25 ms·

> During last year’s election campaign, Trudeau’s party also proposed a ban on “blind bidding” for houses -- the prevailing system by which offers are kept secr

> During last year’s election campaign, Trudeau’s party also proposed a ban on “blind bidding” for houses -- the prevailing system by which offers are kept secret when someone is auctioning a home. This is such a huge deal. Anyone who has had to go through the process of buying a home through a bidding war knows how unfair and one-sided this process is. It take a high-pressure emotional situation, and gives all of the information to one side (the sellers), while leaving the buyer stuck guessing at what the real price for the house is supposed to be. An absolutely horrible process that should be banned. Banning this is such a simple reform. I sincerely hope it happens, though I doubt it it will.

mh8h 5y ago
The effects of blind bidding on price increase are still not very clear. I haven't had a chance to look at the literature, but I've been seeing several news articles about this: https://www.cbc.ca/news/business/blind-bidding-real-estate-1.6191259 https://www.cbc.ca/news/business/blind-bidding-real-estate-1... https://www.ctvnews.ca/business/study-supports-blind-bidding-on-real-estate-but-one-realtor-argues-transparency-better-for-homebuyers-1.5643383 https://www.ctvnews.ca/business/study-supports-blind-bidding...
richbell 5y ago
I think that blind bidding is a bit of a scape-goat here: the problem isn't that the bidding process is blind per se, it's the complete lack of transparency. Once a house is sold, the price that it sold for AND all bids should be made a matter of public record — accessible without having to pay a ridiculous amount of money to view. Not to mention the ridiculous commission fees for realtors, and their well-known practice of "steering" people away from homes with lower commission or prices. A practice that is technically illegal, but not enforced.
- imposterr 5y ago
  In some provinces, the sold data is at least available. It definitely helps get a feel for what one can expect to pay in a given neighborhood.
  - richbell 5y ago
    While the sold data is useful, it doesn't capture nuances like "this house sold for 200k over asking and 175k over other bids because the buyer's agent mislead them and they were scared to lose." Often times a single large sale sets the bar for all future sales in the area; Zillow is a good example of how merely going off the sale history can quickly drive up prices.
- slg 5y ago
  >I think that blind bidding is a bit of a scape-goat here: Almost everything mentioned in the various comments here is a scapegoat. These all might contribute a little to the escalating prices at the margins, but they are not the root cause. The root cause is that many capitalist societies have decided that purchasing a house is the most expensive and important investment most people will make in their lifetime. Therefore these societies gradually shape their policies to ensuring these investments continue to increase or else there are widespread repercussions. The end result is we have collectively refused to build enough housing to keep prices stable or decreasing. The prices need to go up. I don't understand why no one is willing to admit this. All the other problems originate from this. The reason foreigners want to buy homes as speculation or a place to park their money is because governments are committed to ensuring that housing is a safe and profitable investment. It all comes back to us deciding that a basic human need should also be an investment that always is increasing in value.
  - bennysomething 5y ago
    I think the root cause is supply, demand, the salaries of buyers, interest rates and multiple of salary for mortgages permitted by law.
    - katbyte 5y ago
      which are all influenced at every level by the desire (need?) to keep housing prices high and increasing..
    - slg 5y ago
      Those are downstream effects of the problem with housing being an investment. We don't want prices to go down so we don't build enough supply. The policies that make housing a good investment increase demand from speculators and investors above the natural need for housing. There are all sorts of subsidies that exist to give people more money to buy housing instead of trying to make housing actually cheaper. Interest rates are a lever the government uses to support its political goals which includes increasing housing values. It all comes back to the same root cause.
- Spooky23 5y ago
  There's never a root reason. But because real estate agents are middlemen in the process, there's an incentive in a hot market to not act as an honest broker. When the market isn't "hot", a realtor has an interest to move quickly. When the market is hot, they have incentive to move their own listings so they get both sides of the commission. In my case circa 2005, I bid $50k over list via the broker who was managing my home sale. The selling broker "lost" the bid somehow and sold it for $20k over listing price. 7% of 20,000 is close to 3% of 50,000. But... I came to learn later that the selling agent targeted a particular religious community hard, and did a hard sell on insurance, inspection, and even attorneys to buyers, and frequently yielded another 3-5% based on "spiffs" from those providers. All of these inefficiencies and bad behavior add up and inflate prices.
  - SOLAR_FIELDS 5y ago
    For the record dual agency is actually illegal in some places: https://www.homelight.com/blog/dual-agency-is-illegal-in-some-states/ https://www.homelight.com/blog/dual-agency-is-illegal-in-som... Though I will point out that in most of the jurisdictions in the link provided, there's nothing that prevents your scenario - a third party offer is turned down due to the dual agency bid being favored by the sellers because they never received your bid. Only in Colorado, Florida or Kansas is it explicitly prohibited. But at least if it was in one of the other states that requires disclosure (Alaska, Maryland, Texas, Vermont, Wyoming) the sellers would have at least been aware of a possible conflict of interest and may not have entered into a contract because of it.
    - Spooky23 5y ago
      Totally get that what the other guy did wasn't illegal in my state. The thing that bothers me is that as salespeople, real estate agents can deploy all sorts of fluffery and bamboozle people who believe their "agents" are acting in their interest. Of course the reality is that there is very little governing their conduct and behavior. Without a functional "exchange" or disclosure rules, both buyer and seller are dependent on good faith.
- jackyinger 5y ago
  The lack of transparency makes these deals ripe for fraud. I have heard anecdotes from people I trust of their realtor offering to generate a fake offer (by soliciting one from a third party) to drive up the escalation clause. Where there is money and little oversight there is bound to be fraud. It grinds my gears to think about this because I bought a house and the escalation clause went to the maximum. Now do you think that was purely coincidence?
