New provincial real estate regulations that take effect next year aim to make the homebuying process more transparent by offering sellers the option of disclosing bids. But critics doubt that this will level the playing field for buyers, especially those that are being priced out.
The spoke in the wheel is the “optional” nature of the move that expects to end blind bidding which has contributed to sending home prices through the roof. After all, why would a seller disclose competing bids when not doing so could potentially fetch them higher returns.
Under the current system of blind bidding, potential homebuyers submit their offers but do not know the contents of competing bids. As per the law, real estate brokerages who represent clients must disclose the number of written bids but not the value of those bids.
However the province now wants to give sellers the option of an “open offer” process, Minister of Government and Consumer Services Ross Romano announced on Tuesday
“Sellers will no longer be limited to selling their property through a closed or traditional offer system,” Romano said in a statement.
What this means is that when the new regulations take effect, sellers can choose to disclose details of competing bids on their properties. If they do, then the brokerage representing them will disclose details of competing bids. Knowing the bids is expected to help buyers save some money when compared to bidding blindly.
Ontario Green Party Leader Mike Shreiner is not on board with this option.
“Home-sellers shouldn’t be able to pick and choose when the bidding process is transparent and when it is blind,” said Shreiner. “That defeats the purpose of ending blind bidding, since it’s in sellers’ best interest to keep buyers in the dark.”
Shreiner believes it has to be done properly for it to work.
“A consistently transparent bidding process will help bring down the skyrocketing price of houses, and along with other key policies like expanding zoning and investing in affordable rentals, will help us build an Ontario where everyone has an affordable place to call home,” he added. “Let’s end blind bidding and let’s do it properly.”
The federal 2022 budget also talked about bringing forward a national plan to end blind bidding.
The Justin Trudeau government promised to create a Home Buyers’ Bill of Rights that will bann blind bidding, which it says, ultimately drives up home prices.
This seems more practical than offering sellers an option to be transparent.
But Canada’s national real estate association and other powerful industry groups opposed the federal plan, saying that ending blind bidding would not bring down prices and would deprive homeowners of the choice of how they want to sell their homes.
The worry is that it could limit the options and rights of home sellers when selling their most important asset.
In reality, the federal government cannot ban the practice as real estate laws are governed by the provinces and territories. So Ottawa proposed that the federal housing minister work with his provincial counterparts to implement the new law. So far it doesn’t seem like Ontario is in favour of an outright ban.