Pardon my lack of zealousness here, folks. I guess part of me just felt like this post would prove to be a fool’s errand.
Everybody and their mother want to talk about “blind bidding” but many of those people aren’t interested in a discussion. At least, not a two-way discussion.
Many people already have their minds made up! Blind bidding has to go! Blind bidding is causing our market to shoot for the moon!
I just couldn’t stomach the thought of putting so much effort into a blog post, when all the while, I know full well that people will skip the blog itself and head straight for the comments section to provide their two cents.
I’m not afraid of this topic, but rather I harbour so much resentment toward the willfully ignorant and deliberately misleading members of our society that it’s difficult to write this without sounding like a complete jerk.
I’ve often asked: if you tell the truth about something, do so in a blunt and to-the-point way, and that particular truth is not welcome, would the recipients automatically dislike you?
I would have to think, “yes.”
And because there’s so much frustration across our country with respect to the price of real estate, and often a hate-on for real estate agents, I don’t believe that an honest, open conversation about blind bidding is going to change many already-made-up minds.
Let’s start from the very, very beginning: real estate is expensive.
From there, we could ask, “Why,” and that’s a whole other topic. I would argue that Toronto was undervalued for so long that only now, after a two-decade bull run, have prices caught up to where they should be. I would also argue that Toronto is a first-generation world-class city, and these prices make sense.
Compare Toronto to New York, London, Paris, et al, and you can plainly see that we are hysterically cheap. Now, tell me, “Toronto is not New York, and never will be,” and I would agree, but that’s why our prices are still a bargain by comparison.
So we’ve established that real estate is expensive.
But now we need to ask, “Is this a problem?”
To people who want, then yes, it’s a problem. And in 2022, just about everybody wants.
So how do we solve the “problem” then? Should we look at the causes?
Those that refuse to accept the most obvious cause, supply and demand, have spent the last five years looking for someone or something to blame. It just has to be foreign buyers, right? Damn them! Or low interest rates. That’s it, for sure. Or, maybe it’s speculators and investors. Way too many of those! Then again, we think the problem is real estate flippers. Yes, has to be flippers, buying up houses just to re-sell them! Or what about all those vacant properties? Isn’t that the cause? How about the government driving up the prices with all their taxes and development charges, is that it?
Sure, it’s all of those things, or at least it was when those things were hot buzz-words, but each of those ideas got played out.
Today, it’s blind bidding.
In last year’s federal election, the term “blind bidding” gained a lot of traction! So too did the idea of a “Bill of Rights” for all those wanting members of society who, “unfairly,” can’t afford a house of their choosing in one of the most sought-after cities on the planet in which to live.
So with all this said, the federal government decided that “banning blind bidding” was something that needed to be tabled, however, whether they figured this would gain attention, support, and votes, or whether they actually felt this would “cool the market,” remains to be seen.
Two weeks ago, the federal budget referenced a potential “ban on blind bidding,” and in response, the Ontario provincial government got out ahead of this by updating the Trust In Real Estate Services Act (TRESA) to allow home-sellers the option of disclosing terms and conditions of competing offers during a multiple offer scenario, whereas previously, they were not legally permitted to do so.
Does this updated legislation mean that the federal government no longer needs to address blind bidding?
That too remains to be seen.
But let’s pause here for a moment and ask an important question:
Will banning blind bidding cool the market?
It seems to me that many people out there automatically assume that it will, and that’s dangerous thinking for many reasons.
First of all, I believe that the government feeding people the idea that banning blind bidding will cool the market is irresponsible, since they have no idea whether that’s true or not, but they also don’t know how they would implement a “ban” and how the multiple offer process would then work.
But even if the government said, “This is not going to cool the market,” there are still those people out there who have already made up their minds.
Blind bidding is the problem in our market, according to these individuals, and once it’s banned, they can go out and buy the house that they want, for the price they can pay.
As I’ve said many times, the problem is often inexperience among buyer agents and willful ignorance among buyers. When a house is listed for $999,000, for which all the comparable sales are $1,300,000, and “blind bids” are submitted, the person who offers $1,050,000 usually has their photo in a news article one month later when they complain about the blind bidding process and how it “drives up the price of real estate.”
Those individuals will always believe that blind bidding is the cause of high real estate prices, no matter if they read this blog post five times over, or not.
But what if the opposite happened? What if banning blind bidding drove prices up?
Last week, I reviewed eight offers on a King West condo and the “winning” bid of $865,000 had an $850,000 offer behind it, and an $846,000 offer behind that one as well.
If I had told all eight buyer agents the exact bid prices after they submitted, in the spirit of “banning blind bidding,” what’s to say that the person at $846,000 wouldn’t have resubmitted at $866,000? Or what’s to say the clueless agent at $780,000 wouldn’t have said, “Ah, okay, so that’s the value of this condo,” and then submitted an offer of $880,000?
Be careful what you wish for, folks.
And I’m sure that the people who have a hate-on for all things real estate have a “better” system in their minds, but I have yet to hear anything that is rational and allows for the seller to look for the most money possible. Critics of our system usually come from a starting point of keeping prices as low as possible, and I’m sorry but that’s simply not how markets work.
But let’s look at a world in which “blind bidding” is not allowed.
Let’s look at the process and try to see how this would work in practice, because I think this exercise is going to show you just what a farce all this talk truly is.
Let’s say that I have a freehold listing, priced at $1,199,000.
“Blind bidding” is no longer permitted.
Offers are due at 7:00pm.
Now what?
How can anybody make a bid without it being blind?
And there’s the first roadblock here, folks:
In any system, there are always “blind bids,” even when blind bidding is not allowed.
At the very least, the initial bids are blind.
With offers due at 7:00pm, eight agents submit offers with the following purchase prices:
$1,200,000
$1,210,000
$1,305,000
$1,410,000
$1,510,000
$1,540,000
$1,550,000
$1,575,000
Now what?
All of those bids were submitted “blindly,” so in order to “eliminate blind bidding,” what do we do?
I think the idea of “eliminating blind bidding” refers to after initial bids have been submitted, correct? We can all agree on that?
So here’s the next rub, and this part is absolutely amazing for those who think blind bidding will cool the market:
Eliminating blind bidding means mandating the chance for improvement, aka a “second round.”
Right then and there, the government’s “good idea” has driven up real estate prices.
Bravo!
As the listing agent, I wasn’t legally permitted to sell this house to the bidder with the offer of $1,575,000 because to do so would have made all those initial bids “blind.” A second round is now necessitated.