  - josho 5y ago
    If you have a good realtor they will confirm the competing offer exists. Eg. my realtor called up the selling realtor and asked for the name of the realtor that submitted a competing offer. My realtor called the competing realtor to confirm they had a client that submitted an offer. Yes, of course the two other realtors could conspire together. But, now instead of one dodgy realtor you have 2 and the probabilities go down further. Is there fraud, I'm sure there is. But, I don't think it's a significant factor in the market.
  - Spivak 5y ago
    Escalation clauses are dumb anyway. If you tell me “I’m willing to pay you up to 100k for your house” then my offer just became $100k.
    - lotsofpulp 5y ago
      You can require proof of competing offers in your escalation clause.
      - charcircuit 5y ago
        Just get the realtor or some random person to bid $99,999.99
- lupire 5y ago
  Bidding is a total red herring. Bid what you value the property. Go low if you have patience. If you aren't the best bid, look somewhere else. Steering is a problem.
- sokoloff 5y ago
  Why should not selected bids be made public? If I bid $1.2M on a house 2 months ago and didn’t get it, I don’t want the seller of a house that I just bid $950K on to have access to a datapoint that strongly suggests I’m good for another $250K. In such a case, I’d predict a lot of partnerships (or whatever the lowest cost legal structure that isn’t traceable over time if not activated) would be bidding for houses. My bid as “123 Main St Partners” can be as public as you want I suppose.
sonicggg 5y ago
I live in Canada, and the real estate business is such a mafia. They are leeches, and I'm not sure how much value these real estate agents are providing. It baffles me how this industry has not yet been disrupted by an outsider, like Uber did with taxis. I still remember when taxi licenses costed a fortune, and you had the exact same leeches exploiting it. They were seen as an investment in some cities, like NYC. I know there are useless regulations that keep these agents being needed, but so there were with taxis as well, and Uber did not give a crap.
- ethbr0 5y ago
  In the case of real estate, the entrenched transaction businesses control both supply and demand, and hence are more able to block new entrants. In the case of Uber, supply (people who own vehicles) was effectively unlimited and independent.
  - boplicity 5y ago
    Uber is an interesting comparison, because their primary competitive strategy was to ignore existing government regulations. Regulations, of course, are a huge issue in the real estate industry. Maybe someone can step in and invest a many billions of dollars in real estate -- while ignoring the red-tape regulations that often prevent building? This seems unlikely, but could certainly be a path towards disruption. The difference, with Uber, of course, is their cost of capital was relatively low. They didn't have to buy vehicles, for example. (Imagine having to tear down a few multi-billion dollar real estate developments. Yikes.)
    - Spooky23 5y ago
      Uber was just an obvious con that demonstrated the danger of unrestrained capital and an era of ineffective government. Real Estate isn't a regulatory trap; it's an information trap. You can buy and sell property direct. All of the legal stuff is (nominally) done by attorneys. But the association of realtors controls the listing service and makes discovery easy. Like all salespeople, realtors add "value". When you've been in 2,000 houses, you pick up insights that are useful and learn about neighborhoods. The information is used for both good and bad purposes. Most of the disruptors do stupid shit with stupid investor money or integrate with the existing players and add some value.
ethbr0 5y ago
As someone who recently bid in a hot property market, I'm a huge fan of common sense bans and unwaivable rights. In a competitive market, filled with buyers of questionable sophistication, i.e. residential real estate, everyone gets to the bottom of maximally-waived, minimal-safeguards pretty quickly to make a competitive offer. And ultimately, that isn't good for anyone, sellers included. Better to explicitly prohibit the stupidest behavior and require some safeguards. E.g. non-waivable 72 hour cooling off period. Then everyone can compete within those bounds however they want.
- blip54321 5y ago
  It's complex. There are two sides to every equation. Buyer and seller. Sellers aren't necessarily sophisticated either. If I sell my home, and the roof is leaking and I don't know about it, I don't want to be liable down-the-road. Peace-of-mind is worth a lot. Especially if the buyer is sophisticated, I might take a lower offer if it has the right waivers.
- chaostheory 5y ago
  How bad are the bidding wars ie how much over listed price do houses tend to sell for?
AzzieElbab 5y ago
I think people are missing the fact that for many Canadians values of their homes represent their live savings. So while homeownership remains high in Canada doing something substantial about re prices would ruin peoples lives.
- arcticbull 5y ago
  Yeah, about 70% of Canadians are homeowners (almost 15% higher homeownership rate than in the US). Ideally, they find a way to keep home price growth at/below inflation for a few years rather than actually pulling prices down directly. There's very little appetite for reducing the notional price since that 70% is broadly "most voters."
  - glouwbug 5y ago
    Doesn't the 70% ownership stat include those living with their parents? I have friends at 30 who still live with their parents.
    - ipaddr 5y ago
      Those kids will get that house passed down to them.
      - heyitsanewacco 5y ago
        Literally my brother's retirement plan. Good luck to anyone who doesn't have a well off family!
    - amscanne 5y ago
      I believe the 70% stat is from the census, and it would % of households. So it is possible that it reflects a higher % of kids not leaving the nest and renting something, but I also don't think its fully compatible with the narrative that Canadians are being squeezed out of housing (by foreigners) if the home ownership rate is higher than at any other time in history.
    - 5y ago
bennysomething 5y ago
This is an interesting question, what is worse for buyers, blind or open bids? Blinds bids prevent bidding wars. They use them in Scotland. Not sure if buyer or seller is better off using them.
- thethimble 5y ago
  Also another interesting dynamic is that bids can’t simply be compared by headline price. There’s so many other factors to consider in a bid: contingencies, time to close, reliance on a lender, likelihood of close, etc. I don’t see how a blind system can take those factors into account to algorithmically select a single winning bid.
