Somewhere in Canada, perhaps as early as this summer, homebuyers may be able to see real-time bids on properties found on the nation’s most popular listings site Realtor.ca.
The Canadian Real Estate Association (CREA) said last week it was starting a pilot program that will allow the public to see bids as they are registered using software from Australian real estate company Openn Negotiation Ltd. Details are vague, not least because in most provinces there are explicit regulations against the very concept of open and transparent bidding in real estate.
The CREA announcement came one day before the federal budget in which Prime Minister Justin Trudeau reiterated a campaign promise to create a “homebuyers bill of rights” and work with provinces to find a way to end the process known as “blind bidding” in real estate sales.
“We’re still in the process of completing our due diligence across the country before we can determine the appropriate place to launch the pilot,” said Pierre Leduc, media spokesperson for CREA.
While the issue of blind bidding was a hot topic in Toronto and Vancouver prior to the pandemic, it has spread as the residential real estate market supercharged price growth in urban areas across Canada. As knowing more about why you won or lost a bidding war for a house became a national concern it made its way into the federal election campaign last fall. According to industry experts, the main source of the tension in the public comes down to trust.
“The real estate services industry has had its challenges with trust and confidence from consumers,” said Bill McMullin, CEO of Nova Scotia-based Viewpoint Realty. The company was an early transparency pioneer and has for year posted historical sales pricing data on its real estate listings site, a practice many real estate boards still try to restrict. “We know this from our 12 years of being highly transparent – it makes [consumers] more confident. But if you did a survey, you’ll find the source of their non-confidence is their speculation about what they didn’t know or didn’t see through the bidding process.”
In most blind bidding scenarios in Canada, listing agents are bound by provincial regulations: they can only disclose how many offers there are on a given property, and no other details. They can invite some or all of the bidders to resubmit offers more than once after the initial bids. Australia has two methods: a “private treaty” system that’s virtually identical to Canadian blind bidding and an “open bid” process that can run more like a livestock auction where bidders crowd together on a home’s lawn shouting out what they’ll pay, until the highest bid emerges. Openn developed its software to create a digital option for auctions and to offer more transparency to the private treaty process.
“That inability to know what the other bids were made it feel a little bit sketchy and deceptive. … You had mistrust all through the transaction,” said Eric Bryant, director of operations North America for Openn. The company started in Perth, Western Australia in 2016 and now has 30-per-cent market share of transactions in that state; across the rest of the country the penetration is a little under 5 per cent.
In 2021, Openn participated in a National Association of Realtors business accelerator program in the U.S., and that’s where CREA spotted the company, according to Mr. Bryant. The appeal of a system that tracks bids on a property is that it fixes some of the scenarios buyers find most unfair: “Where someone would bid against themselves, it would solve for that. For the guy who over-bids by $200,000? It solves for that.”
Not included in CREA’s announcement was the disclosure that organization has struck a deal to potentially obtain 14 million stock options from Openn, which is listed on the Australian Securities Exchange stock market. That information was disclosed by Openn in Australia and states CREA will be able to exercise the options to purchase several blocks of stock over the next two years.
A question critics of the partnership have is whether transparency in bidding would do anything meaningful to drive prices down or make housing more affordable.
“In markets like New Zealand, Sweden and Australia, that have open bidding, their hot housing markets are even hotter than in Canada. The argument is the open bidding going to further fuel it,” said Andre Kutyan, a broker with Harvey Kalles Real Estate Ltd. who specializes in high-priced real estate in mid-town Toronto.
Then there’s the reality that many sellers may not embrace the idea, even if provinces move to allow it (as Ontario has proposed, at the seller’s discretion, in the 2020 update of the Trust in Real Estate Services Act).
Mr. McMullin has done experiments with real estate auctions or open bidding over the years and has found there are often psychological pressures that discourage experimentation on such a large transaction.
“One thing I’ve learned over 12 years in this business; sellers are fearful of making a mistake,” he said. “Using a novel method to sell their home is nerve-wracking, they do not want to have seller’s remorse.”
If a bill of rights for homebuyers ever turns into real change in the industry, Mr. Kutyan is confident that realtors will find ways to work with whatever system governments land on.
“I’m an expert at setting up homes for multiple offers and running a blind bid, and if it goes open I’m going to switch gears and I’m going to adapt to make that work, too,” He said. “Let’s be clear: It’s not going to put me out of business.”
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