So, in order to “eliminate blind bidding,” I must now send out the following email to the eight buyer agents:
Dear Colleagues:
Please note that on 123 Fake Street, as of 7:10pm, we have received bids with the following prices:
$1,200,000
$1,210,000
$1,305,000
$1,410,000
$1,510,000
$1,540,000
$1,550,000
$1,575,000Feel free to revise your offers as you see fit.
David.
Alright, is this what the public wants?
Because now, the person at $1,550,000 knows that he is in second place! Great, right? It’s no longer blind!
He can revise and resubmit at $1,576,000.
But he refuses to do so until he’s told what the buyer at $1,575,000 does, because he has the right to “know all the other bids.”
Correct?
So he doesn’t resubmit, but the person at $1,575,000 plays the same game.
In fact, everybody plays the same game. So nobody resubmits, because they’ve all been told that “blind bidding is eliminated,” and the entire process falls apart because every buyer is waiting for every other buyer to resubmit, so they can gain the advantage of “not being blind,” and the process grinds to a screeching halt and fails spectacularly.
(womp, womp).
So that doesn’t work.
Let’s try this:
Feel free to revise your offers as you see fit. We will accept the highest offer after all bids have been resubmitted.
David.
That makes sense, right?
Initial bids were blind, then we disclosed all the bids, and now everybody gets one chance to resubmit and we’ll accept the highest bid.
Uh-oh.
Now we’re back to blind bidding! Because while buyers know what the current bids are, they have to blindly resubmit thereafter.
Let’s say the first three buyers withdraw, and the other five buyers improve their prices as follows:
$1,510,000 improves to $1,576,000.
$1,540,000 improves to $1,580,000.
$1,550,000 improves to $1,576,000.
$1,575,000 improves to $1,600,000.
$1,410,000 improves to $1,645,000.
And then that buyer “wins?”
But wait, did we give all bidders the chance to improve their offers?
Because in most cases under the current system, listing agents would likely have sent the first four lower bidders home.
So let us ask:
Does every bidder get a chance to improve? Is this mandated by law?
If that’s the case, then maybe the eight initial bids look like this:
$1,199,000
$1,199,000
$1,199,000
$1,199,000
$1,199,000
$1,199,000
$1,199,000
$1,199,000
Ah, okay! Two steps forward, twelve steps back.
So that can’t work. We can’t legislate that all buyers are permitted the chance to improve, or we’d end up with a situation like the above.
Let’s say that the new legislation allows for the listing agent to decide which bidders are given a second chance. Now, we’ve opened the door to discrimination, favoritism, and cries about the process being “unfair.” But if we don’t give the listing agent that option, then it might provide for a scenario like the one above where every bidder simply submits an offer of $1.00 because they’re all expecting to be told the prices of competing bids in the spirit of “eliminating blind bidding.”
So let’s go back to the scenario where the $1,410,000 buyer improves to $1,645,000 and “wins.”
Will you now suggest that this buyer “overpaid” because the next highest bid was $1,600,000?
Does this buyer have a “right” to revise and pay only $1,601,000?
This is where people get wild ideas and start to use the word “should” quite a bit. This is also where people start to act as though “fairness” equates to the lowest price possible, while completely ignoring any rights the seller might have.
Somebody will suggest, “If this was eBay, that bid of $1,645,000 would beat the bid of $1,600,000, but the ‘bid increment’ of $5,000 would allow the winning bid to come in at $1,605,000.”
True.
But this isn’t eBay.
Should it be?
Should the federal government consult eBay with respect to their Bill of Rights?
Okay, so let’s do what eBay does!
Buyers can submit very, very high prices because they all assume that if they have the highest bid, they aren’t going to pay that price, but rather only a $5,000 increment above the next highest bid.
With that in mind, the buyer at $1,410,000, who improves to $1,645,000, is only doing so because he believes that the minimum bid increment rule will protect him, and he has no intention of having to pay $1,645,000. He thinks the bidding will end up in the high $1.5’s, or maybe just over $1.6M, thus his bid of $1,645,000 is brilliant.
But the buyer at $1,575,000 has the same strategy, and he re-submits at $1,700,000.
So too does the buyer who came in at $1,540,000, and he re-submits at $1,685,000.
Now, the buyer at $1,700,000 “wins,” but has to pay $5,000 more than the next highers – per eBay rules, and thus “wins” at $1,690,000.
Remember when we had the highest bid of $1,575,000 at the onset? Too bad that bid wasn’t permitted to be accepted, in the spirit of “elminating blind bidding,” right?
Alright, so now you want me to scale this back.
You want some sort of allowance for this process to be slowed down as your end goal is to see prices the lowest as possible.
So in our initial scenario where $1,575,000 is the highest bid, I do not inform people that there will be one more “round” of bidding, thus making the next bids blind, but rather I email:
Feel free to revise your offers as you see fit. We will update you again after revised offers are received.
David.
The following bidders drop out:
$1,200,000
$1,210,000
$1,305,000
$1,410,000
$1,510,000
The other offers improve as follows:
$1,540,000 improves to $1,575,001
$1,550,000 improves to $1,575,001
$1,575,000 improves to $1,575,001
Perfect!
Now we have a scenario where transparency was given, bids were not “blind” as the initial bids were disclosed, and price escalation was avoided.
But how long did this take? How long did it take for the first five buyer agents to call the listing agent to say they were dropping out, and for the three highest bidders to resubmit on paper?
Let’s say that took two hours.
Now what?
Now we have three bids all at $1,575,001.
So now I email all three buyer agents and disclose the prices.
Now what?
What if all three buyers say, “Screw it, take it or leave it?”
The public would love that! Only, it would never happen, because human nature is to want. Somebody would pay more for that house.
But to entertain that fantasy, maybe the seller says, “Screw it,” and signs back one of the three offers at $1,650,000. That buyer accepts.
Is that fair?
Some might say it’s not fair for the seller to pick one bidder to work with, right?
Debate “fairness” in that case.
And the seller can’t sign back all three, because if they were all accepted, he’d have sold his house three times to three different buyers.
Now, let’s say that after receiving three bids of $1,575,001, the listing agent allows all bidders to improve, and they call come back at $1,575,002.
That takes another two hours.
Do you see where this is going?
So how about this:
We don’t need buyers to physically re-submit an offer, just have their agent give the listing agent a verbal offer.
But a verbal offer isn’t binding, and even if you want to debate that, it opens the door to chaos.
So how about this:
We’re selling this house to the highest bid at 11:00pm tonight.
But now we’re back to blind bidding, right?
Setting a “deadline” means that, even if buyers continue to resubmit $1.00 higher, as successive offers are disclosed – thus adhering to the “ban on blind bids,” eventually, the last offer before the deadline will be blind.