  - robocat 5y ago
    It isn’t done algorithmically. Often the best bid is obvious - for example an unconditional offer at the highest bid. Sometimes the best bid is not so obvious, and the vendor chooses the bid that suits their situation the best, or they renegotiate price or conditions with the highest bidding buyer(s). A vendor that doesn’t really need to sell and that believes prices are still rising, might accept a high price with a long settling date, or other conditions that might cause the sale to fall through. A vendor than desperately needs the money might accept a lower price with immediate settlement, or if they know their house has problems they will accept a lower bid if it reduces their future liabilities (e.g. zero inspection, as-is clauses, etcetera).
- jefftk 5y ago
  > Not sure if buyer or seller is better off using them. There's a theorem an auction design that says that, under some vaguely reasonable assumptions about bidder information, it doesn't matter what form you use for the auction. Open auction, sealed auction, even second price auction should all give the same winner and same final price: https://en.wikipedia.org/wiki/Vickrey_auction#:~:text=Revenue%20equivalence%20of%20the%20Vickrey%20auction%20and%20sealed%20first%20price%20auction%5Bedit%5D https://en.wikipedia.org/wiki/Vickrey_auction#:~:text=Revenu...
  - 5y ago
macspoofing 5y ago
>This is such a huge deal. Is it though? I chatted with someone from Australia which has open bidding and you know what .. houses still went way over reserve. At the end of the day, if you have 20+ offers on a house, you're not getting that house without destroying your budget, no matter how you set up the bid system. The common sense change I wanted to see implemented was to prevent the waiving of a home inspection as a condition of purchase.
- gregable 5y ago
  I'm not sure why "amount over reserve / list" is a meaningful metric. It's clear that in a lot of cases the list prices are intentionally below market to attract more bidders and produce the appearance of more competition at open houses and the like. It's a very manipulated and manipulable metric.
  - macspoofing 5y ago
    >I'm not sure why "amount over reserve / list" is a meaningful metric. It's not. The salient part is that the current market is crazy and there is a large number of bids on any given house. >It's clear that in a lot of cases the list prices are intentionally below market to attract more bidders and produce the appearance of more competition at open houses and the like. Yes, list prices are intentionally below market but you know what ... houses are going for crazy amounts because we are in some sort of a bubble. This isn't the fault of blind bidding, or unscrupulous realtors or greed property owners. There are systemic economic issues at play. In my area, for example, there are houses that doubled in value in under 24 months. When I bought my property 12 years ago, there was blind bidding, and bad realtors, but on any given property there were only 2-3 bids, so there was no issue.
    - nemo44x 5y ago
      > Yes, list prices are intentionally below market but you know what ... houses are going for crazy amounts because we are in some sort of a bubble Why? The last 40 years interest rates have continued to decline and inflationary pressures have hurt the value of every currency. What reason is there to believe this won't continue indefinitely (low interest + ~2% y/y inflation) and that the market is simply pricing things well? Clearly all these homes are being bought so it would appear people have the money.
CountSessine 5y ago
You're fighting scarcity. You still won't win the bidding war - it just won't be as one-sided. Stop championing scarcity by blaming scapegoats. Either we limit Canada's crazy-high immigration rate (1% of population every year) or we build more homes which is mostly gated by illiberal zoning laws passed by municipalities. But both of these policies are very popular so you'll be swimming upstream, politically. While you're at it, you could go after other wildly popular policies that lead to high housing prices, like the primary homeowner capital gains tax exemption (probably, by value, the biggest tax dodge in the industrialized world), and Canadian cities' extremely low property tax rates (0.3% of assessed value in Vancouver, for example).
- LimaBearz 5y ago
  Is it so far fetched to assume some realtors may be juicing the bidding to increase their own commission and to make their firm more uhh "prestigious" by being able to drive up the price for their own marketing purposes further down the line. Likewise if you dont know who you're bidding against, how do you even know the bidder is even real (foreign or not)? Transparency is good thing. While there may be some "scarcity" not having full transparency and realtors not in alignment with their own clients needs is a step in the right direction. (I use scare quotes here because while I know we're not building enough but the current market has a fair share of retail speculation, institutional investors inflating prices, and homes held as purely places to mark money(non-owner occupied). Scarcity is real and building does need to happen, but thats slow and expensive. Millions of homes are kept empty or as poor speculative investments and thats a problem)
  - CountSessine 5y ago
    Is it so far fetched to assume some realtors may be juicing the bidding to... Of course not, and I didn't say that I'm completely against reforming the real estate industry and the bidding process. But it won't fix expensive housing. It's all bullsh*t if it doesn't address scarcity. In 2016 we had had 10 years of 2% population growth in Vancouver and 1.2% housing stock growth and we wanted to blame foreign investors, so we enacted the foreign-buyers tax. That was going to fix high housing prices. In 2017 we all got angry about dirty money and our casinos being used as money-laundromats so we commissioned the German report to detail what was going on and surely that would show that real estate was expensive because of money-laundering. It said prices might have gone up by 6% because of money-laundering. So that's 6% of 400%. In 2021 we started talking about investors driving up the cost of housing, ignoring the fact that investors typically become landlords and in cities with rental vacancy rates hovering around 1% (Vancouver's was 0.4% in 2017!!!), that sounds like a good thing. It's all bullsh*t and it's all a distraction that let's us ignore scarcity. I've decided that no matter how justified that housing reform is (ie open-bidding), I refuse to support it before we deal with scarcity because we'll deal with open-bidding and then say, "Ok ... let's see where we are in 3 years time now that we've fixed that!" Deal with scarcity or f*ck off with talk about housing prices. Don't expect me to validate your cognitive dissonance.
deleted 5y ago
[deleted]
Tiktaalik 5y ago
