Critics of the blind bidding process for real estate are pushing for what they say are viable alternatives that could create a better system for both sellers and buyers. 

In provinces across Canada, blind-bidding is the default practice when a home attracts multiple offers. In this scenario, buyers compete to offer the highest purchase price on a home without knowing the dollar amount of the other bids.

“I think there are serious issues with the way we are conducting things right now,” said Murtaza Haider, a professor of data science and real estate management at Ryerson University.   

Haider says an end to blind bidding could have some impact on volatility in housing prices, but more importantly, “greater efficiency and transparency would bring more trust to the industry, and that should be a priority for the real estate sector.”

This past election, the federal Liberals made their stance on the issue clear when they said they’d ban blind bidding as part of their housing platform.

In a new poll commissioned by the CBC, the majority of respondents supported an end to blind bidding. The survey of 1,511 Canadians was conducted between Sept. 17 and 19 using Leger’s online panel, and found that 52 per cent supported the elimination of blind bidding, 23 per cent wanted things to stay the same, and 25 per cent said they didn’t know.

 

For Jeanhie Park, the experience of offering $230,000 more on a property than she needed to underlines the need for change. 

“It would eliminate a lot of the deceit and misinformation that people receive when putting in an offer,” she said.

Park and her family went looking for a cottage in central Ontario this spring. Up against steep competition, they lost four bidding wars in a matter of weeks, so they were prepared when their real estate agent told them they were competing on the next property too. 

“We were advised to bid a couple of hundred thousand over list, and we just went a little bit over just because we wanted to get that property … under the assumption that there were two other registered offers.”

Park later learned, through the listing agent, that there were actually no other offers.

“We felt duped and manipulated,” Park said. “The fact that there were zero registered offers, that we were misled with false information in order for us to put in our top price.”

 

Park submitted a complaint in May to the Real Estate Council of Ontario (RECO), an oversight body responsible for protecting the public interest and enforcing the rules that real estate agents must follow. 

RECO confirmed Park’s complaint, but said it can’t comment on its progress or specifics. It added that, “Misrepresenting the number of offers willfully is a breach of our legislation and offenders can expect to be disciplined.”

The real estate agent Park filed the complaint about also declined to comment while the investigation is open, aside from saying they were “cooperating fully with the provincial regulator.”

Even if the regulator finds wrongdoing on the part of the agent, Park questions how much difference it will make.

“They’re not going to reduce the price that we paid, and they’re certainly not going to pay for my mortgage.”

Real estate agents found guilty by RECO of breaching the realtor code of ethics can face discipline ranging from educational courses to fines up to $50,000.

“What does that do? It’s just nothing but a slap on the wrist,” Park said. “You know, we’re having to pay more money. We’re having to get a larger mortgage amortized over 30 years, well beyond our retirement target date, and it’s just completely unfair.”

From January 2020 to Aug 31, 2021, RECO says it received 172 inquiries related to the number of offers on a listing and says six of those have led to complaint investigations. 

Choice vs. transparency

Haider says cases like Park’s highlight issues with how real estate is sold. 

“The goal should be to get the highest price possible, but the highest fair price possible — not in a way that it discriminates by withholding information,” he said.

On the other hand, the real estate industry objects to a proposed ban on blind bidding, arguing that homeowners should get to decide how they want to sell their homes. 

The Canadian Real Estate Association says, “Canadians have the right to choose how they want to transact what is likely the largest purchase of their lives.” 

It’s an argument echoed by David Oikle, president of the Ontario Real Estate Association. “Auctions are available now, so the consumer gets to decide if they want to sell with or without representation. For sale by owners have been around forever and they’ll continue to be around. So I think that a seller gets to decide how they do it.”

 

Currently, selling via open bidding is synonymous with selling without representation from a real estate agent, because while provincial rules vary, regulations such as the Real Estate Brokers Act in Ontario make it illegal for realtors to disclose the dollar amount of competing bids. That means transparent bidding can only happen outside the current real estate sales framework dominated by agents.

Presently, there are more than 135,000 registered real estate agents across Canada who can sell via blind bidding, but only a few auction houses selling real estate.

