Blind Bidding.  What is it and what is wrong with it?

Since Spring, the topic of Blind Bidding has been all over the news. It is still prevalent today in our local market but not as much as what was seen in the spring and summer market of this past year.

What is a blind offer?

A blind offer starts when a listing is posted for sale and an offer date is set on the property. On the offer date or just prior to, all interest parties submit their best offer. Your offer will include the price you’re willing to pay, as well as any conditions you have or are willing to remove (such as the home inspection or financing). It’s called a 'blind offer,' because no one knows how much the other hopeful buyers are offering. Essentially you get one shot to make the best guess as to what it’ll take for you to have your offer accepted.

How is a blind offer different from other bidding wars?

With other bidding wars, you usually have the opportunity to go back and forth a couple times with your offer, in order to try and outbid the other potential buyers. With a blind offer, however, you have only one chance and there is zero transparency. You have no idea what your competitors are going to offer and, therefore, you have no idea where you stand with your own offer.

What’s wrong with the blind offer system?

Because of the lack of transparency, the 'winning' offer may be thousands and thousands of dollars more than it needs to be, because there's no disclosure of what others may be offering.

For example, Buyer A could offer $10,000 over the listing price, Buyer B could offer $15,000 over and Buyer C could offer $30,000 over. These numbers aren’t unrealistic, yet we see them all the time. Instead, Buyer C could easily have offered just $15,001 over the listing price and still won. The lack of transparency made Buyer C feel like they had to make a super high offer in order to win the bidding process.

The question is, does the blind offer system — which only helps sellers and hurts buyers — set our housing market up for disaster? If people continue to pay dozens, and even hundreds, of thousands of dollars over listing prices, the value of our real estate could eventually reach an unsustainable level – and then decline.

What about Open Bidding

The Canadian Real Estate Association (CREA) holds the position that Open Bidding is still bidding. CREA cites Australia as an example where they have implemented open bidding and house prices are still high and continue to rise. 

Furthermore, CREA states

“Canadians have the right to choose how they want to transact what is likely the largest purchase of their lives. The proposed banning of blind bidding removes the ability for Canadian homeowners to sell their home the way they want.”

Housing advocates and some economists say the practice of blind bidding artificially inflates prices and benefits sellers and realtors who reap more cash in sales prices and commissions. This has the effect of driving up neighbouring home values.

Many industry professionals think that more transparency is needed.

In this market it is even more important to work with an experienced REALTOR® who will take the time to make sure you understand market value and the potential future value of your home and neighbourhood. This is not the market to bypass your due diligence and a trusted REALTOR® will help you make an informed decision.