Depending on whether you’re a potential buyer, or potential seller, in this 2014 Toronto real estate market, you might find the idea of a real estate “auction” to be far-fetched.
But as has been noted many times in the media in our market, real estate auctions do happen in major markets around the world.
The fall market is almost upon us, and sales will pick up, and thus so to will multiple offer situations and “bidding wars.” So let’s take a look at a true real estate auction, and you decide whether or not this could work in Toronto…
I know I’ve made this point, and asked this question, many, many times before.
But as we prepare to head into the real estate abyss, which is the second-last two weeks of August, I’m already looking ahead to the Fall 2014 market, and expecting to see more of what we experienced from January to May of this year.
And with that said, my clients are already asking me, “Do you expect to see multiple offers on every single-family home that comes out in our price point?”
Sadly, yes, I do.
The Spring 2014 market was the busiest market I have ever worked in, and it was both the most frustrating, and the most rewarding, for my clients.
I just through my records for this year, and from January to the end of May, I “won” in multiple offers 14 times on houses, and 3 times for condos, for my buyer clients. What that means, of course, is that for thost 14 buyers who “won” while bidding on houses, I probably submitted 25-30 offers, possibly more, and some of those dated back to 2013.
Many active buyers for single-family homes will eventually say, “I hate the way houses are sold in this city,” but what is the alternative? “If you don’t like the game, then don’t play.”
Enter: real estate auctions.
Is this a more “fair” version of Toronto’s real estate “bidding” process? Is it more organized, officaiated, and transparent?
Transparent, yes. But are the prices kept any lower? Not necessarily.
For those of you that think prices would be lower if the process were kept “transparent,” watch the following video, and you might be convinced that emotion plays even MORE of a role when real estate is sold in this fashion:
Wow!
I really thought he had it at $891,000! Who knew that there would be a dozen more bids!
It reminds me of Elaine bidding on John F. Kennedy’s golf clubs…
Jerry: “I really thought you had her there at $16,000….”
joel
at 8:06 am
Assuming that sellers can set a reserve amount, I think that this is a great way to sell. People can see what others are bidding and there are no longer any conflicts of interest, which are commonly mentioned on the blog. I am not sure how the Toronto market would react to this, but I hope that someone tries this with a reasonably sized sfh. (I know that there have been a few in the last year on mega mansions)
Kyle
at 9:12 am
Before all the whiny, entitled biatching about how our system is so broken starts, i hope people actually take a step back and really imagine themselves being in one of these bidding situations. The house in front of you is your dream house that you’ve been searching for, for months. Now you literally have seconds to decide whether you want to realize your dream (at the same time crushing someone else’s in the process – yup you’ll get to see firsthand when you are competing against another desperate family with a young child whose expecting twins), or let it slip by.
Also here’s what buyers can expect if Canada adopts the Australian model:
– No more free rides, buyers now have to pay their own buyer’s agent 1 – 3% + tax
– Better do all your homework beforehand as you have seconds to decide whether to proceed or not, wanna go back and check comps, confer with your spouse, find out if there is daycare close by, etc? Tough!
– If you and your partner are buying together, only ONE of you can actually bid, and there isn’t really an opportunity to have any kind of meaningful discussion, let alone sleep on it. Only one of you will be calling all the shots. Going once, going twice….
– No conditions or cooling off period, once the hammer goes down you’re immediately on the hook for a non-refundable 10% deposit and will need to close at the agreed settlement date.
So let the whiny, entitled biatching begin…
jeff316
at 6:52 pm
You got it, Toyota.
“For those of you that think prices would be lower if the process were kept “transparent,” watch the following video, and you might be convinced that emotion plays even MORE of a role when real estate is sold in this fashion”
^^^ Most important line in David’s post. The current system lets you determine the price you think best reflects your budget and the house’s value, relatively independent of outside emotional influence, with periods of time to actually think about it, assess it, and compare it to other comparables. A live auction makes that decision a lot harder, reduces the time available and the ability to research/compare. If the worry is bidding wars, or the worry is inflated prices, the live auction only exacerbates both problems.
Amelia Haynes
at 9:17 am
More transparent? lol … Why, because you can see the guy next to you and hear what price he’s willing to pay? As if that’s the only thing that matters.
Since when has heightening the emotion in a negotiation kept prices low? Ummm, never!
That said, I think auctions are a great way of selling real estate.
Real estate isn’t retail but buyers have a retail mentality – so my guess is they will always feel as if the game isn’t fair to them. If winning is truly your objective, hire an agent who knows how to win.
Annie
at 10:20 am
There’s a world of alternatives between our current black box model and the stressful, live, seconds to make a decision auction model. How about an iterative bidding process? Offers have to be in by a certain date/time. Only those who make an offer, at least as high as the list price, can continue. Offers are revealed and people can choose to drop out or take 24hrs to bid above the highest offer. Lather, rinse, repeat. And that’s just my pre coffee ramblings. If people put their minds to it, I bet they could come up with 5 even better ideas within the hour.
Kyle
at 10:57 am
Agreed there could be room for shades of grey, but for any alternative to work there has to be something in it for the seller too. We can come up with as many ideas as we want, but if they only benefit buyers at the expense of sellers, then why would any seller choose the new model to sell their house?
If i were a seller, i see no benefit in choosing a long drawn out multi-day bidding process, but i do see lots of downside.
Chroscklh
at 11:18 am
Annie speaks great idea – iterative bidding process. Peoples need times to think about consequence. Auction get crazy, far more likely to have deals go bust after fact. In my village we use auction, but auctioneere speak very slowly -not like U.S.-style speed talker – auction lasts 18-20 hours on average, with only 5-6 bids – auctioneere speak VERY slowly, and must repeat 300 times each sentence. Most bidder get frustrate and go away, only serious bidder wait for 2 hours to raise paddle
Appraiser
at 9:00 pm
An auction by definition, is a “multiple-offer” situation guaranteed every time.
Yeah, it’s different…but how in the world is it actually better?
Waqas Ali
at 1:27 am
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Chroscklh
at 9:35 am
Why I buy house with realtor who look like mobster, wearing black suit and red tie? What if I say I no like house he show me, he break leg? This guy so gangster, he put link on other realtors blog! Thank you but no – I work with the Fleming, he make me very wealth
Ed
at 11:02 am
Hey David, friend of yours?
Boris
at 3:51 pm
You must be brother of Mister Chemical Ali
http://www.google.ca/imgres?imgurl=http://upload.wikimedia.org/wikipedia/commons/b/b1/Detail_Ali_Hassan_al-Majid.jpg&imgrefurl=http://en.wikipedia.org/wiki/Ali_Hassan_al-Majid&h=223&w=226&tbnid=hMz_Oesse_7qJM:&zoom=1&tbnh=186&tbnw=188&usg=__E7SynByU8L3HfTzPWTcEfSozyt0=&docid=sn40k-VXA3phwM&itg=1&sa=X&ei=JHDqU7PaIo-BygSp14DYDw&ved=0CJQBEPwdMAo
Kyle
at 9:44 am
Dude you need a serious lesson in geography, The Kingsway is not in Mississauga and Mississauga is not in Toronto. I think you need to get that straight, if you want to sell houses!
Kim Armstrong
at 1:43 am
I’d prefer they will set a standard price for condo unit. For their business, this might be good. When you buy a home, first you need to be financially stable. This is one of the thing that I have considered before buying a unit at marina one residences condo. Well, I guess this kind of auction is only applicable for someone who has too much!