GTA brokers, buyers call for more transparency in real estate bidding process
Blind bidding process leading to ‘distrust’ in the real estate industry, broker says
Grace Choi started shopping for a home in Toronto in January when she and her husband found out they were expecting a baby.
For months, the couple put in competitive offers but were outbid over and over again.
"I didn't realize how psychological the bidding process is," Choi said.
"It was a lot more mind games than I thought that was going to be."
Choi said they made unsuccessful offers on six properties, with little or no idea of how much the competing offers were — and from whom.
She said the lack of transparency in the traditional bidding process soured her experience.
"You're blind bidding against people," she said.
"You don't know their price range, and you make all these assumptions about the other buyers and you're always second guessing yourself. You're like, 'Did I do enough?'"
Blind bidding leaves buyers in the dark
A high demand for property, paired with a lack of supply are contributing to these gruelling bidding wars, experts say.
In most cases, home sellers opt for the closed-bidding process, also known as "blind bidding" — where buyers make an offer but aren't officially allowed to know the details of other competing offers.
Philip Kocev, a broker and partner at iPro Realty, said he's seeing more and more buyers fed up with the traditional process and losing out on multiple properties, because they don't know where they stand compared to other competing buyers.
"That's leading to a lot of distrust in the process and in the industry," he said, adding that almost all of their listings end up in some kind of multiple-offer scenario — if not a full-out bidding war.
More transparent process needed, broker says
That's why his brokerage is advocating for agents to be allowed to disclose the top offer, including the terms of agreement, such as closing dates and conditions, to competing buyers, something that realtors are restricted from doing right now.
"[It gives] the other buyers an opportunity to either beat that offer or walk away from the table," Kocev said.
Another option is the open-bidding process — a method that is popular in Australia — where buyers stand out front a property and openly bid through an auction. All offers are on the table for everyone to see and the process provides complete transparency.
Tim Hudak, the CEO of the Ontario Real Estate Association (OREA), says sellers in the province can opt for the auction process but it's not a popular choice.
"This very private personal information, like how much you can afford to pay, how much you're going to have to borrow — not every buyer wants to sell that kind of personal information," Hudak told CBC Toronto.
'We should give people a choice,' OREA says
Hudak said the OREA is in favour of more transparency, but cautioned against mandating any one system, such as the open-bidding auction process.
"We believe we should give people a choice," he said.
"Fundamentally, buyers and sellers should decide if they want the traditional offer process, [or] do they want to have an open option."
He also said the open system wouldn't cool down the market. Instead, it could result in "auction fever" that could drive up property prices.
"That fever catches on and it can drive to higher prices at the end of the day," Hudak said.
Kocev, the broker at iPro Realty, said what his brokerage is advocating for isn't an open system but merely a tweak to the already existing process.
"We wouldn't be disclosing any of the personal details of buyers or who they are. It would simply be the seller being able to, through their agent, report back to the other buyers what that top offer is. So privacy would be maintained," Kocev said.
"It will have buyers leaving the table feeling like it was more fair."
After five months, Choi finally found a home for her growing family, but if she were to do it again, she said she would opt for a more open and transparent process.
"If we knew what we were going up against from the beginning, it would save a lot of stress on our end."