worth noting that Aus and NZ don't have blind bidding and have severe housing issues as well.
- robocat 5y ago
  New Zealand has deadline sales, which you sign a blind offer with whatever conditions you want, and then the vendor can choose any offer or change the rules or ask for more money or do basically anything they want. There are also tenders, which I don’t know much about. And I have seen auctions where they set the reserve at a ridiculously high amount, and then negotiate with the highest bidder. A few years ago, one place I was underbidder at $280k (for something that I thought should go for about $250k), final bid was $290k, then vendor negotiated that bidder up to $350k! Another I was underbidder at $190k, final bidder was at $200k, then vendor negotiated them up to $250k. The dirtiest trick that real estate agents do is to convince/pressure vendors to bring the date of sale forward. Sale goes through at a lower price, agent does less work and turns over their properties more quickly (which vastly enhances the agents yearly profits). New Zealand restricted sales to foreign buyers in 2018, to prevent ballooning property prices for New Zealanders. Also rich foreigners buying large farms and prime coastal real estate was unpopular with most of the voting public? Edit: when the real estate market was burning hot, lots of sales were deadline (blind). I think deadline sales mean that the winner often has bid their highest price (I certainly did for my home). In auctions you often pay just a little bit over the underbidder, even if your top dollar might have been potentially a lot higher. When selling you mostly care about that one person who really loves your place and that is willing to, and can afford to, pay well over market price for it. All other potential buyers are just wasting time.
  - WaylonKenning 5y ago
    I think a tender is really a blind bid. A bunch of offers from different people (the tenders) are received before a deadline, and then the vendor views them all and chooses whatever one they like (which is probably the highest offer). I've just bought a house, and it's been interesting to see the selling method change as the market goes from hot to cold - Auction, Tender, Deadline, Buyer Enquires Over, Asking price.
dfas23 5y ago
I'm not so sure. We're currently hunting for houses, and lost out on a few listings because we didn't want to overbid. When the sold price was revealed, SO many times we'd think DAMN, we'd prob pay $10-$25K on top of that to get it had we known..
bogomipz 5y ago
Interesting. Is the process for home buying in Canada always blind-bidding or is there a regular practice similar to Australia where people show up for an in-person public auction?
jl2718 5y ago
There’s also the possibility of using homomorphic encryption to make it blind on both sides.
kazinator 5y ago
> This is such a huge deal. Probably, less than people think. Sealed bid auctions do not increase revenue to the seller, according to auction theory. https://en.wikipedia.org/wiki/Revenue_equivalence https://en.wikipedia.org/wiki/Revenue_equivalence > gives all of the information to one side (the sellers) Well, not all the information; just what other people are bidding. But all that matters to the bidder is that that other bidders do not have access to more information. The fact that someone's bid is higher than yours, is not caused by its temporary secrecy.
- robocat 5y ago
  > https://en.wikipedia.org/wiki/Revenue_equivalence https://en.wikipedia.org/wiki/Revenue_equivalence Auction theory has so many assumptions that it really can’t be applied to buying a home. The link above assumes the highest bidder knows[1] the highest price the underbidder would pay, which is extremely silly. Apart from the fact that if you know the highest price of another bidder, then the seller also probably knows your highest price, and the seller can just ask for the highest possible price, duhhhh! Bidding (auction or blind) is used precisely because the prices are not known. Personally I have been involved with enough home auctions and blind bids to know that there are huge information asymmetries or uncertainties. When you lack information, sometimes you need to make your best bid, and you might value a property a lot higher than the underbidder. I would like to see more protection against lemon markets, but realistically I can’t think of a fair way to enforce that. Banks and insurance protect some people against doing stupid things. [1] First price auction: “if each player bids such that they bid the expected value of second highest bid”
  - kazinator 5y ago
    Most of the people crying foul over the blind real estate bids have no idea about auction theory and what those assumptions are, and who is favored by the ways in which those assumptions do not hold, and how much. > The link above assumes the highest bidder knows the price of the underbidder, which is silly The first price auction and second price auction types are understood to be sealed bid. The English auction is open: bidders can bid more than once and see other bids. In the second price auction, the underbidder's price is revealed when the auction ends, not during the bidding; the highest bidder pays that price.
aaron695 5y ago
deleted 5y ago
[deleted]
nradov 5y ago
There's nothing unfair about a bidding process. It's an efficient means of price discovery. If you get emotional about it then that's your problem. Some prospective buyers get irrationally attached to a single property, which makes no sense. Just go buy a different home.
peeters 5y ago
There are a number of things like this that I don't think will move the needle on housing prices, but because of the massive seller's market we're in, are politically expedient to do now: - Make home inspections an unwaivable right. - Eliminate blind bidding - Fully open MLS data - Heavily regulate (specifically buyers') real estate agents to eliminate much of the corrupt practices.
wdn 5y ago
It is supply and demand. If the buyers don't think it worth the price, they wouldn't place the bids. If you want open bid/ask, there is always the stock/futures/options markets.
smsm42 5y ago
Why do you think there's such thing as "real price of the house"? I've sold a house recently. I had 4 offers, all for different prices. Which one of them were "real"? Should I have rejected the highest offer because it's "unreal"? Should I be forced to accept the lowest price - I am sure the highest buyer would appreciate to pay less? Why? And BTW I also bought a house before (no wonder, since I am not that handy, to sell a house I had to buy it first ;) - and if you hire RE agent, which at least in the US most people do, and they are worth anything, they'd get you at least the rough information on how high you should go, and sometimes even the exact numbers. There were situations where we knew exactly how high the highest bid is, and more when we had decent idea if not exact figure. So it wasn't exactly blind.