Also:
Who sets the deadline?
Who? When? How is it communicated? Can it be 3:00am? Is that fair? Can it be today at 10:00pm but then be extended to next Saturday at 4:00pm, mid-process?
Okay how about this:
Offers cannot be improved by $1.00. The minimum increment must be $10,000.
Great!
But who determines that?
The government? Via legislation? Isn’t that bordering on ridiculous now?
How about the listing agent? Can he or she set the minimum bid increment? But why give the listing agent that kind of power? We’d be worse off than we are now!
You just can’t legislate your way out of this. You can’t perfect this system so that prices don’t escalate and everything is “fair” to both buyers and sellers.
Show me a scenario where:
1) Blind bidding is completely eliminated.
2) The process is completely transparent and fair to both buyers and sellers.
3) Prices are always lower.
In all the examples above, that’s just not going to happen, and this is the biggest problem I have with the idea of “banning blind bidding.” The talk is always about how it will “cool the market” when that’s simply a sound byte for politicians.
So now comes the part where somebody says, “We need online auctions! That’s the only way to cure this!”
Okay, so who designs the platform? Who owns, regulates, and oversees it?
The government?
Oh, great. Another Phoenix online payment system scandal is just around the corner…
Personally, I don’t think we should be looking to the government to control the sale of all real property in this country, but I guess I must be alone on that one.
And if we found a platform, say, via the individual real estate boards, then we’re back to the same questions and issues: what are the bid increments, how does the timing look, who is permitted to bid, etc.
And we haven’t addressed the biggest red herring in all things auction just yet:
“Bids” through online auctions or on the lawn of somebody’s house in Australia are not binding.
Because you’re forgetting that in addition to the purchase price, there are other negotiable points of an offer to purchase real estate:
-Deposit amount
-Deposit method
-Closing date
-Title search date
-Chattels included
-Fixtures excluded
-Rental contracts assumed
-Conditions
-Clauses
You cannot standardize an “offer” via auction, because that wouldn’t be fair to buyers, and it would lead to another sort of chaos.
So now every real estate auction leads to further negotiation on terms and conditions, thus the auctions are only getting you halfway there.
Imagine bidding on a house in Australia. You stand on the front lawn and call out prices at the top of your lungs against other excited bidders.
Oh, wait, you can’t stand on the lawn because your boss didn’t give you the day off work. Or because you hit traffic and couldn’t get there on time.
Are in-person auctions on the front lawn of somebody’s house really the best way to buy/sell real estate in 2022?
Alright, well, whether we’re on somebody’s lawn in Australia or Toronto, or bidding behind a computer, either way, once the “winning bid” is established, now the buyer and seller enter into negotiations.
What?
Negotiations?
I thought we had a “fair” way of doing this, ie. via auction?
Oh, but what about the 5-day condition on financing that the buyer wants? And what about the 180-day closing date that the seller wants? Those weren’t communicated in the auction, as nothing was communicated except for price.
So every auction leads to a bargaining session, and that opens the door to disagreement over terms and conditions, and many of these properties won’t end up “selling via auction.” This is the case in Australia where many properties are re-listed for auction thereafter, or re-listed outside of the auction in a traditional sale format.
Of course, we also have “reserve prices” in auctions, which are kept secret, so the seller isn’t obligated to accept a “winning” price that’s below what he or she really wants.
Then there are the properties that sell before the auctions, which we would liken to the “bully offers” here in Toronto.
Again, feel free to draw up two hundred rules that you want to be legislated for the “new way” to buy and sell real estate in Toronto, but the bottom line is:
Any “solution” is going to open the door to other problems. Unintended consequences are impossible to avoid.
I’m not averse to any ideas, solutions, or changes, but I am realistic when it comes to the implementation and the process thereafter.
I said at the onset that many people will refuse to read the preceding or do so with an open mind. The level of hate for all things real estate, including the process and the players, results in these people sitting around with blinders on.
Case in point: all this talk about real estate agents being averse to a ban on blind bidding because of commissions.
When I got into the business in 2003, a good friend of mine cited the best-selling book, Freakonomics, and the chapter on how real estate listing agents aren’t motivated to sell properties for more money because of the commission structure.
“If you sell a house for $1,000,000 you get a $25,000 commission,” he told me. “But if you sell for $1,020,000 you get another $500, so why the hell would you work harder to jack up the price?”
His entire argument stemmed from the fact that the commission structure provides no reason for listing agents to want prices any higher.
Today, the argument is the complete opposite.
Multiple letters-to-the-editor in major newspapers last week had people claiming Realtors chasing higher commissions were the issue.
The sound bytes in some of these angry letters were fantastic.
For sure it would see a reduction of increased prices in the recent market. For sure it would reduce commissions. Victor Wells, Mississauga.
That snippet appeared in the Globe & Mail.
As did this one:
The excessive greed of realtors cries out to be reined in by politicians who really want to bring relief to all facets of a diseased housing market. Rob Hawkins, Oakville, Ont.
These are the individuals that I speak of when I argue that many people don’t want to truly understand what blind bidding is, how it works, and most importantly, why it’s present in our market.
The greed needs to be “reigned in by politicians.”
“Politicians” have the answer for everything, don’t they?
This is the type of constituent that politicians salivate over!
So again, I ask: can we have a conversation about “blind bidding” with a clear mind?
Do you think that Victor and Rob would read this blog post? Or do you think they’d rely on the age-old, contrarian, “Screw off, realtor scum,” as the iron-clad backbone of their argument as it pertains to “solutions” to our housing problem?
I am 100% in favour of allowing listing agents to disclose the terms and conditions of competing offers in an effort to bring transparency to the process, but as I’ve demonstrated above, “banning blind bidding” is impossible because at many points during a revised process, subsequent actions will, in fact, be blind.
And prices aren’t going down as a result. That’s naive. That’s fantasy.
Some properties will sell for more, some will sell for less, the process of reviewing multiple offers will be even more complicated and lead to complaints and litigation, but the government will get to say, “We banned blind bidding!” so all will be well on their end.
But what I am continued to be bothered by in all of this is the people who believe that banning blind bidding is some sort of “solution” to a problem that hasn’t been defined.
Even worse, I am incredibly bothered by people who refuse to learn and understand the process of selling real estate in Ontario, how other processes could succeed or fail, and all the while believe that there’s a system that’s absolutely perfect, and we’re just unwilling to implement it.
