Saturday, February 4, 2023
Market-Reporter
  • Home
  • Markets
    • U.S. Markets
    • Canada
    • Europe & Middle East
    • Emerging Markets
    • Asia
    • Latin America
  • Investing
    • Stocks
    • IPOs
    • Mutual Funds
    • ETFs
    • Bonds
    • Commodities
    • Currencies
    • Cryptocurrencies
  • Economy & Politics
    • Personal Finance
    • Spending & Saving
    • Retirement
    • Real Estate
No Result
View All Result
  • Home
  • Markets
    • U.S. Markets
    • Canada
    • Europe & Middle East
    • Emerging Markets
    • Asia
    • Latin America
  • Investing
    • Stocks
    • IPOs
    • Mutual Funds
    • ETFs
    • Bonds
    • Commodities
    • Currencies
    • Cryptocurrencies
  • Economy & Politics
    • Personal Finance
    • Spending & Saving
    • Retirement
    • Real Estate
No Result
View All Result
Market-Reporter
No Result
View All Result
Home Canada

How to tame the housing wars: Why open bidding may not work – National

MtR by MtR
June 12, 2021
in Canada
0
How to tame the housing wars: Why open bidding may not work – National

Related articles

Alberta oil production set new record in first half of 2022

August 10, 2022

Canada expands market for fresh British Columbia cherries to South Korea

August 10, 2022


The idea of eliminating blind bidding from residential real estate transactions is gaining steam among those looking for a quick way to squirt some cold water onto Canada’s sizzling hot housing market.

In B.C., for example, the provincial government is reviewing blind bidding as part of a broader effort to strengthen protections for homebuyers.

Read more:
Is improved consumer protection in B.C.’s housing market on the horizon?

In much of Canada, the volume of homes changing hands has come down from the eye-popping peak set in March. But for every home with a for-sale sign, in many parts of the country, there are still plenty of eager homebuyers, and bidding wars remain common.

But while critics of blind bidding make a straightforward case, it’s hard to tell whether so-called “open bidding” would be any better.

Story continues below advertisement


Click to play video: 'More home buyers purchasing homes with ‘no conditions’, according to Kingston real estate agents'






1:40
More home buyers purchasing homes with ‘no conditions’, according to Kingston real estate agents


More home buyers purchasing homes with ‘no conditions’, according to Kingston real estate agents – Nov 4, 2020


The case against blind bidding

With blind bidding, homebuyers vying for the same property don’t know how much others are offering. But the specific rules that govern the bidding process vary from province to province.

For example, while buyers in Ontario are entitled to know at least the number of competing offers, brokerages in B.C. currently don’t have to disclose even that information.

Story continues below advertisement

Read more:
Here’s how home prices compare to incomes across Canada

Not knowing how much others are willing to put on the table, critics contend, often creates an incentive for buyers to offer tens of thousands if not hundreds of thousands of dollars above the asking price in what’s commonly known as “bully bids.”

This creates a situation where “you have a bunch of bids kind of clustered around one area and then one sort of crazy bid that’s six figures above the rest,” says Ben Rabidoux, president of North Cove Advisors, a boutique market research firm.

Read more:
Will the housing market crash? Why home prices may stay hot

The way Rabidoux sees it, that’s an undesirable outcome for several reasons. For one, it hurts the eventual homebuyer, who may have been able to purchase the property at a lower price, he says.

Second, the result is often unfair to sellers as well, who might face an equally challenging bidding process when buying their new home, Rabioux argues.

“For the most part, sellers are moving laterally within the market. They’re selling one property, but they’re moving into another property,” he says.

“They then have to get back into just an equally crazy bidding process as well.”

Story continues below advertisement

But perhaps most importantly, bully bids have knock-on effects on home prices, as the prices of properties that sell vastly over their asking prices become reference points for future sellers in nearby areas, Rabidoux says.

Trending Stories


  • Health Canada won’t release over 300K J&J COVID-19 vaccine doses due to quality issues


  • Time to change your password: Largest compilation of passwords leaked online


Click to play video: 'Bidding wars and moving to the suburbs: Saskatchewan’s real estate market booming'






2:07
Bidding wars and moving to the suburbs: Saskatchewan’s real estate market booming


Bidding wars and moving to the suburbs: Saskatchewan’s real estate market booming – Apr 9, 2021


But is open bidding any better?

Blind bidding isn’t the only way to let multiple buyers compete in the real estate market. In Australia, for example, homes are often sold through open bidding or so-called auction-style bidding, where buyers try to outdo each other with higher and higher offers.

Story continues below advertisement

But while the country’s process has been praised for its transparency, it’s unclear whether selling homes at auction would do much to temper the impact of bidding wars on prices.

For one, Rabidoux notes, “the housing market in Australia is every bit as crazy as it is here in Canada.”

Australian home prices were up 11 per cent in May compared to the same month last year, with the median price of a home reaching $908,000.

Empirical studies of different styles of bidding in real estate markets are rare. But one paper comparing blind bidding and open bidding in land auctions in Singapore found that the latter actually led to higher prices for sellers.

Read more:
‘Nowhere to go’: Canadian homebuyers without family help are running out of options

In a 2014 paper published in Real Estate Economics, an academic journal, researchers Yuen Leng Chow and Joseph Ooi found prices were between one per cent and nearly 10 per cent higher for plots of land available for residential development in the same are of the city-state that had been sold with an open-bidding instead of a closed-bidding process.