mh8h 5y ago

The effects of blind bidding on price increase are still not very clear. I haven't had a chance to look at the literature, but I've been seeing several news articles about this: https://www.cbc.ca/news/business/blind-bidding-real-estate-1.6191259 https://www.cbc.ca/news/business/blind-bidding-real-estate-1... https://www.ctvnews.ca/business/study-supports-blind-bidding-on-real-estate-but-one-realtor-argues-transparency-better-for-homebuyers-1.5643383 https://www.ctvnews.ca/business/study-supports-blind-bidding...

richbell 5y ago

I think that blind bidding is a bit of a scape-goat here: the problem isn't that the bidding process is blind per se, it's the complete lack of transparency. Once a house is sold, the price that it sold for AND all bids should be made a matter of public record — accessible without having to pay a ridiculous amount of money to view. Not to mention the ridiculous commission fees for realtors, and their well-known practice of "steering" people away from homes with lower commission or prices. A practice that is technically illegal, but not enforced.

imposterr 5y ago
In some provinces, the sold data is at least available. It definitely helps get a feel for what one can expect to pay in a given neighborhood.
- richbell 5y ago
  While the sold data is useful, it doesn't capture nuances like "this house sold for 200k over asking and 175k over other bids because the buyer's agent mislead them and they were scared to lose." Often times a single large sale sets the bar for all future sales in the area; Zillow is a good example of how merely going off the sale history can quickly drive up prices.
slg 5y ago
>I think that blind bidding is a bit of a scape-goat here: Almost everything mentioned in the various comments here is a scapegoat. These all might contribute a little to the escalating prices at the margins, but they are not the root cause. The root cause is that many capitalist societies have decided that purchasing a house is the most expensive and important investment most people will make in their lifetime. Therefore these societies gradually shape their policies to ensuring these investments continue to increase or else there are widespread repercussions. The end result is we have collectively refused to build enough housing to keep prices stable or decreasing. The prices need to go up. I don't understand why no one is willing to admit this. All the other problems originate from this. The reason foreigners want to buy homes as speculation or a place to park their money is because governments are committed to ensuring that housing is a safe and profitable investment. It all comes back to us deciding that a basic human need should also be an investment that always is increasing in value.
- bennysomething 5y ago
  I think the root cause is supply, demand, the salaries of buyers, interest rates and multiple of salary for mortgages permitted by law.
  - katbyte 5y ago
    which are all influenced at every level by the desire (need?) to keep housing prices high and increasing..
  - slg 5y ago
    Those are downstream effects of the problem with housing being an investment. We don't want prices to go down so we don't build enough supply. The policies that make housing a good investment increase demand from speculators and investors above the natural need for housing. There are all sorts of subsidies that exist to give people more money to buy housing instead of trying to make housing actually cheaper. Interest rates are a lever the government uses to support its political goals which includes increasing housing values. It all comes back to the same root cause.
Spooky23 5y ago
There's never a root reason. But because real estate agents are middlemen in the process, there's an incentive in a hot market to not act as an honest broker. When the market isn't "hot", a realtor has an interest to move quickly. When the market is hot, they have incentive to move their own listings so they get both sides of the commission. In my case circa 2005, I bid $50k over list via the broker who was managing my home sale. The selling broker "lost" the bid somehow and sold it for $20k over listing price. 7% of 20,000 is close to 3% of 50,000. But... I came to learn later that the selling agent targeted a particular religious community hard, and did a hard sell on insurance, inspection, and even attorneys to buyers, and frequently yielded another 3-5% based on "spiffs" from those providers. All of these inefficiencies and bad behavior add up and inflate prices.
- SOLAR_FIELDS 5y ago
  For the record dual agency is actually illegal in some places: https://www.homelight.com/blog/dual-agency-is-illegal-in-some-states/ https://www.homelight.com/blog/dual-agency-is-illegal-in-som... Though I will point out that in most of the jurisdictions in the link provided, there's nothing that prevents your scenario - a third party offer is turned down due to the dual agency bid being favored by the sellers because they never received your bid. Only in Colorado, Florida or Kansas is it explicitly prohibited. But at least if it was in one of the other states that requires disclosure (Alaska, Maryland, Texas, Vermont, Wyoming) the sellers would have at least been aware of a possible conflict of interest and may not have entered into a contract because of it.
  - Spooky23 5y ago
    Totally get that what the other guy did wasn't illegal in my state. The thing that bothers me is that as salespeople, real estate agents can deploy all sorts of fluffery and bamboozle people who believe their "agents" are acting in their interest. Of course the reality is that there is very little governing their conduct and behavior. Without a functional "exchange" or disclosure rules, both buyer and seller are dependent on good faith.
jackyinger 5y ago
The lack of transparency makes these deals ripe for fraud. I have heard anecdotes from people I trust of their realtor offering to generate a fake offer (by soliciting one from a third party) to drive up the escalation clause. Where there is money and little oversight there is bound to be fraud. It grinds my gears to think about this because I bought a house and the escalation clause went to the maximum. Now do you think that was purely coincidence?
- josho 5y ago
  If you have a good realtor they will confirm the competing offer exists. Eg. my realtor called up the selling realtor and asked for the name of the realtor that submitted a competing offer. My realtor called the competing realtor to confirm they had a client that submitted an offer. Yes, of course the two other realtors could conspire together. But, now instead of one dodgy realtor you have 2 and the probabilities go down further. Is there fraud, I'm sure there is. But, I don't think it's a significant factor in the market.
- Spivak 5y ago
  Escalation clauses are dumb anyway. If you tell me “I’m willing to pay you up to 100k for your house” then my offer just became $100k.
  - lotsofpulp 5y ago
    You can require proof of competing offers in your escalation clause.
    - charcircuit 5y ago
      Just get the realtor or some random person to bid $99,999.99
lupire 5y ago
Bidding is a total red herring. Bid what you value the property. Go low if you have patience. If you aren't the best bid, look somewhere else. Steering is a problem.
sokoloff 5y ago
Why should not selected bids be made public? If I bid $1.2M on a house 2 months ago and didn’t get it, I don’t want the seller of a house that I just bid $950K on to have access to a datapoint that strongly suggests I’m good for another $250K. In such a case, I’d predict a lot of partnerships (or whatever the lowest cost legal structure that isn’t traceable over time if not activated) would be bidding for houses. My bid as “123 Main St Partners” can be as public as you want I suppose.

