Posted by Breaking down the concept of blind bidding – some of the pros and cons. Important to understand for home buyers/sellers and students enrolled in Humber College’s Real Estate program.
Hi, everybody. Rebecca here at the Coaches’ Hangout. One of the topics that is on a lot of people’s minds is the out of control real estate prices and the overall lack of affordability. Whether you’re a buyer or a tenant, when the pandemic hit there were fears that the real estate market would crash even CMHC predicted it would, but the exact opposite occurred. The real estate market has been on fire and prices seem to be out of control. One of the proposals on the table to help cool things down a bit is to eliminate the blind bidding system.
I’m going to talk little bit about that proposal to get the conversation going. We would love to hear what you think so feel free to leave your comments in the comment section below. On a side note, if you’re interested in becoming a real estate agent in Ontario, stay in tuned to the end of this video where I’ll share a 20% discount code that can be used to purchase SeeWhy’s exam preparation tools geared towards Humber College Real Estate Licensing Program.
On one hand, there’s the argument that a seller should be able to market their property in such a way that it generates the highest possible selling price. Perhaps the seller bought it years ago, made payments as agreed, took care of it and even improved the property and wants to maximize the sale price. On the other hand in this frothy market, do sellers really need an advantage? More to the point are bidding wars over inflating prices?
This is what could and does happen under a blind bidding system with some real estate transactions. Let’s suppose a house is listed at $1 million. You’ve lost out on multiple properties, always being out bid so you decide to go in strong and offer the full asking price of one million with no conditions on inspection or financing. In other words, a really strong offer. You then receive a call from a real estate agent informing you that there’s a second offer. In other words, you’re now competing.
Since it is a blind auction, you have no idea what the other party is offering, but for the purpose of this discussion let’s assume worse than your offer. Let’s say 950,000. Before the sellers review the offers, you are asked if you want to improve or better your offer. Unfortunately, you need to make this decision without the benefit of knowing the substance of the other offer, including the price, down payment provided, closing date and conditions.
Tired of losing out on property after property? You say, “Okay, I will bump my offer to one million and $50,000” Not aware that when the other potential buyer was asked the same thing, they said, “No way. 950,000 is the maximum I am willing to pay.” When the sellers finally review the offers, naturally yours is accepted. The end result is you get the house at a price of one million and $50,000. But if it was an open bid system and you knew the substance of the other offers, you probably would’ve stuck with your original offer of $1 million. So in this scenario, blind bidding worked out for the seller, but not the buyer.
Are you a proponent of the blind bidding system? Would you like to see a move towards a more open bid system? Like I said, at the top of this blog, I would love to hear what you think. So by all means, leave your comments below. Let’s have an informative, respectful conversation.
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