Auction systems vs Blind Bidding

The real estate world here in Sudbury Ontario has a new auction company in town. The new company has caused a bit of a kafuffle with realtors and clients alike. This is mainly due to their use of their auction system to sell homes. This is a new process that has not been widely adopted. Anything new is always met with skepticism and fear. But is this new method really a good option for sellers?




The Liberal federal government declared that they would work towards ending the blind bidding process. From up high, this sounded like a great election promise as we are in a housing crisis and the pandemic was causing prices to skyrocket due to a very limited supply. People were paying top dollar for homes and in many cases paying well over the asking price. Now this does get complicated as many realtors priced homes much too low on purpose during this period to generate bidding wars and get the most money they could for their sellers. The market conditions were such that the buyer would gladly pay over asking in order to secure a home. The prices of these homes, for the record, have not declined which means that the buyers, for the most part, did not over pay for their purchases.


Blind bidding is the process that has been used when buying/selling homes for many years. Interested parties in a competition will submit their best offer to the listing agent (or sometimes presented directly to the seller). The buyers do not know what the other bid amounts are. All they can do is put forward what their best bid is and hope that the seller chooses them to buy their house. Price is usually the largest factor but there are others that the seller will consider: closing date, deposit amount, conditions, inclusions, etc. When competing with another for the purchase of a home, the speculation is that the buyer might overbid their opponent by way too much money. This is great for the seller but evidently not so great for the buyer. They could have possibly secured the purchase for much less than they paid. This is the issue that the Liberals were targeting and hoping to solve. But is it really a problem? The buyer had the opportunity to weigh their options and decide if they were willing to spend the amount they spent on the house. Nobody forced them to do it. In our economy, the house is worth what the market is willing to pay for it.



An auction system allows the people interested in purchasing the house to see how much their competition is willing to spend. The price goes up incrementally as bids are put in by the buyers. As the price bar lifts, they can decide if they want to raise it further or back out and let the current leader win the deal.


There have been auction systems used in the past and some are still being used in other countries today to sell homes. An auction system can also cause a buyer to pay more than what they were originally intending to pay as they are tempted over and over again to bid higher and higher as the competition goes on.


Each province has a governing body for real estate agents and legislation that speaks to how we conduct business. While it sounds great that the federal government would like to end blind bidding, it is up to the provincial government to enact those changes to the law. Right now, our governing body would like to leave the choice on how to sell the property up to the home owner. They can choose to sell the current way or choose to sell via an auction system.


At some point, the largest real estate website in Canada, Realtor.ca, will be releasing it's own auction tool for selling homes. When it does (slated for next year sometime is what I have heard), then companies that have developed their own tools might be in a difficult spot. TIme will tell.


In my opinion, I believe that the seller is better served with the current blind bid system. If I was selling my own home, I absolutely would want to use this system. If the home is properly priced and priced at a point that satisfies the seller, then using the current system makes sense. If the buyer is willing to spend well over that price to secure the deal, then that is their informed choice and a result of the current market pressure. With an auction system, the seller will almost certainly not experience the same possible purchase price. An auction system, more often then not, will benefit the buyer. While I would like to help my buyers not spend more than they should, the system is set so that the seller can decide how they would like to sell. Some will choose the auction system, I think more will stick with the current system.











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