When the real estate sector overheats, should purchase offers be made public?
In Quebec, the question was asked at a consultation launched by Finance Minister Eric Girard last year. So far, the ministry does not offer anything on the subject.
In Ontario, sellers will be able to disclose the content of offers to promising buyers if they wish beginning April 1, 2023. However, this measure will not be mandatory.
Stephen Moranis, former president of the Toronto Region Real Estate Board, and Murtaza Haider, professor of property management at the Metropolitan University of Toronto, answered questions from journalist François Sanche of Will pay.
Some buyers exceed the bid, when they already have the best offer. They pay too much for nothing. Is this normal?
Murtaza Haider : It is common practice to see the selling agent invite the buyer’s agents to make the best offers to improve their price. In this case, consumers do not know where their offer stands in relation to others. […] That is why they will bid blindly. Because the supply of available properties is far from meeting demand, buyers are afraid of losing. So they will exceed the bid, even if their offer is the highest. This is a fairly common situation.
Stephen Moranis : Nationwide, agents need to tell buyers how many offers there are. […] So it is possible that you will make a very good offer because you are told that there are, for example, five offers on the table. […] Regulators must protect these consumers. While the situation is favorable with sellers, sellers today will be buyers tomorrow.
I don’t think the meeting will take away the extra heat overnight?
Murtaza Haider : Prices rise when demand exceeds the supply of available homes, regardless of whether bids are blind or not. On the other hand, we can see the effects on a small scale. If a property sells $ 250,000 more because of blind bidding, neighborhood home values will adjust accordingly. Prices for other listings will increase. They will not go down because there are not enough houses for sale. Thus, on the size of a neighborhood or a street, blind bidding raises prices if the first home is oversold.
What can you say to those who believe that disclosing offers will make the process more complicated?
Stephen Moranis : It’s only complicated if we don’t simplify the way to do it! It makes no difference how you sell a Group of Seven, Picasso or Monet painting. Everyone sees the price increase. Technology allows you to make it completely open and transparent, until you decide it’s too expensive for you. So I think there are solutions to simplify the process.
Murtaza Haider : This technology already exists. But I think there is reluctance on the part of lawmakers. Governments should be able to tell us if blind bidding affects home ownership, if it contributes to overheating, but they don’t have that information. No need to know who offered [pour protéger les renseignements personnels des acheteurs, NDLR]. On the other hand, we need to know where our offer stands in relation to others, or how large our offer is than others.
Are we ready for more transparency?
Murtaza Haider : The real estate industry is built on trust. And trust comes with transparency. Without transparency, there is intense resentment. […] The industry must make fairness and transparency for both buyers and sellers a priority. Not only will it protect the interests of the sellers and leave the buyers to defend themselves. The sellers ’agents are the holders of all the cards. Governments must restore balance.
Stephen Moranis : I agree with Murtaza. Currently, the seller has an advantage, and industry and regulators encourage and support that. I promote transparency to restore consumer confidence in regulatory authorities and the brokerage industry. Which doesn’t mean it will promote access to the property. Houses are not very affordable, especially since they are few in the market. With more transparency, some homes can sell more! Because consumers will have more confidence in the system and be convinced that they are being treated fairly.
What do you think of Ontario’s proposal to allow disclosure of offers only if the seller agrees?
Stephen Moranis : We have gone beyond making this option voluntary. It should be mandatory. If there are many offers, the process should be open and transparent for people to have confidence.
Comments are summarized to facilitate understanding.
Source: Radio-Canada