sonicggg 5y ago

I live in Canada, and the real estate business is such a mafia. They are leeches, and I'm not sure how much value these real estate agents are providing. It baffles me how this industry has not yet been disrupted by an outsider, like Uber did with taxis. I still remember when taxi licenses costed a fortune, and you had the exact same leeches exploiting it. They were seen as an investment in some cities, like NYC. I know there are useless regulations that keep these agents being needed, but so there were with taxis as well, and Uber did not give a crap.

ethbr0 5y ago
In the case of real estate, the entrenched transaction businesses control both supply and demand, and hence are more able to block new entrants. In the case of Uber, supply (people who own vehicles) was effectively unlimited and independent.
- boplicity 5y ago
  Uber is an interesting comparison, because their primary competitive strategy was to ignore existing government regulations. Regulations, of course, are a huge issue in the real estate industry. Maybe someone can step in and invest a many billions of dollars in real estate -- while ignoring the red-tape regulations that often prevent building? This seems unlikely, but could certainly be a path towards disruption. The difference, with Uber, of course, is their cost of capital was relatively low. They didn't have to buy vehicles, for example. (Imagine having to tear down a few multi-billion dollar real estate developments. Yikes.)
  - Spooky23 5y ago
    Uber was just an obvious con that demonstrated the danger of unrestrained capital and an era of ineffective government. Real Estate isn't a regulatory trap; it's an information trap. You can buy and sell property direct. All of the legal stuff is (nominally) done by attorneys. But the association of realtors controls the listing service and makes discovery easy. Like all salespeople, realtors add "value". When you've been in 2,000 houses, you pick up insights that are useful and learn about neighborhoods. The information is used for both good and bad purposes. Most of the disruptors do stupid shit with stupid investor money or integrate with the existing players and add some value.

ethbr0 5y ago

As someone who recently bid in a hot property market, I'm a huge fan of common sense bans and unwaivable rights. In a competitive market, filled with buyers of questionable sophistication, i.e. residential real estate, everyone gets to the bottom of maximally-waived, minimal-safeguards pretty quickly to make a competitive offer. And ultimately, that isn't good for anyone, sellers included. Better to explicitly prohibit the stupidest behavior and require some safeguards. E.g. non-waivable 72 hour cooling off period. Then everyone can compete within those bounds however they want.

blip54321 5y ago
It's complex. There are two sides to every equation. Buyer and seller. Sellers aren't necessarily sophisticated either. If I sell my home, and the roof is leaking and I don't know about it, I don't want to be liable down-the-road. Peace-of-mind is worth a lot. Especially if the buyer is sophisticated, I might take a lower offer if it has the right waivers.
chaostheory 5y ago
How bad are the bidding wars ie how much over listed price do houses tend to sell for?

AzzieElbab 5y ago

I think people are missing the fact that for many Canadians values of their homes represent their live savings. So while homeownership remains high in Canada doing something substantial about re prices would ruin peoples lives.

arcticbull 5y ago
Yeah, about 70% of Canadians are homeowners (almost 15% higher homeownership rate than in the US). Ideally, they find a way to keep home price growth at/below inflation for a few years rather than actually pulling prices down directly. There's very little appetite for reducing the notional price since that 70% is broadly "most voters."
- glouwbug 5y ago
  Doesn't the 70% ownership stat include those living with their parents? I have friends at 30 who still live with their parents.
  - ipaddr 5y ago
    Those kids will get that house passed down to them.
    - heyitsanewacco 5y ago
      Literally my brother's retirement plan. Good luck to anyone who doesn't have a well off family!
  - amscanne 5y ago
    I believe the 70% stat is from the census, and it would % of households. So it is possible that it reflects a higher % of kids not leaving the nest and renting something, but I also don't think its fully compatible with the narrative that Canadians are being squeezed out of housing (by foreigners) if the home ownership rate is higher than at any other time in history.
  - 5y ago

bennysomething 5y ago

This is an interesting question, what is worse for buyers, blind or open bids? Blinds bids prevent bidding wars. They use them in Scotland. Not sure if buyer or seller is better off using them.

