7 ms·

> IMHO blind bidding is an unethical practice that should be outlawed regardless of its impact on housing prices. Why? There’s no special virtue ascribed to th

• 3qz 5y ago
  The real estate agents operate as a cartel and wouldn’t accept offers this way.
  • hkt 5y ago
    I don't know how it works in Canada, but in the UK the incentive is that most estate agents take a % of the sale value. They have every reason to push house prices higher. Cartel or no cartel, it is very harmful.
    • grasseh 5y ago
      That's exactly how it works in Canada too. Both estate agents split a % of the sale value. That's fine on the seller's side, IMO. But on the buyer's side, it's a silly conflict of interest.
    • nameisname 5y ago
      This is how it works in Canada and it's absolutely toxic. I have seen Realtors push people up on price when they're the highest bid.
      • sokoloff 5y ago
        The Realtors are (transparently disclosed as) working for the seller. Why wouldn't they do that? It's literally their job and everyone knows it. It's certainly the case that the agent who knows that a particular bidder is the highest/most attractive offer is working for the seller.
        • RocketOne 5y ago
          The buyer's realtor is supposed to be working in the buyer's best interest and getting the lowest price possible. In reality it doesn't often work that way, especially when the buyer and seller realtors know each other. I just bought a house and both realtors ended up being from the same office, and are good friends. Do I honestly think I got the best price? Not likely.
          • sokoloff 5y ago
            Maybe it’s different in Canada, but in the US (or at least in Massachusetts and New Hampshire) the agent merely must disclose to whom they owe allegiance. In both of my purchase transactions, the agent I worked most consistently with was legally working for the seller. (I was comfortable with that and acted accordingly, having “my” agent submit bids that I was comfortable with, but not treating/trusting them as if they were my lawyer). You can have an agent working on behalf of the buyer, but my experience is that’s a minority rather than majority arrangement.
            • djrogers 5y ago
              Your experience is not the norm, nor is it one I would recommend in most cases. You should find an agent you trust and can work with well to represent you, and they should be the only agent you ever have to speak to. Dual representation can work out ok in some scenarios, but the hyper-inflated and super competitive market we're in right now isn't one of them.
              • sokoloff 5y ago
                Even in a situation where your agent is representing only you, they still have a massive incentive to get you to raise your bid so they get 1/4 of the total commission (and their brokerage house gets 1/4 of it). Their incentive is even stronger than that of the listing agent, because when it comes time to choosing a bid, the listing agent and brokerage is getting their commission one way or another and so a 1% difference in final contract price on a $1M house represents a difference of around $150 pre-tax to the listing agent. A difference of 1% that causes that specific buyer to get the house can represent a $15150 pre-tax difference to the buyer's agent. If you tell "your" agent that you'd like to bid $1M but are able to and would pay up to $1.2M because you really love the house, you're giving away a lot of information that I decided I wasn't willing to give up and so kept all Realtors at arms-length.
    • jaclaz 5y ago
      The issue is that the flat percentage incentive is not a valid one, there was a chapter in Freakonomics about that (I seem to remember it was about Chicago estates, but it could have been another city in the US). The study determined that when a house was the property of the estate agent sold in a little more time at a noticeably higher price. The idea if that your house sells (today) for (say) 100,000 units of value (pounds/dollars/whatever) the estate agent will get (still say) 5% of it, i.e. 5,000 "units" (also today). If in a few more months time you can sell it for 120,000, the agent will get (a few months later) 1,000 "units" more, but he/she will have spent a lot more time visiting the property with prospective buyers, runnning ads on newspapers, whatever, so the incentive for the agent is to conclude the sale as soon as possible, even if at a (reasonably) lower price. The proposal to correct the incentves was to have a flat percentage (like the mentioned 5%) until a certain amount and a much higher percentage (like - if I recall correctly 15% or maybe 20%) on the excess. Of course it depends on the local current market, but estate agents have interest to push house price higher only until the property is an "easy sale", the sheer moment the house stays on the market for some time (this highly depends on the local market, it could be weeks or months) they will start saying something "Hmmm, maybe we valued a little too much, we (that means you) should discount it by 10%", this in the same 100,000 unit house means that you will get 10,000 unit less, while the agent would get 4,500 units instead of 5,000.
  • bluGill 5y ago
    Farms often are sold in live auction this way with the bidders announcing their bid. Each bidders knows their maximum, but none give that way, all they give away is they are willing to top the previous bid by someone else (even this is a trick - some bidders will pretend to be more/less interested than they really are trying to scare off other bidders) The auctioneer is typically a licensed real estate agent. The whole farm will be sold that day, sometimes field by field, sometimes as a whole (sometimes both ways - this is complex to understand: they get bids an all fields separately, then for the whole and the larger total wins). Then they sell the equipment and junk. Bankers are on hand to verify financing... For houses most people wouldn't work this way, but for farms it makes sense.
