Ontario has allowed open bidding for real estate
The authorities have reformed the rules of buying and selling.
New rules for buying and selling real estate in the province of Ontario are coming into effect and are intended to provide more clarity for buyers and sellers. However, the changes made to the legislation are not as drastic as some had hoped.
The rules, which went into effect Friday, Dec. 1, include the ability for sellers to use an open bidding process and disclosure of brokers and brokerage services.
What's changed
First, the open bidding option gives the seller the ability to disclose proposed prices to potential buyers, something that was previously prohibited to do.
Second, previously, if buyer's and seller's agents worked for the same brokerage firm, they were subject to the so-called multiple representation scenario, given the potential conflict of interest. In these cases, the agents could only act as intermediaries and were limited in the amount of information they were permitted to disclose. By appointing specific agents, the buyer and seller will be exempt from multiple representation under the new rules.
Third, the reform includes a modified code of ethics. The information guide that clients receive from the agency before entering into a contract is also being transformed.
Expecting and responding to change
Open bidding has long been advocated by many lawmakers. Ontario Green Party leader Mike Schreiner called them the best way to reduce rampant overpricing of real estate.
The federal Liberals also promised in their 2021 election campaign to end blind bidding altogether because, they said, ignorance of other bids ultimately leads to higher housing prices.
However, the reform had its detractors. Joseph Richer from the Real Estate Council of Ontario said that there is little research on the impact of blind bidding on prices. He also cited the experience of Australia, where open auctions generally drive them up. The main evil, in his opinion, is not just open bidding, but mandatory open bidding:
"Keep in mind that in every transaction, there's a buyer and a seller, and that whatever you mandate for one, might be, and probably is at the detriment of the other," Richer said.
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That said, open bidding as a possible option still seems like a good idea to Richer, as sellers who are having trouble finding buyers may want to let their agent disclose bids.
The president of major Ontario real estate agency Innovation Realty Ltd. Randy Oikle said that at this point, open bidding doesn't look like an attractive idea for most sellers in the current market. However, at the same time, real estate agents will find it useful.
