Transparency must not be optional when blind bidding for homes

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Millicent Wong
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from RBC Mortgages

  1. property
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Transparency in housing markets may require more than a federal nudge

A for sale sign outside a home in Toronto. A for sale sign outside a home in Toronto. Photo by REUTERS/Carlos Osorio Files

The federal government has promised a total ban on blind bidding on homes, but the Ontario government has now announced changes to its real estate transaction rules that will leave the choice for sellers to go through an open bidding process when competing bids could be disclosed to interested buyers become, instead of the closed offer system.

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The change, announced by Ross Romano, Secretary of State for Government and Consumer Services, is part of the revised Trust in Real Estate Services Act (TRESA) 2020, which replaced the Real Estate Business Brokers Act 2002.

Other changes include a new code of ethics for real estate agents and additional disciplinary powers for the Real Estate Council of Ontario (RECO). The changes will come into effect in April 2023.

The proposed changes were endorsed by the Ontario Real Estate Association (OREA), which advocates for “homeowners’ right to sell their home however they want.” However, critics of blind bidding believe the changes are only cosmetic. Since blind bidding favors sellers, there is little point in leaving the decision on open bids in their hands to improve transparency.

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The Canadian Real Estate Association (CREA) has also announced a new pilot program that will allow consumers to view listings on their website, www.realtor.ca Portal. CREA is operated by Openn Negotiation Ltd. integrate developed software to implement the pilot project.

Details of the six-month pilot have not been released, but reports suggest there may be a long-term association between Openn and CREA, as the association has reportedly “written 14 million unlisted options on the company.” Openn’s shares on the Australian Stock Exchange rose 22 percent shortly after the transaction was announced in early April.

Openn has been exploring opportunities in North America and announced its participation in the REACH Canada 2022 accelerator program last October.

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Canada’s real estate industry has lobbied to uphold sellers’ rights, but the Australian company doesn’t seem to share the unilateral transparency obligation that leaves all decisions to sellers’ discretion.

Eric Bryant, a director at Openn, was recently quoted as saying the inability to know what the other bids were made blind bidding “a bit sketchy and deceptive… They had suspicions throughout the transaction.” We couldn’t agree more with him.

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The real estate industry and the federal states expect that the federal government will probably soon implement its election promise to ban blind bids. Recently, Ahmed Hussen, the Minister for Housing and Diversity and Inclusion, unveiled plans to unveil a Bill of Rights for homebuyers that could include provisions to limit or prohibit blind bids.

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The federal government will likely be monitoring recent developments in the industry and in some provinces. However, Ontario’s announced changes fall far short of a serious and meaningful attempt to improve transparency in real estate transactions. For example, the industry hasn’t even committed to collecting data on blind bids to analyze how this might affect local home price inflation.

Blind bidding is more pronounced when housing demand far exceeds supply. In the coming months, demand for housing is likely to ease as interest rates rise, meaning that the excessive buying cycle may have peaked. As a result, there will likely be fewer properties in multiple bid scenarios going forward than in the recent past. However, that should not be an excuse to divert focus from improving transparency in property markets.

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Perhaps the federal government should conduct an awareness campaign about blind bidding and seek public input. A series of opinion polls on whether blind bidding is restrictive can help clarify how most Canadians feel about the issue. Since a sale can only have one successful buyer and many unsuccessful and frustrated bidders, it’s not hard to guess where the majority believes.

Transparency in housing markets may require more than a federal nudge. The government must engage all relevant stakeholders, including potential buyers, in meaningful dialogues across Canada. A national consensus for more transparency in real estate transactions will later help with the introduction of standards.

Murtaza Haider is Professor of Real Estate Management at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at the Haider-Moranis Bulletin website, www.hmbulletin.com.

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