Oikle says a change to open bidding will also not address Canada’s affordability crisis, and points to Australia as an example. In that country’s hottest markets, the vast majority of real estate is sold in auctions that are often held outside the property.  

“Auction fever creates a three-ring circus on front lawns,” Oikle said, adding that “auctions can drive prices higher and dangerously push buyers to make rushed decisions.”

This year prices in major Australian cities were up 20 per cent. Similar or larger increases were seen in Canada this past year too, with many cities seeing an increase between 20 and 30 per cent, including 27.9 per cent in Fredericton, 25.6 per cent in Hamilton, 35 per cent in Montreal, and 23.7 per cent in B.C.’s Fraser Valley.

“I think that that’s going off of a very narrow-sighted view of what auctions are and how they operate,” retorted real estate agent Daniel Steinfeld. 

Despite the restrictions, Steinfeld says he wanted the buyers and sellers he represents to have more choice, so in 2017 he and his partner Katie Steinfeld launched a company designed to offer transparent bidding.

“We wanted to introduce the fact that there is more than one way to sell a home.”

 

However, complaints from industry stakeholders led RECO to tell Steinfeld that as an agent, he had to follow the industry rules around the disclosure of bids. So he became a licensed auctioneer and in 2019 he opened On The Block Auctions, alongside his brokerage with the same name. 

“The process works exactly the same as what people expect with the traditional listing,” Steinfeld said. “The property is staged, we take professional photos and videos, prepare all the marketing materials … and then the property is listed on MLS. The only big difference is that the property is now up for open bidding.”

The bidding process Steinfeld uses happens via an online platform where registered buyers can make their own offers and see the number and dollar amounts of competing bids. Bidders can increase the amount they want to offer as many times as they like, with the auction only ending once all bidding has stopped. 

“When you do away with the blind bidding process, in certain situations, you’re confident that the number that you’re putting forward is the price you needed to pay to win the home,” Steinfeld said.

 

Earlier this year, Bev Holt sold her home in Burlington, Ont., using On The Block’s auction process. Holt said the transparent model appealed to her.

On auction day, Holt and her family gathered around the computer and watched the bids come in. 

“It was very exciting,” she said, “and the house went for more than we expected it would. Five minutes before the end of the auction a new bidder jumped in, and you can’t have that in the traditional process.” 

Philip Kocev, a broker and managing partner at iPro Realty in Toronto, agrees that open bidding doesn’t have to be complicated and suggests a way for traditional real estate agents to offer it.

“Sellers, through their listing agent, should be allowed to disclose the best offer on the table to all competing offers, with all participants given an opportunity to resubmit their offer or walk away.”

He adds that many real estate agents he’s spoken to support transparent bidding.

He believes the time for a hard look at this issue is now, because in Ontario the Ministry of Government and Consumer Services is currently reviewing the legislation that governs real estate brokerages, brokers and salespersons in the province. 

“If we don’t get involved now and help shape the offer process, [the] government could impose changes upon [us] that may not be in the best interest of our industry or consumers.”

No quick fix

While Steinfeld says a system like his shows transparency is possible, he acknowledges it’s unlikely to fix the issue of affordability. 

Haider agrees it’s no silver bullet, since “on a per-capita basis, we are building half as many homes now as we were building in the early ’70s.”

 

Haider says the only way to fix the affordability crisis is with an increase in supply, but adds that an end to blind bidding could help take some of the heat out of local markets.

“The house will always go to the person with the highest reserve price, that’s not the issue,” he said. “The question is, should that person be $300,000 or $500,000 more than the second-highest? What happens then is that it has raised that threshold for every other subsequent sale. So all those homes that will be listed the following day, they would escalate the price.”

Haider adds that while the Liberal government has expressed its desire to end blind bidding through a federal ban, he believes it would make the most sense for change to come from provincial governments, since they create legislation around real estate and govern the rules the industry must follow.

“I think the best thing is to go back to the provincial regulators and say, is your current practice guaranteeing fairness, protecting the rights of sellers and buyers alike?

“If that’s the case, sure, write it off saying no need to do anything more. But if it’s not, then let’s build transparency and trust because that’s what the industry relies on.”

Watch full episodes of The National on CBC Gem, the CBC’s streaming service.