And most of all, I’m bothered by those people, both in the general public and in government, who think that a “solution” like banning blind bidding will cool the housing market, when it won’t, and all this time, effort, and energy could be otherwise spent on meaningful action to increase housing supply across the country.
I live in reality, folks.
I’ll leave the fantasy for somebody else…
House Keys
at 8:43 am
Agree wholeheartedly with your comments above. Simplifying the situation, I think there are actually only two scenarios that people really want to change:
(1) The situation where the best (and sometimes only) offer is sent back to improve
(2) The situation where the top 3 bidders are all forced to improve their offers by some unknown amount
As you can see in your comments, no easy way to solve the problem, but I believe a positive step for all involved is as follows: if there is a set offer date/time, following the initial round of bidding, the highest bid package should be unblinded and sent to all parties who submitted an offer, along with the total # of offers submitted. All parties are welcome to submit a second offer at a chosen time, at which the Seller, in their discretion, can select the best bid package. If you’re the highest bidder, you have the opportunity to stay put, but it gives everyone a chance to see the preliminary market clearing price / conditions, and still gives interested parties a chance to improve their offer. Yes, you still end up with a situation not unlike blind bidding today in the end, but it gives the perception and feelings of fairness to all involved. Just an idea — improve the status quo without overcomplicating it.
Geoff
at 2:58 pm
I think most people who talk about blind bidding don’t realize how conditions factor in. Even choosing the top three offers – let’s say there are 4 offers. $1M (no conditions), $1.1M (conditional on financing), $1.3M (conditional on home inspection) and $1.4M (conditional on sale of their home which has been on the market for months). What’s the top 3 offers in that scenario?
Appraiser
at 8:43 am
Something else to look forward to is a proposed “Homeowners Bill of Rights”
Here is my suggestion for starters:
1) Homeowners in Canada may legally sell their real property in any way they see fit.
JL
at 9:32 am
“Show me a scenario where…”
Ok, I’ll try – how about this:
Everyone starts at the list price (or lower), and go in order of registering, taking turns increasing their initial offer by minimum increments (or larger increments if they so choose and want to accelerate things), being always told what the current highest offer is. Over several rounds as the highest price rises bidders drop out until only 1 is left. I would expect this would be an “on the clock” kind of process over an hour or two, with each party having 5-10 minutes to update their bid. Everyone knows what the high bid is at all times, and seller will get the highest price from among the group.
I’m not pushing this as some perfect ideal – and I’m probably overlooking some big flaws – but as its something I came up with over 5 minutes while reading this blog I imagine smarter people could come up with at least some improvement to the status quo.
My problem with blind bidding is the initial “overbidding” aspect. If you find a property you love, and there is 1 other bid, do you go all out in case the other person is also serious, or risk it with something more modest because there is a good chance the other party might be uninformed/low ball bidders? The sellers should get the “highest price”, but the “highest price” should not be $100k over the 2nd highest just because the process is “blind”.
The “other negotiable points” seem like a red herring to this discussion, because as was indicated many times even in this blog, price is by far the main consideration. I expect it would be rather rare for the highest bidder to not be able to come to agreement with the seller on terms because, for example, they stubbornly insist that the living room chandelier form part of the sale.
JL
at 9:37 am
As an addendum to my post above, one alternative to dealing with the other conditions is to have the price auction as above, but the seller can still choose a lower bid if the terms/conditions of the highest bid are not to their satisfaction.
JL
at 9:51 am
Or to speed the whole thing up go in parallel rounds by increment. List at $1M. Ask the 12 bidders, who is willing to go to $1.025M? 11 of you? Ok. Next round, who is willing to go to $1.05M? etc, etc.
London Agent
at 10:51 am
“the “highest price” should not be $100k over the 2nd highest just because the process is blind”
Why not? People need to understand that an offer made by a buyer is based on their experience and knowledge of the market. If there are multiple comparable sales that support that price and the buyer is willing to pay it, then we have a willing buyer and a seller that is achieving a sale price that is in line with market trends.
The answer to your question above as to what direction the buyer should take in this scenario is answered by an expert buyer representative that is knowledgeable about the market/the value of the property. Anyone that doesn’t seek that level of insight and expertise from their representative, in one of the most difficult and challenging markets in the world, is bringing a toothbrush to a gun fight.
Appraiser
at 11:01 am
Everyone trying to reinvent the wheel in the end eventually surmises:
“Hey, how about that round thing”
Bryan
at 11:43 am
But if they are bidding $100k over the second highest offer because that is what the comparable/market trends sales say the place is worth, then they aren’t doing it “just because the process is blind”. If that really is why it happened, it would almost certainly happen whether the process was blind or not IMO.
JL
at 12:08 pm
That comes down to the argument that the “value of a property” is not the same as what someone is willing to pay for a property, and in the current system there is a sense (correct or not) that people are paying a premium just to navigate and win the process (and not because they think a property is worth what they’re paying). I think even David quoted something recently to his clients along the lines of “I think this property is worth X but you’ll need to pay X+Y to get it”.
The person bidding $100K over doesn’t make the property “worth” that price in the market value sense; they’re just throwing $100k at it as a transaction costs to ensure they can buy, IMO. If they knew the second highest bidder had stopped bidding, they wouldn’t exceed the second highest bid by such an excessive increment. Sure, the second highest bidder might be tempted to play a few more rounds and inch higher thinking they’re still close, but I would wager the final selling price and winning margin would both be smaller.
Bryan
at 12:51 pm
I agree with you…. perhaps my reply was worded poorly. It was more a comment on what “London Agent” wrote.
An offer shouldn’t be $100k over the second highest “just because the bidding is blind” as you say (or perhaps “just because a buyer feels the need to pay a premium to win in this setting” is a more apt way of putting it). I think L.A. conflated 2 different types of scenarios where a winning bid goes $100k over the 2nd best bid, which is what I take issue with. The case LA describes is perfectly acceptable…. someone looks at comparable listings and makes an offer that is in line with them, represented by experts that know what they are talking about. It is very likely that this is a fair price then and, in this case, price would almost certainly have gotten there regardless of the process. Sellers look at those same comparable listings and will just re-list if they fall $100k short. The second case that we (as a society) could/should(?) address is when someone feels the need to overpay by $100k because of the process itself (as you describe) and is very much separate from the first.
London Agent
at 4:40 pm
I agree, buyers should not feel a need to increase their offer simply based on the number of offers. I tell my clients what I think a house is worth based on factors x, y and z, they then decide what they are willing to pay. In competition, I feel that the number of competing offers is irrelevant to what they should offer. It comes down to educating them on the value of the house and then they decide what a house is worth to them based on their experience in the housing market.