(It should be noted, however, that the blind-bidding process described in the paper involves only one round of competing bind bids. In Canada, bidding wars often involve the seller’s agent asking buyers to up their offers if the bid are close or considered too low).

Story continues below advertisement

Read more:
‘Incredibly stressful:’ Why renting isn’t always a solution for those who can’t buy

In Toronto, Davelle Morrison, a broker with Bosley Real Estate, worries open bidding would give buyers even less time to think about what they can really afford.

In Ontario’s current blind-bidding process, buyers may have the chance to place a quick call to their parents, mortgage broker or financial adviser before raising their bid, she says.

In an auction-style bidding war, on the other hand, “you have to make a split-second decision about something that’s the most important and most likely the largest purchase of your life,” she says.


A possible fix: eBay-style bidding

One way to avoid the bully bid may be an automatic escalation clause similar to automatic bidding on eBay, Rabidoux says. On the e-commerce site, customers can set the maximum amount they’re willing to pay and opt to let an algorithm bid on their behalf in increments up to their price ceiling.

Story continues below advertisement

It’s an idea some big-bank economists have written about as well. In March, BMO Senior Economist Robert Kavcic mentioned standardized escalation clauses for the price component of bidding offers as a possible measure that could “limit the ballooning that we’re now seeing in a very tight market.”

But on its own, both Rabidoux and Kavcic say, tweaking bidding wars won’t cool the real estate frenzy.

“It is still an extremely tight seller’s market, even with the recent slowdown in sales,” Rabidoux says.

Still, changing the way buyers compete for scare housing may “take some of the extreme irrational froth off the market.”


Click to play video: 'Priced out: Will the Canadian housing market crash? Why home prices may stay hot'






2:04
Priced out: Will the Canadian housing market crash? Why home prices may stay hot











© 2021 Global News, a division of Corus Entertainment Inc.





Source link

Related Posts

Alberta oil production set new record in first half of 2022

by MtR
August 10, 2022
0

Alberta oil production set a new record in the first half of 2022, according to a report by ATB Economics. Daily...

Canada expands market for fresh British Columbia cherries to South Korea

by MtR
August 10, 2022
0

The growth of Canada’s cherry industry is a major success story, exporting high-quality products to markets all over the world,...

Home prices cool off in Sudbury, Sault Ste. Marie after pandemic boom

by MtR
August 10, 2022
0

The real estate market in two northeastern Ontario cities has cooled off in recent months after two years of price...

US and Canada Dragon Fruit Market Size Worth US$ 194.10 million

by MtR
August 10, 2022
0

US and Canada Dragon Fruit MarketThe US and Canada dragon fruit market was valued at US$ 129.15 million in 2018...

Tesla discloses lobbying effort to set up factory in Canada By Reuters

by MtR
August 10, 2022
0

2/2 © Reuters. FILE PHOTO: The Tesla logo is seen on a car at Tesla Motors' new showroom in Manhattan's...

Load More
  • Trending
  • Comments
  • Latest

Bank of England tells ministers to intervene on digital currency ‘programming’

June 21, 2021

Tips for checking smoke alarms during daylight saving time

March 12, 2022

GLOBAL MARKETS-U.S. stocks follow Europe up; Treasury yields rise, dollar firm

July 9, 2021

What will Durham County education bonds pay for? A full list

July 8, 2022
African currencies week ahead: Zambia's kwacha seen on back foot, Kenyan shilling up – Business Recorder

African currencies week ahead: Zambia's kwacha seen on back foot, Kenyan shilling up – Business Recorder

0
Maxum Foods releases Global Dairy Commodity Update for June

Maxum Foods releases Global Dairy Commodity Update for June

0
Letter: Perpetual bonds can help states fight hunger

Letter: Perpetual bonds can help states fight hunger

0
United Kingdom ETFs Are Riding the Re-Opening Momentum

United Kingdom ETFs Are Riding the Re-Opening Momentum

0

Investment in overseas real estate surges : The DONG-A ILBO

August 11, 2022

U.S. inflation CPI report, Wall Street, currencies

August 10, 2022

Alberta oil production set new record in first half of 2022

August 10, 2022

Industrial Lubricants Market to Reach $71 Billion by 2027.

August 10, 2022

Recent News

Investment in overseas real estate surges : The DONG-A ILBO

August 11, 2022

U.S. inflation CPI report, Wall Street, currencies

August 10, 2022

Alberta oil production set new record in first half of 2022

August 10, 2022

Categories

  • Asia
  • Bonds
  • Canada
  • Commodities
  • Cryptocurrencies
  • Currencies
  • Emerging Markets
  • ETFs
  • Europe & Middle East
  • IPOs
  • Latin America
  • Mutual Funds
  • Personal Finance
  • Real Estate
  • Retirement
  • Spending & Saving
  • Stocks
  • U.S. Markets
  • Privacy & Policy
  • About Us
  • Contact Us
  • Advertise with us

© 2021 Copyright Market-Reporter

No Result
View All Result
  • Home
  • Markets
    • U.S. Markets
    • Canada
    • Europe & Middle East
    • Emerging Markets
    • Asia
    • Latin America
  • Investing
    • Stocks
    • IPOs
    • Mutual Funds
    • ETFs
    • Bonds
    • Commodities
    • Currencies
    • Cryptocurrencies
  • Economy & Politics
    • Personal Finance
    • Spending & Saving
    • Retirement
    • Real Estate

© 2021 Copyright Market-Reporter