thethimble 5y ago
Also another interesting dynamic is that bids can’t simply be compared by headline price. There’s so many other factors to consider in a bid: contingencies, time to close, reliance on a lender, likelihood of close, etc. I don’t see how a blind system can take those factors into account to algorithmically select a single winning bid.
- robocat 5y ago
  It isn’t done algorithmically. Often the best bid is obvious - for example an unconditional offer at the highest bid. Sometimes the best bid is not so obvious, and the vendor chooses the bid that suits their situation the best, or they renegotiate price or conditions with the highest bidding buyer(s). A vendor that doesn’t really need to sell and that believes prices are still rising, might accept a high price with a long settling date, or other conditions that might cause the sale to fall through. A vendor than desperately needs the money might accept a lower price with immediate settlement, or if they know their house has problems they will accept a lower bid if it reduces their future liabilities (e.g. zero inspection, as-is clauses, etcetera).
jefftk 5y ago
> Not sure if buyer or seller is better off using them. There's a theorem an auction design that says that, under some vaguely reasonable assumptions about bidder information, it doesn't matter what form you use for the auction. Open auction, sealed auction, even second price auction should all give the same winner and same final price: https://en.wikipedia.org/wiki/Vickrey_auction#:~:text=Revenue%20equivalence%20of%20the%20Vickrey%20auction%20and%20sealed%20first%20price%20auction%5Bedit%5D https://en.wikipedia.org/wiki/Vickrey_auction#:~:text=Revenu...
- 5y ago

macspoofing 5y ago

>This is such a huge deal. Is it though? I chatted with someone from Australia which has open bidding and you know what .. houses still went way over reserve. At the end of the day, if you have 20+ offers on a house, you're not getting that house without destroying your budget, no matter how you set up the bid system. The common sense change I wanted to see implemented was to prevent the waiving of a home inspection as a condition of purchase.

gregable 5y ago
I'm not sure why "amount over reserve / list" is a meaningful metric. It's clear that in a lot of cases the list prices are intentionally below market to attract more bidders and produce the appearance of more competition at open houses and the like. It's a very manipulated and manipulable metric.
- macspoofing 5y ago
  >I'm not sure why "amount over reserve / list" is a meaningful metric. It's not. The salient part is that the current market is crazy and there is a large number of bids on any given house. >It's clear that in a lot of cases the list prices are intentionally below market to attract more bidders and produce the appearance of more competition at open houses and the like. Yes, list prices are intentionally below market but you know what ... houses are going for crazy amounts because we are in some sort of a bubble. This isn't the fault of blind bidding, or unscrupulous realtors or greed property owners. There are systemic economic issues at play. In my area, for example, there are houses that doubled in value in under 24 months. When I bought my property 12 years ago, there was blind bidding, and bad realtors, but on any given property there were only 2-3 bids, so there was no issue.
  - nemo44x 5y ago
    > Yes, list prices are intentionally below market but you know what ... houses are going for crazy amounts because we are in some sort of a bubble Why? The last 40 years interest rates have continued to decline and inflationary pressures have hurt the value of every currency. What reason is there to believe this won't continue indefinitely (low interest + ~2% y/y inflation) and that the market is simply pricing things well? Clearly all these homes are being bought so it would appear people have the money.

CountSessine 5y ago

You're fighting scarcity. You still won't win the bidding war - it just won't be as one-sided. Stop championing scarcity by blaming scapegoats. Either we limit Canada's crazy-high immigration rate (1% of population every year) or we build more homes which is mostly gated by illiberal zoning laws passed by municipalities. But both of these policies are very popular so you'll be swimming upstream, politically. While you're at it, you could go after other wildly popular policies that lead to high housing prices, like the primary homeowner capital gains tax exemption (probably, by value, the biggest tax dodge in the industrialized world), and Canadian cities' extremely low property tax rates (0.3% of assessed value in Vancouver, for example).

LimaBearz 5y ago
Is it so far fetched to assume some realtors may be juicing the bidding to increase their own commission and to make their firm more uhh "prestigious" by being able to drive up the price for their own marketing purposes further down the line. Likewise if you dont know who you're bidding against, how do you even know the bidder is even real (foreign or not)? Transparency is good thing. While there may be some "scarcity" not having full transparency and realtors not in alignment with their own clients needs is a step in the right direction. (I use scare quotes here because while I know we're not building enough but the current market has a fair share of retail speculation, institutional investors inflating prices, and homes held as purely places to mark money(non-owner occupied). Scarcity is real and building does need to happen, but thats slow and expensive. Millions of homes are kept empty or as poor speculative investments and thats a problem)
- CountSessine 5y ago
  Is it so far fetched to assume some realtors may be juicing the bidding to... Of course not, and I didn't say that I'm completely against reforming the real estate industry and the bidding process. But it won't fix expensive housing. It's all bullsh*t if it doesn't address scarcity. In 2016 we had had 10 years of 2% population growth in Vancouver and 1.2% housing stock growth and we wanted to blame foreign investors, so we enacted the foreign-buyers tax. That was going to fix high housing prices. In 2017 we all got angry about dirty money and our casinos being used as money-laundromats so we commissioned the German report to detail what was going on and surely that would show that real estate was expensive because of money-laundering. It said prices might have gone up by 6% because of money-laundering. So that's 6% of 400%. In 2021 we started talking about investors driving up the cost of housing, ignoring the fact that investors typically become landlords and in cities with rental vacancy rates hovering around 1% (Vancouver's was 0.4% in 2017!!!), that sounds like a good thing. It's all bullsh*t and it's all a distraction that let's us ignore scarcity. I've decided that no matter how justified that housing reform is (ie open-bidding), I refuse to support it before we deal with scarcity because we'll deal with open-bidding and then say, "Ok ... let's see where we are in 3 years time now that we've fixed that!" Deal with scarcity or f*ck off with talk about housing prices. Don't expect me to validate your cognitive dissonance.

deleted 5y ago

[deleted]