Inflated $.02
at 2:55 pm
^^ This 100%, with a small caveat…
While I don’t agree that a bid of 100K over doesn’t reflect market value (as that bidder is a participant in the market and in making that bid, by definition the market can quote that price), a key component of an efficient market, which – due to a variety of factors – is less evident in housing (and seems to be overlooked in the “like any free market/driven by supply & demand” fall-back), is the ability to conduct price discovery.
For one thing, a single particular property is much less liquid, subject to many more transactional details that comprise an offer as mentioned in the post, and much more varied relative to other “market comps” than for example a Tesla share, or a barrel of oil. Add to this the prevalent strategy of under-listing to generate interest (which ends up making the list-sale spread usually so large as to be utterly useless as a bid/ask reference), and the result is that unlike those other assets there is no truly reliable/efficient/timely mechanism for price discovery. In other words, “the house down the street that sold two weeks ago for X” is much less helpful to a market participant trying to determine market value than “brent crude just traded at 100.66 thirty seconds ago.”
For another, for most people there is much more emotion wrapped into the process of buying or selling a house (which is natural) than in deciding whether to be long in Bitcoin at 50K, and therefore much greater likelihood of irrational behaviour, which is probably the biggest contributor to the frequent dissonance mentioned above between buyers’ (and sometimes even their agents’) “valuation” of a property, and what the market/they may end up paying for it.
Sure the eventual sale price is still the market value, but that doesn’t mean it’s efficient. And when a market becomes too inefficient, some degree of intervention may be justified. Not “let’s nationalize housing” kind of intervention, but maybe “let’s look at how we can facilitate a little more price discovery” kind of intervention.
I agree with David that the notion that eliminating/modifying “blind bidding” would do much to make housing more affordable (or that cooling prices should even be its objective) is questionable, but from a free market point of view, the asymmetry of information between sellers with full access to all bids, and buyers with only the number who showed up to the starting line (and a meaningless ask), is far from ideal. There are all kinds of forces that can cause a disconnect between the market value and intrinsic value of assets, and it’s not outlandish to suggest the current way houses are bought and sold here is one of them. At worst, slightly less imperfect information for all participants might make a wild market a little more efficient.
London Agent
at 4:42 pm
You’re assuming that it’s impossible for anyone to deduce what the other offers might look like. All agents (and thus their clients) have access to the same data. Use it! Where is the responsibility of the buyers representative to educate the client and help them draw a conclusion as to what a house should sell for? And if an agent truly has no idea what they might be competing against, they have no place in this business. How they have clients is mind blowing to me.
Inflated $.02
at 7:37 pm
I think the key operative word there is “might”… My partner and I thankfully had an experienced, competent agent to help us navigate a tough market for buyers last March, whose guidance was aligned with our approach which eventually worked out for us.
The data and a good agent have a lot of value in setting basic expectations and helping target what kind of properties to look at so nobody’s time is wasted, but at any given offer night, neither the data nor their experience can reliably account for the possibility of an irrational actor ignoring previous/prevailing market behaviour (maybe guided by a clueless agent) out of a boundless desire to beat out 10 other “competing” offers despite no knowledge of how competitive they actually are… If the house sells for 1.7 and no other offers were above 1.5, which agent(s) had no idea what they were competing against? Who mis-valued the property?
What also seems to be unconsidered is the possibility that more transparency might in fact benefit sellers too, particularly if you believe that the balance of a market can shift. For a seller/agent trying to decide what to list at, wouldn’t the complete offer history on a comparable property be more valuable than just the sale price? Couldn’t it mitigate the risk of mis-pricing due to the disproportionate impact of an outlier if you could see that a majority of market participants valued it differently than one who may have overpaid?
Jason H
at 11:47 am
I honestly think it has to go away but I don’t think it’ll do what people expect.
My first thought is the offers should just be prices first that’s it. Let’s call it letter of intent to purchase (1 pager) with only financing, and inspection checked on or off.
At that point everyone has an additional day to decide what they’ll do and then an official offer.The people who can’t afford the higher prices bail out and no one’s time is further wasted (including realtors) and those who increase start the process.
I think you’re still looking at the reasons assuming the same processes apply. It’s evident.
Jason H
at 11:48 am
This was meant for David but I guess the same thing could be applies! Ha
Bryan
at 12:31 pm
I came down here after reading the article to post something very similar to this. I don’t see any other possible way that “non-blind” bidding could work. For price, it has to be a turn based thing with a minimum bid increase of X% of the list price. I agree also that some of the other negotiable points are silly to talk about. The chattels and fixtures seem silly, as do a lot of the non standard conditions/clauses that occasionally come up. That said, they are important to some people and do need to be sorted out. I would propose the 2 avenues to do so would be “standardization”, and some sort of “seller valuation” for conditions that can’t be standardized.
Starting with standardization (which is easier), there are a lot of things that agents put in offers all the time that still (unnecessarily) differ agent to agent and buyer to buyer. The government could standardize a bunch of these rather easily by (rough list): mandating that all deposits are 5%(or something) of list price and payable by dank draft within 12 hours of offer acceptance, standardizing title search timelines, mandating all sellers provide a status certificate(for condos) or do a home pre-inspection by a neutral and regulated inspector (and eliminating sales conditional on inspection), eliminating offers conditional on financing (or mandating pre-approval).
There will still be a set of conditions/clauses that aren’t fixable that way though (closing comes to mind). To address that, I would say that the sellers should basically write up the entire offer they want to receive without price included (ideal closing, keeping the renters, etc etc would all be in there). This would then serve as the “default” offer that every potential buyer would be using while bidding on price (and legally speaking, the one that would be binding if/when a price is accepted). Obviously buyers would need an opportunity to negotiate these conditions, so at least 24 hours before offer night, if a buyer wants any variation to the non-price parts of the offer (ie we want a 30 day close instead of 90, doesn’t want to keep the renters etc), they must inform the seller, and the seller in turn must assign that variation a dollar value 12 hours(?) before offers are due. The buyer could then decide to use the “default” offer or have the condition(s) added/changed to their (and only their) offer. All potential buyers would sign offers (whether they are the “default” or customized to their own wants as previously negotiated) and send them along with their initial price bids. If a buyer not using the “default” offer wins the bidding, they would need to pay their bid price PLUS whatever price the seller requested for the variation(s).
I think that would *work* as a system…. though I have enormous doubts that it would do anything to decrease price growth. If anything I would guess it would do the opposite.
marmota
at 1:01 pm
This would introduce so many complications. Imagine your 80 y/o grandma trying to navigate this, even with the most experienced realtor.
