The reason that residential real estate boards exist in major cities across Canada is to both protect consumers with home purchases and ensure integrity, professionalism, and transparency with members working as real estate agents in Canada. The second part of that should be fairly self-explanatory, but when we consider the first prerogative there we need to remember that there are 2 distinct parts to that equation. There are home buyers, and by necessity there needs to be home sellers that have their homes on the market for the buyers to be able to buy.
Both sides will have their own interests, and nobody is going to deny that there is a housing crisis in Canada and there needs to be solutions tried. But the Liberal governments recent promise to introduce legislation that will, among other points, ban ‘blind bidding’ is very short sighted and a mere band aid fix that will provide a small amount of benefit for one interest group while compromising the interests of the other.
Real estate agents are often homeowners themselves, and they have other interests that go along with growing their personal real estate business. Facilitating that growth means bringing new clients into the fold, but every realtor will tell you that’s easier said than done. That’s why our online real estate lead generation system here at Real Estate Leads is so highly regarded among realtors who are looking for real advantages. The power of Internet marketing is put to work to generate genuine client leads and these realtors are the only ones to receive them.
But back to our topic this week, let’s talk about why most realtors will disagree with this proposed legislation proposed by the Trudeau Government, even if it may be well intentioned.
Market Reflections
The reason that blind bidding exists is solely because of the wish of ever greater numbers of people to own real estate in Canada being matched with a supply of homes that has never increased even remotely in step with this demand. The Ontario Real Estate Association believes this plan would harm hardworking Canadians and make them less able to choose how they’ll sell their homes, and in the bigger picture regulating real estate practices through the Criminal Code is going to be harmful in both the short and long term.
No matter what side you’re on, that’s as accurate a statement as you’ll find and it’s illogical to think it is possible to fix Canada’s housing crisis by denying millions of hardworking families the choice of how to sell their home and also pitting homeowners against buyers in some sort of competition.
What this will do is negatively impact Canada’s housing market and making home ownership even more unaffordable. Let’s look at Australia and New Zealand that have much healthier housing markets and nowhere near the affordability and supply crisis that we do here in Canada. Open auctions are the norm there, with sellers much more often than not choosing to use the open bidding process.
Why? Because it’s better for everyone and is again a function of the market and its dynamics dictating purchaser behaviour. Auction fever creates its own reality with hopeful buyers crowding in front of a home with a live auctioneer, or online, and the bidding begins. This actually doesn’t make homes more affordable – it can actually drive prices higher, and force buyers into making rushed decisions involving tens of thousands of dollars with the feeling that the window of opportunity to make a successful purchaser bid on the house is closing.
We can also expect that the Liberal’s ‘Home Buyers Bill of Rights’ will be predictably empty once it’s opened up. It would include banning blind bidding, on the notion that having bidders not know the bids of other prospective buyers is somehow going to be helpful. We take no issue with the other part of it establishing a legal right to a home inspection and requiring real estate agents to disclose to all participants in a transaction.
But changing the bidding process for the sake of mistakenly addressing the crisis at hand really doesn’t make a whole lot of sense.
Protect Consumer Choice & Buyer Means
The smart general consensus in the industry is that consumer choice and consumer privacy should be always come first in government policy. Federal public policy is best when it recognizes the right that consumers have to privacy and allows them to consent to the disclosure of personal information. It’s pretty simple to understand that this is better than penalizing home buyers and sellers. Punishing home buyers and sellers for wanting to keep their financial decisions private for the largest transaction of their lives is a real example of bureaucratic impropriety and there’s really no debating that.
However, some transparency can be helpful but there is a need to find a middle ground so that this doesn’t benefit homebuyers entirely at the expense of the individuals selling the homes. It is possible to utilize our current regulated offer process but with tweaks that let Realtors share the top offer with the seller. This would go along with all participants being aware of the amount attached to the leading offer and giving each an opportunity to up their offer or decided it’s time to bow out.
But even more transparency won’t solve Canada’s housing affordability crisis or stop price growth. The real root factors being housing unaffordability in Canada are not being addressed.
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