Ending Blind Bidding in Ontario: Who will benefit?
What is blind bidding?
Blind bidding is when the homebuyer makes a bid or an offer on a home without knowing what fellow homebuyers are offering.
Some experts say it’s one of the main reasons for high home prices and this makes perfect sense. Imagine if you and five other homebuyers are making an offer on a property. You may know that there are five other bidders, but you have no idea how much they are offering or what conditions they are including.
What can happen is that you can come out as the winning bidder but end up overpaying by a lot. You could outbid the next closest homebuyer by $5,000 or $50,000. You really have no clue. Only the home seller knows how much everyone paid. This is why it can result in inflated home prices.
What is the Ontario government proposing?
Assuming that the Conservatives form a government after the coming election, the new changes are expected to come into effect in April 2023.
Under the new rules, homebuyers could see exactly what other homebuyers are offering on the home that they are bidding on. This would let homebuyers change their bid accordingly.
At face value, this looks like a huge win for homebuyers. You would think that home prices wouldn’t go up as quickly, as the process would be more open and transparent.
There’s a catch
The problem is that the new rules of revealing home prices to all homebuyers making offers is optional. As a home seller, you get to choose whether you want homebuyers interested in your home and make offers to see what other homebuyers are offering.
And herein lies the problem. As a home seller, why would you let other homebuyers know the offer prices of everyone if it doesn’t work in your favor? The answer is you wouldn’t.
There are instances when home sellers might reveal the prices of fellow homebuyers, but only when it benefits them.
More of the same
The bottom line is that it’s more of the same. Unless the new rules become the norm, this could make home prices worse, not better, for homebuyers.