Imagine she is also out of province moved into a long term care facility/retirement home.
Now all sales take at least two days?
Tim K
at 1:19 pm
“The way to make this process simpler is to make it seventy times more complicated.”
-Bryan, April 25th, 2022
Appraiser
at 1:53 pm
LOL
Bryan
at 2:07 pm
I’m not sure what planet you are living on where people think the push for blind bidding has anything to do with making the process simpler… though I am all ears if you have some way to do so.
As David so aptly describes in this posting, the idea itself raises so many complications that it is basically unfeasible. This represents a way to address most of those complications and make it at least mostly “feasible”….. and also very complicated.
Bryan
at 2:29 pm
This is a fair criticism…. though I’m afraid complication is unavoidably tied to the very idea of “banning blind bidding” (fwiw if it were up to me, we would just keep the imperfect blind bidding). David lays out a lot of very tough questions that would all need to be answered in any type of open bidding system. This was no more than an attempt at that. The only thing worse than a bunch of tough questions with complicated answers is a bunch of tough questions with no answers….
As I see it, the only alternative to taking 2 days to sell up front is to negotiate all of the extra conditions after price is agreed upon….. which would take two days at best and waaay longer at worst. What happens if the highest bidder wants a financing condition, an inspection, a 10 day close, has no deposit, and wants all of Grandma’s furniture? Can Grandma then negotiate with the second highest bidder instead? At what price? What about the third, fourth or fifth? If she can negotiate with them, what was the point of the auction in the first place? Is there another “auction” if the winner can’t come to terms? Is Grandma just not allowed to sell her house if they don’t agree?
Andrew Sommers
at 6:47 pm
Make sure the agent representing you has shown you all of the recent sales. If have 1.2 million and you’re bidding on a house that is listed at 999k (but they have all been selling at 1.5) should you be wasting your time in the first place??
Marina
at 10:01 am
I don’t like blind bidding, but I also don’t think it’s a solution to the pricing situation. Blind bidding for me has 2 issues:
1. If there was a more open system, people wouldn’t have to “overpay”. I hate the idea of there being 5 offers, and the highest is let’s say 100K over the next highest. Of course when I sell my house I will likely feel differently, but as a concept it doesn’t sit right with me.
2. I also like the option to bid more if the highest offer is below my highest price. Now of course I can always offer my highest price, but that brings me back to #1 – why should I have to pay the max I can afford? It’s not really fair
The reality is though that those points address the price of a particular property, I don’t think they will impact the market as a whole. Some properties will sell lower, because nobody goes nuts, but some will say higher, because people will bid each other up.
As for realtor commissions, I can see the argument of not wanting to pay a % since a house that sold for $1 million 2 years ago that now sells for $2 million would not necessarily require twice the work to sell. But that’s the commission structure for almost anything that sells on bids. Selling a 15K work of art and a $2 million work of art requires roughly the same work, but you still pay a % commission. And you can always sell on your own if you don’t want the help of a realtor. But a realtor cannot make a client pay more than they can afford, so I don’t really see that as driving up prices.
Appraiser
at 11:10 am
It is the scourge of multiple offers that is the cause of “blind bidding”.
We should therefore ban multiple offers.
Bryan
at 12:53 pm
First bid takes the property no questions asked? Everyone get on your laptops for that 7pm offer time and get your $1 offers ready!
Appraiser
at 1:57 pm
“First bid takes the property no questions asked?”
Exactly! Every buyer should be able to purchase any house they want for whatever they wish to pay. Then it would fair.
Bryan
at 2:13 pm
I dunno…. I think this still favours those rich foreign investors who can afford faster internet! We should probably also make the cable companies sell their fastest internet packages for whatever people want to pay too…. just to be sure its fair.
Libertarian
at 3:16 pm
It doesn’t have to be internet based. Just go back to the old fashioned way – you list your house on MLS and have offers at any time, i.e, ban “offer night”.
This way you get rid of the game of underlist the price, post it on MLS on Wednesday, have offer night the following Tuesday.
Banning offer night would likely cause the seller to list closer to their desired price. Then it’s up to buyers and their agents to figure out the comps and what they want to pay. Or the seller could instead over list, then wait for an offer slightly under that price.
JF007
at 11:58 am
how about banning the practice of underpricing???? Isn’t the reason why we have bids all over the place because this strategy of underpricing and selling over asking has become the norm. if by rule/law the onus is put on listing agent to make sure the property is listed within a certain range of expectation that in itself could be a good starting point..and if a property that has comparable of 1.3 million does get listed for that or thereabout automatically you wouldn’t have the few bottom of the barrel bids in 1.1.5 range…just a thought..don’t think there are any easy answers here and whatever is being proposed by the govt is just an eye wash…
Jennifer
at 12:25 pm
i agree, i hate the under-listing – this should be somehow be curtailed before blind bidding. but if someone lists at what they expect as you set out, and then someone comes in and just blows it away, then what? will you look back and say that was under-listed?
What about a reverse auction? or the list price is an offer, not an invitation to treat? I think that there are some states that work like that but not certain. you hear stories on here all the time that the seller thought 1.3 million would be great and they would sell at that price, and in comes a buyer at 1.5.
Andrew
at 1:46 pm
How do you ban underpricing?
A property is worth with somebody will pay for it.
How do you know what “underpriced” is before people have had a chance to make bids?
Jimmy
at 1:54 pm
I have to agree with the above. See the list price as an offer vs an invitation to treat. If the agent lists low and only gets one offer at that price, you are selling the property. That would stop agents from listing low and seeing what the market will pay with no risk. If you are an agent that does not the value of the product you are selling, you will be out of the business soon enough.
Geoff
at 3:35 pm
What you’re really proposing is the death of all conditions, save price. No conditions on financing, no conditions on home inspection, a closing date that’s completely flexible…. I have yet to hear a single proponent of this whole ‘pick the best offer’ who can really tell me how they’d solve the conditions issue. Have a house you’ve sold already, with a closing date already? too bad, so sad.
Bryan
at 1:43 pm
I have always thought there needed to be some sort of downside risk to under-listing in order for people to stop doing it. Sure, sellers don’t always whip up enough of a frenzy to get the price up to a number they want, but if they don’t they can just re-list.
I have also always liked the idea of a seller having to lay out an entire “asking offer” rather than just an “asking price”. Basically, the seller would write up an entire minimum offer they would be willing to accept (price, closing, conditions, clauses), and should they receive at least 1 offer that meets or surpasses their conditions on offer night, they would be legally obligated to sell. If they had multiple offers, it would proceed much like things do today, but if you price your $1.4M townhouse at $999,990 and you get no action on offer night, you may have to sell it for $1M to the one person that showed up and met all your conditions instead of re-listing it a week later for $1.35M. I would imagine this would at least limit the absurd under-listing that is commonplace these days as people would be worried they would need to accept a number that is too low.
