Re/Max Canada’s two top executives are calling for more transparency in the home bidding process, and say homebuyers should be allowed to know what their competition is offering.
The common realtor practice of blind bidding has angered buyers and is being blamed for pushing up prices in the country’s overheated real estate market. Some economists and a handful of realtors have said blind bidding needs to end.
The Re/Max executives are the most prominent voices in the real estate industry calling for changes. Re/Max is a major real estate company in Canada with a 33-per-cent market share and more than 21,000 full time licensed realtors working under its brand name here.
“We have to do right by the consumer and it is very apparent that they want reform when it comes to blind bidding,” said Christopher Alexander, Re/Max’s chief strategy officer and executive vice-president for Ontario and Atlantic Canada.
Mr. Alexander’s counterpart for Western Canada, Elton Ash, agreed and said “an open-auction style process is the most transparent way to go.”
Real estate sales practices are governed by the provinces and their real estate regulators. Laws in B.C. and Ontario, home to the priciest real estate, say it is up to the seller to choose whether they want an open, auction-like process or a closed one.
The Re/Max executives say the rules should be rewritten. Mr. Ash said although auctions are the most transparent, consumers see them as a sale of last resort. He said an alternative would be to require the seller’s agent to disclose the offers to the bidders so they know what they are up against.
Mr. Alexander said the bidding process should either be opened up so that buyers are “exposed” to competing offer prices, or rounds of bids should be banned so the seller’s agent does not continually go back to the buyers asking them to increase the price. “Open it up or stop the endless rounds of improving offers,” he said.
Mr. Alexander said he would propose these options to Ontario’s real estate regulator, Real Estate Council of Ontario (RECO).
The comments from the Re/Max executives do not mean policy will change for realtors working under their brand. Agents may not welcome the change because their commission typically increases with the value of the transaction. As well, home sellers will probably not like the idea, as they have benefited immensely from the bidding wars.
Since the start of the pandemic, the average selling price in the country is up more than 30 per cent, with smaller Ontario markets such as Woodstock, Ingersoll, Prince Edward County, Lakelands and Bancroft up more than 40 per cent.
BMO bank economists have said that opening up the bidding process could help reduce skyrocketing house prices without having a negative impact on other parts of the economy. The economists have said: “While this won’t cool the market on its own, it would limit the ballooning that we’re now seeing in a very tight market.”
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.