ve been paying attention for the last year, you have likely heard stories of properties selling for hundreds of thousands over the asking price, spurred on by massive competition between buyers shooting in the dark the price that will land them a home. But if it works, and they have the money, can you blame them? Critics of the practice known as “blind bidding” are now calling for alternatives to be put in place, claiming it drives up prices artificially and makes homes more unaffordable.
Blind bidding is a process of property bidding in which no prospective buyer may know the offer of any other buyer. Buyers are shooting in the dark and hoping to land on the highest number, and many are getting desperate. Often, the highest bid is far above the second-highest, even when both are far above asking.
But, people need homes, and they will get them where they can. For sellers and agents, massively inflated sale prices make for a bigger payout. You can’t blame them for accepting.
Ultimately, the loser is the prospective buyer who doesn’t have $100,000 dollars to add to their offer. In a recent poll conducted by the CBC, 52% of respondents agreed blind bidding should be eliminated.
Before you blame agents, consider that provincial regulations such as the Real Estate Brokers Act in Ontario prohibit the disclosure of competing bids. If a seller wants to avoid blind bids, they will need to broker the sale themselves or sell through a rare few auction houses.
Critics say that blind bidding must be done away with for the sake of reigning in out-of-control housing prices, and the Liberals even made abolishing blind bidding a major campaign promise.
However, some agents are arguing the grass may not be so green on the other side. One counterexample is that of Australia, where property auctions are common and still housing prices have risen by 20% or more in many places in the past year. With similar increases seen in Canada, it seems to be a “damned if you do, damned if you don’t” scenario. Others argue that sellers should have the right to decide how they sell their property, with the banning of blind bidding representing a narrowing of options for the seller.
Whether for or against blind bidding, it’s clear that it’s only one issue of many in a troubled real estate system. Change in only one place is not going to address the concerns of many Canadians. The federal and provincial governments, as well as industry, all need to do their part to address what is a much wider issue.