JL
at 3:53 pm
I would love to see this, but was told (somewhat convincingly) that every agent would switch to the reverse strategy – try to list as high as possible and then sell at or as little under as possible (i.e. their list price would never be so low as to have someone accept it outright without trying to negotiate down, and instead of a bunch of $999k homes we’d have everything at $2M with sales below). Only risk to them is you discourage interest if you price so high that they don’t feel they can negotiate down to reasonable levels.
Arguably still better then status quo, but not flawless by any means.
Bryan
at 5:07 pm
That’s an interesting theory. It could certainly happen, but I’m not sure I agree. I think that the reward for the under list strategy is really big right now….. which is why everyone is doing it. There is some fundamental competitiveness I think that it taps into where not only do buyers want the house but they want to “win” and it makes them go over what they might have otherwise stopped at. Enticing as many buyers as possible (which really means convincing a few people that your $1.4M home may go for $999k so they should definitely put in an offer to drive the number of offer up) is hugely beneficial…. and you are going to lose all the garbage offers if you overprice. I would think that people would still underlist but a lot more modestly.
Geoff
at 4:19 pm
I can’t imagine any world where one “has” to sell their property. I get that on something like ebay you really do have to sell (or get blacklisted) but a house has a multitude of complications. Take for example saying a closing day of 60 days from now. When we bought our current house, the closing day of the new house was a week after the closing day of our former loft – meaning we’d be homeless. But after the offer was signed, my agent was able to negotiate with both buyers to adjust their dates. In this ‘no blind offer’ world, where do renegotiations fall in? Would all old bidders have to be notified? It’s murky, murky murky.
Bryan
at 5:02 pm
The “asking offer” idea is (or at least can be) sort of independent from blind bidding in my view. I have no ide how to handle renegotiations like that in an open bidding system… functionally speaking that small renegotiation is the same as taking $200k off the price though certainly far different in spirit. Not sure how to prevent one without the other.
S
at 12:15 pm
You could achieve this if you banned the practice of holding offers until a certain date. Seller has to decide on each offer as it comes in, weighing the risk of it being the best offer vs one that could come in a few days. If this was the case you would have to list closer to what you really want. You might even be incentivised to list higher than you think it’s worth in order to set expectations.
The nicest houses will still have multiple offers if a lot of people see it same day, but this would only happen for the true gems. Underlisting might get you a few on day one or two, but without a week to drum up interest and pit people against each other the competition would be less.
Granted agents would find a way to get around this, most likely with more detailed ‘coming soon’ type listings, so the legislation would have to have the teeth to really punish any attempt to create an offer date whether explicitly or by circumstance.
RPG
at 2:44 pm
These comments are probably what David was afraid of. Everybody has an idea of a better system but they all favour buyers getting properties at lower prices and every idea is more outlandish than the one before.
Is anybody brave enough to admit that if they were on the selling side they would want the most money for their home?
JL
at 4:03 pm
If everyone plays by the same rules, why not? I mean, maybe if someone was about to be a major seller (or selling without buying) you’d want that advantage to maximize return, but if you’re a typical move up buyer/seller you’ll experience both sides of it so it would balance out for you (i.e. sell for less, but buy next property for less also – all theoretically, of course)
Geoff
at 4:58 pm
A move up seller is probably the worst case scenario. Offers could be conditional on sale of their home or financing, and certainly a condition would involve closing day. Nightmare city if there are 8+ offers. I still don’t understand – would it be that all offers would be put up on a website somewhere, and then if buyers want to improve, they can? I mean the first offer will still be blind.
Andrew Sommers
at 6:51 pm
See my comment that is here somewhere 🙂
Jennifer
at 11:34 am
it’s not lower prices, rather fair prices and an ethical system. one friend told me their agent said “yes you will be overpaying what it is worth today, but it will be worth that in a few years. you are buying future value so don’t worry about it just bid”. That is beyond stupid if you ask me, yet this is what the system brings out, and this is who is out there transacting for people.
S
at 1:03 pm
It’s not about buyers paying less. It’s that in such a supply constrained environment, where sellers have all the leverage, they shouldn’t also be able to shape the process in order to give them even more of an advantage (and cloud any transparency or predictability in the market). If we get rid of offer dates we actually achieve a more balanced process. Won’t fix affordability but will prevent you from having to do 10-15 minutes of research on house sigma every time a listing comes up to see what it’s actually worth (you need to actually look at listings for comparables as the data alone doesn’t capture a lot of intangible things that affect desire for a property).
M
at 4:28 pm
https://www.openn.com/en-ca/
This is the company that is doing a pilot with CREA to improve offer transparency.
EastYorker
at 5:11 pm
Great post !
What if instead of improving the offers the 1.575 offer changes it to 1.501 ? Since it is higher then the second place price ? And, or, then without knowing this the 1.5 offer changes to 1.576 ?
I’ve never understood the terms over or under priced. A houses “value” is different for every buyer. Only the purchaser really determines that. The initial price is an asking price
JL
at 5:31 pm
Except that “asking price” is never accepted if offered. That’s my definition of “under priced”; put for sale at a price that if offered by a buyer would not actually be accepted by the seller.
Mxyzptlk
at 7:52 am
So what? Why do you care? I’ve never understood people who “hate” underpricing? Why exactly is it so terrible?
I also don’t understand why so many commenters here aren’t prepared to treat buyers who “overpay” as rational, responsible adults who make their own decisions freely. Categorizing people you don’t even know as somehow impulsive, emotionally fragile children is insulting, not to mention ridiculous.
marmota
at 12:36 pm
Thank you!
It seems we need more government red tape and regulation to protect people from themselves…
Condodweller
at 6:57 pm
A buyer agent is incentivized to “win” the auction at any cost for their client. That’s sort of against the buyer’s best interest who does not want to overpay for an already expensive house. When it comes to making an emotional purchase likely to be the largest of your life, people’s impulsive and emotional side just might cause them to be irrational. Add in a bit of FOMO and an agent looking the get the deal done and a perfectly rational adult just might do something he otherwise would not have.
I agree with the idea of a cooling-off period for the second hand market that was floated here a while ago.
Joel
at 5:44 pm
I think the end blind bidding is stupid. If they want to do something they can eliminate offer nights. Set your price and people can make offers if and when they see fit. This will take more effort and experience from realtors, but is what most markets have seen for the last few decades.