Tiktaalik 5y ago

worth noting that Aus and NZ don't have blind bidding and have severe housing issues as well.

robocat 5y ago
New Zealand has deadline sales, which you sign a blind offer with whatever conditions you want, and then the vendor can choose any offer or change the rules or ask for more money or do basically anything they want. There are also tenders, which I don’t know much about. And I have seen auctions where they set the reserve at a ridiculously high amount, and then negotiate with the highest bidder. A few years ago, one place I was underbidder at $280k (for something that I thought should go for about $250k), final bid was $290k, then vendor negotiated that bidder up to $350k! Another I was underbidder at $190k, final bidder was at $200k, then vendor negotiated them up to $250k. The dirtiest trick that real estate agents do is to convince/pressure vendors to bring the date of sale forward. Sale goes through at a lower price, agent does less work and turns over their properties more quickly (which vastly enhances the agents yearly profits). New Zealand restricted sales to foreign buyers in 2018, to prevent ballooning property prices for New Zealanders. Also rich foreigners buying large farms and prime coastal real estate was unpopular with most of the voting public? Edit: when the real estate market was burning hot, lots of sales were deadline (blind). I think deadline sales mean that the winner often has bid their highest price (I certainly did for my home). In auctions you often pay just a little bit over the underbidder, even if your top dollar might have been potentially a lot higher. When selling you mostly care about that one person who really loves your place and that is willing to, and can afford to, pay well over market price for it. All other potential buyers are just wasting time.
- WaylonKenning 5y ago
  I think a tender is really a blind bid. A bunch of offers from different people (the tenders) are received before a deadline, and then the vendor views them all and chooses whatever one they like (which is probably the highest offer). I've just bought a house, and it's been interesting to see the selling method change as the market goes from hot to cold - Auction, Tender, Deadline, Buyer Enquires Over, Asking price.

dfas23 5y ago

I'm not so sure. We're currently hunting for houses, and lost out on a few listings because we didn't want to overbid. When the sold price was revealed, SO many times we'd think DAMN, we'd prob pay $10-$25K on top of that to get it had we known..

bogomipz 5y ago

Interesting. Is the process for home buying in Canada always blind-bidding or is there a regular practice similar to Australia where people show up for an in-person public auction?

jl2718 5y ago

There’s also the possibility of using homomorphic encryption to make it blind on both sides.

kazinator 5y ago

> This is such a huge deal. Probably, less than people think. Sealed bid auctions do not increase revenue to the seller, according to auction theory. https://en.wikipedia.org/wiki/Revenue_equivalence https://en.wikipedia.org/wiki/Revenue_equivalence > gives all of the information to one side (the sellers) Well, not all the information; just what other people are bidding. But all that matters to the bidder is that that other bidders do not have access to more information. The fact that someone's bid is higher than yours, is not caused by its temporary secrecy.

robocat 5y ago
> https://en.wikipedia.org/wiki/Revenue_equivalence https://en.wikipedia.org/wiki/Revenue_equivalence Auction theory has so many assumptions that it really can’t be applied to buying a home. The link above assumes the highest bidder knows[1] the highest price the underbidder would pay, which is extremely silly. Apart from the fact that if you know the highest price of another bidder, then the seller also probably knows your highest price, and the seller can just ask for the highest possible price, duhhhh! Bidding (auction or blind) is used precisely because the prices are not known. Personally I have been involved with enough home auctions and blind bids to know that there are huge information asymmetries or uncertainties. When you lack information, sometimes you need to make your best bid, and you might value a property a lot higher than the underbidder. I would like to see more protection against lemon markets, but realistically I can’t think of a fair way to enforce that. Banks and insurance protect some people against doing stupid things. [1] First price auction: “if each player bids such that they bid the expected value of second highest bid”
- kazinator 5y ago
  Most of the people crying foul over the blind real estate bids have no idea about auction theory and what those assumptions are, and who is favored by the ways in which those assumptions do not hold, and how much. > The link above assumes the highest bidder knows the price of the underbidder, which is silly The first price auction and second price auction types are understood to be sealed bid. The English auction is open: bidders can bid more than once and see other bids. In the second price auction, the underbidder's price is revealed when the auction ends, not during the bidding; the highest bidder pays that price.

aaron695 5y ago

deleted 5y ago

[deleted]

nradov 5y ago

There's nothing unfair about a bidding process. It's an efficient means of price discovery. If you get emotional about it then that's your problem. Some prospective buyers get irrationally attached to a single property, which makes no sense. Just go buy a different home.

peeters 5y ago

There are a number of things like this that I don't think will move the needle on housing prices, but because of the massive seller's market we're in, are politically expedient to do now: - Make home inspections an unwaivable right. - Eliminate blind bidding - Fully open MLS data - Heavily regulate (specifically buyers') real estate agents to eliminate much of the corrupt practices.

wdn 5y ago

It is supply and demand. If the buyers don't think it worth the price, they wouldn't place the bids. If you want open bid/ask, there is always the stock/futures/options markets.

smsm42 5y ago

Why do you think there's such thing as "real price of the house"? I've sold a house recently. I had 4 offers, all for different prices. Which one of them were "real"? Should I have rejected the highest offer because it's "unreal"? Should I be forced to accept the lowest price - I am sure the highest buyer would appreciate to pay less? Why? And BTW I also bought a house before (no wonder, since I am not that handy, to sell a house I had to buy it first ;) - and if you hire RE agent, which at least in the US most people do, and they are worth anything, they'd get you at least the rough information on how high you should go, and sometimes even the exact numbers. There were situations where we knew exactly how high the highest bid is, and more when we had decent idea if not exact figure. So it wasn't exactly blind.