The practice of blind bidding has come under fire in recent months -- blamed, in part, for skyrocketing house prices that are making economists and policy makers nervous.
Blind bidding has been the norm in real estate markets across Canada for decades, and it operates on the premise that a home is worth whatever the market is willing to pay for it, no matter how crazy the price may be. But it also gives the seller a distinct advantage over the buyer. When a home goes on the market and the offers come in, the buyers are almost always in the dark about the other offers. The seller’s agent may hint in realtor-speak that buyers face competition on the property, but they’re not allowed to say any actual numbers. It’s not an open process like in Australia, where an agent stands outside the house with a crowd of buyers and holds an auction.
In Canada, the buyers are mostly fumbling around in the dark when trying to land the deal. In BC and Ontario this year, the result has been buyers offering hundreds of thousands of dollars over asking.
And that is why the practice has got some in the industry, mostly in Ontario, asking whether transparency around the selling process is now needed to cool the market. In Vancouver, some realtors would like to see more transparency, but not around the amounts being offered. They’d like proof that there are actual bids, because without that, they say an unscrupulous listing agent could manipulate buyers into paying more.
“When a listing agent says to me, ‘I have an offer coming in,’ I always say, ‘who’s the other realtor?’ And they often say, ‘I can’t tell you that.’ But why can’t you tell me?” asks Vancouver realtor Ian Watt. “I have no idea if it’s true or not, because there is no rule that says if three realtors have submitted offers, then the listing agent has to tell you their names and the names of their brokerages. We have no idea if the guy is telling the truth. The only time you can be sure there were other offers is when your buyers lose out on the property.
“That’s why I always tell my buyers to offer whatever amount they are comfortable with, even if it means losing out.”
And a lot of buyers have lost out in recent months, and so have buyers’ realtors who were caught out by rapid price escalations. Vancouver home sales for April were 56.2% above the 10-year sales average for that month, according to the Real Estate Board of Greater Vancouver. That was a 342.6% increase over sales for April 2020, which isn’t a surprise considering that that’s when the pandemic had just started. It does show, however, the strength of the market. It has slowed slightly since March, by 14%, but prices are staying strong. The board’s benchmark price for a Metro Vancouver home is at $1,152,600, a 2.6 % increase over March.
In the current market, there is always that buyer who’s willing to be the outlier, says Watt.
“In BC you put that offer in and everybody is like $5,000 or $6,000 over asking, and then there’s that one guy who goes 10% over, and you go, ‘What?’”
Realtor Shali Tark, who tutors students before they take the Real Estate Trading Services Licensing Course, lost out on a recent sale because the (eventual) buyer was willing to pay $150K over asking. She doesn’t expect the listing agent to disclose all the bids, because if they had, the seller likely wouldn’t have got that high an offer, which was far above the market price. But she too would like assurance that there is actual fierce competition.
“With multiple offers, we are at the mercy of what the listing agent says, and there is no way to really know how many offers there actually are. It would be more beneficial for the buyers if they knew for sure that they are in a multiple offer situation versus maybe the listing agent is creating that illusion and [the buyer] ends up overpaying for a property.
“I think some sort of log or registry is required that says, ‘these are the people that are writing’ and it gets sent out. Then everybody knows what the competition level is.”
Patricia Houlihan and other Vancouver realtors were recently shocked when a house at 332 E. 23rd Ave. on the city’s east side – traditionally the lower end market compared to the west side – sold for $4M. The listing agent had priced the newly built house on a standard sized lot at $3.588M and received three offers, all over asking. On the west side, a bungalow at 3193 W. 28th Ave. sold for $502K over asking, at a final price of $3.1M, also to a young family. The listing agent for the property had received 11 offers.
Although sellers have the option of giving buyers transparency around bids, it’s obviously not beneficial to do so.
“Your goal is to get the seller the highest price in any way that is legally and ethically fine,” says Houlihan, who’s also a lawyer. “The sad thing is, and it’s heartbreaking, what is happening to some buyers right now, they are bidding on seven or 10 houses and not getting them, and some are paying for inspections.”
“That’s why I’m telling them to chill until they find the perfect home. Watch what’s going on, but don’t get caught up in the crazy. Wait six months or even a year, and then breathe and buy your dream house.”
Blind bidding creates a FOMO (fear of missing out) frenzy that drives up prices. But price isn’t always a priority for a seller, adds Watt. Sometimes a seller cares more about the ease of the transaction, and they may not look at offers with subjects on them, or they might prefer an offer with a closing date that works for them.
But getting that top price is still a key part of the job. “After all, we get paid ridiculous money,” Watt says. “You have to, as a listing agent, try to get the best sale for your clients, and do what is best for them.”