Get rid of the offer night and have people over pice their properties, then negotiate down from there. I think this is actually what these people want. They don’t want to see a hoe listed for 999K to sell for 1.45million. They want to see a home listed for 1.5 sell for 1.45.
Mxyzptlk
at 8:47 am
Do they? How do you know “they” do? And who exactly are these “these people” of which you speak? More pathetic amateur psychology.
Average Joe
at 6:07 pm
Because federal politicians are tripping over themselves to fix the perceived problem. They’ve done the research and determined blind bidding is very unpopular with “these people”.
Setting prices artificially low isn’t allowed in retail because it’s seen as predatory and anti-consumer. If you think many buyers are in favour of the bait-and-switch then no professional can help you, bud.
Sirgruper
at 6:24 pm
Blind bidding is not truly the issue. The only possible issue is when a buyer who has the best bid is told to rebid without knowing if he/she is bidding against themselves or a second best bidder that is not near in price and terms. I think its an ethics question only. It only is important in a real hot market which is now, outside of a few pockets, is turning cold fast. The market sentiment has definitely changed.
If we want to deal with blind bidding, why stick just to residential real estate? In business and industry, there are blind bids all the time and you have no idea who really won? Sometimes the bid is blank for the purchasing agent to fill in. Why not regulate that? Oh right, matters between businesses are not “Star” worthy or vote worthy. Just the flavour of the month.
David, funny that, although you did not wanting to write something, it sure doesn’t impede your prodigious writing volume or craft. Well done.
David Fleming
at 8:07 pm
@ Sigruper
The sprained ankle meant I would be missing my Sunday run. That freed up the afternoon, so combined with the fact that I “had to” write this post, I just really went for it. I know it’s long, but I actually pared it down, if you can believe it.
Andrew Sommers
at 6:43 pm
Great post! Amazing too how the government is willing to throw the seller under the bus just to appease the buyer. Here’s the thing also, Trudeau can photo op?sound bite this, but at thend of the day it’s under provincial jurisdiction!
Lujba
at 8:59 pm
It’s not blind-bidding per se that I object to. It’s the “improve offer” process after the first round has already produced a winner. Now, the highest bidder raises against herself, and tangible fundamental value goes out the window. This no longer stable, competitive pricing. (The ordinary meaning of competition is two or more people vying for the same item. Bidding against yourself doesn’t qualify.)
In this game, the deepest pockets can always win. Imagine if we allowed this for automobiles. You offer the list price, and the dealer says, “I’m sorry Ms Smith, we’ve received another offer, possibly higher. Would you like to improve yours?” There are good reasons why this is illegal in most other contexts. Why should houses be any different?
JF007
at 10:45 am
i was talking to a realtor who told me about this offer night he had recently concluded for a seller of his..the propertly had been relisted and underpriced..on offer night two offers came both under what the seller was expecting with one about 30K over the second placed one and at list price and yet the agent was able to cox the final sale price to over 150K over asking by playing the 2 offers against each other…and at times the top offer against themselves..so is that great selling skills or downright unethical but it did put some nice change in the pocket of the seller for sure..
Keith
at 12:36 am
Let’s put a five year moratorium on immigration to Canada. Go ahead, call me a racist. Let’s adjust the rules of financing. Twenty five percent down payment minimum, no CMHC insurance (why is the non house owning taxpayer insuring Canadian banks against mortgage default), twenty five year mortgage amortization. No using a HELOC to finance a down payment.
Housing is unaffordable because there is a tidal wave of liquidity chasing a supply that cannot increase fast enough, even if you zone high rises everywhere and building permits take a week. Cut the liquidity, as we are already in rising interest rates and put a medium term moratorium on the increase in demand. Worth a try.
Average Joe
at 7:57 am
I agree, making an open auction won’t reduce prices. So I don’t really understand the opposition since it won’t drive down price and will make it more efficient to work with buyers. Just a lot of moaning over nothing and resisting any change/rules.
I’ll bet if deals start to fall apart this spring/summer or prices decline, blind bidding and the real estate industry is taking all the blame for the fallout. This could end up getting forced through as risk mitigation.
Dusty
at 12:03 pm
From your deep love of ‘Revenge of the Nerds’ to your opinions on real estate, we are in total agreement.
I agree that Toronto’s real estate was undervalued. The move upwards is a price correction. Eventually, it will even out but I highly doubt it will drop, barring an economic disaster. This shift away from buy a home young (or at all) has already happened in cities across the world.
It really doesn’t matter what the government legislates, it just shifts the problems to a different area. Same sh*t, different pile.
Merrick
at 1:14 pm
Excellent and thoroughly logical analysis of the topic
Condodweller
at 4:21 pm
Will eliminating blind bidding make homes affordable? No. Will it affect prices? I definitely think it would. Having said that, I think it would moderate price increases and push higher prices into the future.
I don’t know if the government has proposed a way to do this but I believe if they decided to do it, implementing it wouldn’t have to be anywhere near as challenging as David has described it. As a matter of fact, I think he went out of his way to make it as difficult as possible simply because he doesn’t like the idea and doesn’t want it. There you have it, the bias issue again.
I mean it can be done as simply as keeping everything as they are today, except for one simple change. On offer day when the agent sends out the email notices of other offers received to agents simply include the price. The auction can still proceed according to the agent’s plan and perhaps let the first round be price discovery where all the interested parties see where they are and they can be invited to go back and make another offer. This would set a level playing field for all involved and they can still shoot for the stars if they really want the house and are willing though I think it would help everyone come up with a realistic price. This would let a buyer know if they are the highest bidder and if not, how much are they behind.
To make things more efficient, the registered offer prices can be made available to potential buyers to eliminate the back and forth. This wouldn’t even be a problem with any privacy laws if only the number of offers and prices were disclosed. Perhaps stipulate to only make them available once more than two offers are received as it would be self-evident what the other offer is since you know your own.
If someone wanted to know how blind bidding affects prices I’m sure a statistician can look at the data for an area and see if there were any outlying higher than expected winning bids that weren’t warranted by a feature followed by even higher prices for similar units vs another area where similar units increase in a more moderate way as one might expect. This process might highlight the magnitude of how much blind bidding affects prices.
Deborah
at 11:36 pm
Thanks for this!
Steve
at 11:29 am
How about a fixed time frame? Say you listed at 1.2 or best offer on May 1st and the open bidding process was transparent for a week, or a couple of days. Then everyone could see what the highest offer was and rebid higher if they wish to continue.