Real estate: a good idea to reveal the content of offers to purchase?

In Quebec, the question was asked during a consultation launched by Finance Minister Eric Girard last year. For the moment, the ministry has not offered anything on the subject.

In Ontario, sellers will be able to disclose the content of offers to promising buyers if they so wish as of April 1, 2023. However, this measure will not be mandatory.

Stephen Moranis, former president of the Toronto Region Real Estate Board, and Murtaza Haider, professor of property management at Metropolitan University of Toronto, answered questions from journalist François Sanche of The bill.

Some buyers outbid, when they already had the best offer. They are paying too much for nothing. Is it common?

Murtaza Haider : It is a common practice to see the seller’s agent invite the buyers’ agents who made the best offers to improve their price. In this case, buyers do not know where their offer stands in relation to those of others. […] They will therefore bid blindly. As the supply of available properties is far from meeting demand, buyers are afraid of losing. They will therefore outbid, even if their offer was already the highest. This is a fairly common situation.

Murtaza Haider is a professor of property management at Metropolitan University of Toronto.

Photo: Radio-Canada/James Dunne/The Canadian News

Stephen Moranis : Across the country, agents have to tell buyers how many offers there are. […] It is therefore quite possible that you will make a very generous offer since you have been told that there are, say, five offers on the table. […] Regulators should protect these buyers. While the situation is favorable to sellers, today’s sellers will be tomorrow’s buyers.

I guess going public wouldn’t eliminate overheating overnight?

Murtaza Haider : Prices rise when demand exceeds the supply of available homes, regardless of whether bids are blind or not. On the other hand, we will see impacts on a small scale. If a property sells for $250,000 more because of blind bidding, neighborhood home values ​​will adjust accordingly. Prices for other listings will go up. They will not be lower because there are not enough houses for sale. So, at the scale of a neighborhood or a street, blind bidding raises prices if the first house sold for far too much.

What do you say to those who believe that the disclosure of offers would make the process more complex?

Stephen Moranis : It’s complicated only if we don’t simplify the way to do it! It’s no different from how you sell a painting of the Group of Seven, Picasso or Monet. Everyone sees the price going up. Technology allows you to do this completely open and transparent, until you decide it’s too expensive for you. So I think there are solutions to simplify the process.

Stephen Moranis is a former president of the Toronto Region Real Estate Board

Photo: Courtesy of Stephen Moranis

Murtaza Haider : This technology already exists. But I think there is a reluctance on the part of legislators. Governments should be able to tell us if blind bidding is impacting homeownership, if it’s contributing to overheating, and yet they don’t have that information. It is not necessary to know who made which offer [pour protéger les renseignements personnels des acheteurs, NDLR]. On the other hand, we need to know where our offer stands in relation to others, or by how much our offer outperforms that of others.

Are we ready for more transparency?

Murtaza Haider : The real estate industry is built on trust. And trust comes with transparency. Without transparency, there is strong resentment. […] The industry should make it a priority to be fair and transparent for both buyers and sellers. It cannot only protect the interests of sellers and leave buyers to fend for themselves. It is the agents of the sellers who have all the cards in hand. Governments must restore a balance.

Stephen Moranis : I agree with Murtaza. Currently, the seller has the advantage, and the industry and regulators encourage and support that. I advocate transparency to restore consumer confidence in regulatory authorities and the brokerage industry. Which does not mean that it will promote access to property. The houses are not very affordable, in particular because there are few of them on the market. With more transparency, some houses could even sell for even more! Because buyers would have more confidence in the system and would be convinced that they had been treated fairly.

What do you think of the Ontario proposal to allow the disclosure of offers only if the seller agrees?

Stephen Moranis : We have gone beyond making this option voluntary. It should be mandatory. If there are multiple offers, the process should be open and transparent so that people can have confidence.

The comments have been summarized to facilitate understanding.