Published On: Thu, Oct 11th, 2018

Ontario Real Estate Association calls on province to allow open bidding process

The Ontario Real Estate Association (OREA) is recommending the province adopt a new open bidding process that could be a game changer for home buyers, who are currently forced to bid blind against competing offers in Toronto’s hot housing market.

Under the current rules, realtors aren’t allowed to share the details of an offer with anyone other than the home seller. That means consumers, facing competition from other buyers, have no idea what money or conditions they are bidding against.

The blind process has been blamed for driving up home prices in particularly fierce competition such as that seen in the Toronto-area real estate market in 2016 and early 2017, when it was common for a property to attract a dozen offers, sometimes more.

The market has since cooled, but less heated competition for homes continues, particularly in the city of Toronto.

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“We are still in the process of being fully briefed on this file. We will provide updates once we have further information,” said an email from David Woolley, spokesperson for the Ontario Minister of Government and Consumer Services Todd Smith.

The former Liberal government started the process, raising the fines for realtors found violating REBBA. But their proposed changes to rules allowing one realtor to represent both buyer and seller were not enacted before this year’s change of government.

Opening up offers to competing buyers doesn’t guarantee the selling price of a home won’t rise just as it does here when buyers are trying to guess at what it will take to beat a competing offer, Hudak said.

In Australia where it’s common to hold public auctions on the lawn of a house, “the same sort of fever can grip you,” he said.

“We think that if this process is chosen it will give people time to weigh their decisions and decide if they’re going to improve their offer. It takes the circus out of what you see in open auction jurisdictions like Australia with the benefit of transparency,” said Hudak.

It would probably be up to the seller to determine if they want to opt for an open offer sale, he said.

Toronto Royal LePage agent Desmond Brown said the move “would be a huge game changer,” adding if people know what others are offering for a home, it would be an exciting step in the direction of greater transparency.

“There’s still too many questions that a lot of the losing agents are asking after the house has sold. People are always wondering how fair was the process was,” Brown said.

“It will probably stabilize prices a bit more because there are many instances where we’ve had winning bids that have been well over $ 150,000 more than the second-highest bid,” he said.

Under the current legislation, real estate agents are prohibited from disclosing any of the financial or other conditions of an offer. But the brokerage representing the seller has an obligation to tell other potential buyers how many offers are in play on the property, said Joseph Richer, registrar of the Real Estate Council of Ontario, the industry regulator.

The policy of not disclosing offers was likely designed to prevent agents and sellers from using competing bids to drive up prices, he said.

He called the idea of open offers “interesting,” likening it to a silent auction.

“But where does it end and does it drive up the price? I don’t know,” Richer said.

OREA’s report follows a yearlong review of the legislation by a task force made up of the heads of the country’s top real estate brokerages, including Sotheby’s International Realty Canada, Royal LePage Canada and Re/Max Integra.

The report also suggests tougher rules be introduced against those who operate as real estate “consultants” in an effort to avoid being required to register and train as realtors.

Hudak said his group has seen a growth in the number of people who act or pass off as realtors, but do not operate under the same legal and ethical rules. He said newcomers from Chinese and Korean communities have been the biggest targets by these consultants.

Among the 37 recommendations, the report suggests:

  • Reverting the total number of hours required to complete a realtor licence to 255 hours, from the newly decreased 120 hours (set to come into effect in 2019).
  • Requiring builders and developers to register under the act to sell pre-construction properties.
  • Allowing realtors to incorporate their businesses, which is permitted in B.C., Quebec, Alberta, Saskatchewan, Manitoba and Nova Scotia.

The previous Liberal government passed new rules limiting when real estate agents can represent both a buyer and seller in the same transaction. Those changes have not yet taken effect. It also doubled the fines for realtors and brokerages who violate the REBBA rules.

With files from Canadian Press

Tess Kalinowski is a Toronto-based reporter covering real estate. Follow her on Twitter: @tesskalinowski

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Ontario Real Estate Association calls on province to allow open bidding process