    • randomdata 5y ago
      As a farmer in Canada, I haven't seen a farm auction like that since I was a kid. Most farms these days are sold either by someone knocking on a door and making offer that can't be refused or by tender, conducted by law firms. Real estate agents/auctioneers, and the cut they want to take, have largely been taken out of the equation given how easy the farm properties are to sell.
      • bluGill 5y ago
        I see ads for farm auctions that work like that every few weeks living in Iowa. I have no idea why there are regional differences, but I'm not really surprised they exist.
        • randomdata 5y ago
          > I have no idea why there are regional differences I'm sure it is multi-faceted, but supply management is a big difference. Notably, diary farmers in some provinces voted to impose a quota price limit in an attempt to make it affordable for new farmers back in the mid-2000s. This means that the amount that quota sells for is the same now as back then, even though the fair market value has at least doubled in the meantime. This has created a market aberration where the quota is undervalued and to resolve it farmers have started tacking the difference onto the purchase of land. In other words, on paper I pay you $x for quota and $y for land in order to stay compliant, even though in reality I'm actually paying you $2x for quota and $y-x for the land. This, of course, has driven up the price of farmland to unreasonable heights as people notice what farmland is selling for on record. $40,000 per acre isn't unheard of these days. I bet you in Iowa, despite having a climate that can easily outgrow us in Canada, won't see anything close to that. As farmland prices have risen (up ~700% since 2007), residential sprawl out into that farmland has become much more expensive. This has increased the pressure on housing in existing urban areas, pushing prices up there. And, thus, the Canadian housing problem that's being discussed in the larger scope here.
• dagurp 5y ago
  It will inflate housing prices
  • willnonya 5y ago
    Blind bidding doesnt 'inflate housing prices'. the marketplace competition does. itnis neoyher unethical or the rooy of any problem. its the latest boogeyman in a world that seeks to turn other peoples property into public commodities.
• foldor 5y ago
  The theory of that, and the reality of it are two different things. As someone who has been on both sides of this in Ontario, I can tell you for a fact that blind bidding results in people over paying, and never knowing by how much. The stress of buying a home in the GTA has lead people to stretch their budgets beyond reasonable limits, and realtors have only made it worse now. In recent years it's started to become normal for the list price to purposefully not reflect reality, causing the true sale price of a house to be left up to the buyers, and after probably losing dozens of bids, people get desperate and throw everything they can, which ends up in homes that regularly go over over $100k over asking. When I sold my house, I had three bids, and the highest bidder payed over $30k higher than the second place. It was still over $100k over asking, with no conditions. That's just the reality of things right now, and it's not the sign of a healthy market for something as critical as housing. People are desperate, and it's getting worse.
  • jejeyyy77 5y ago
    This is wrong on a few levels. 1) as someone who has been on the ground as well, I’ve lost a few offers because I was worried about over paying. On multiple occasions, after seeing what it sold for we thought “damn, we woulda paid another $25K on top to get it had we known.” 2) Canadian banks has a very conservative “stress test” for securing mortgages. This includes qualifying at much higher rates then is being offered. Therefore it isn’t possible to “stretch yourself beyond any reasonable limits”
    • TimPC 5y ago
      It’s still quite possible to stretch yourself. Variable mortgages are common and interest rates are going up at a rapid clip. It’s possible for them to rise further than the stress test numbers. Refinancing in five years may be painful if you got a mortgage at 1.5%, stress tested for 3.5% and refinanced at 5%.
      • jejeyyy77 5y ago
        Stress test currently means you need to qualify at 5-6% if you have 20% down. If you are putting less than 20% then the stress test is even higher. I doubt we will see 5-6% interest rates in the next 5 years.
• data-ottawa 5y ago
  I suspect real estate markets are a lot less efficient than we think. We take people who know nothing about pricing homes, put them in a high stress time sensitive situation, advised by realtors who are incentivized to close deals quickly and at higher prices, and then expect them to make reasonable bids. In my opinion real estate assets are likely overpriced and inflexible from what they should be due to the current regulatory situation. The “money on the table” argument is weak, because the first bid is when people are most rational, it’s only after human psychology takes over that they start bidding higher.
• guelo 5y ago
  > Nothing stops the purchasers Inability to coordinate due to lack of information allows the seller to maintain full control of the process.