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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 bli
by foldor 4y 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 4y agoThis 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 4y agoIt’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 4y agoStress 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.
- noirbot 4y agoTell that to the 5.1% rate a friend of mine just got on a new home purchase with >20% downpayment. I dunno if rates are a lot better in Canada or something, but we're already in 5-6% range in the US for some properties. They had excellent credit too.
- freeone3000 4y agoRates are better in Canada. 2.3% is within the norm.
- jejeyyy77 4y agoInterest rates are still at 2.5% in Canada. Still a ways off from 5-6%.
- jdsully 4y agoUS mortgages are 30yr fixed. In Canada you cannot get a fixed rate for that long and 5 years is the norm - everyone here effectively has an ARM. This is why rates are almost always higher in the US.
- ranit 4y ago> Canadian banks has a very conservative “stress test” ... Therefore it isn’t possible to “stretch yourself beyond any reasonable limits” “stretch yourself beyond any reasonable limits” means that you may not be able to pay your mortgage, it doesn't mean the bank won't offer it to you.
- deleted 4y ago[deleted]
- s1artibartfast 4y agoThe bank won't offer if you can't pay, at least in the US these days. But we have 30 year fixed mortgages, I think Canada is shorter
- djrogers 4y agoThe norm in Canada is 30 year term, with a variable rate. It's the second part that can really get you...
- foldor 4y ago30 years hasn't been possible in Canada for several years now (thankfully).
- throwaway2037 4y agoWhat is normal? It's hard for middle class people to afford normal housing stock in highly advanced countries without 30 years of amortizing debt. Yes, I understand that some countries force you to chain bullet mortgages over ~30 years to achieve a similar effect.
- s1artibartfast 4y agoWhy is that a good thing?
- s1artibartfast 4y ago
- bombcar 4y agoThat “damn we would have paid X more” is exactly what it’s designed to encourage - we’re not good at calculating large numbers so once you’ve “made the decision” to pay $500k making a decision to pay $50k more is relatively easy (and seems like nothing). In a normal Dutch auction style situation you’ll pay $1 more than the second highest bidder, which is a bit more fair.
- shuntress 4y agoI think you mean a reverse Dutch action. Which is almost a regular auction. In a Dutch auction (regular dutch auction. Not reverse.) there is no second bidder. The price starts too high and drops until the first bidder to decide the price is low enough (as it drops) buys.
- brailsafe 4y agoSeems like you're not talking about over paying, but rather out-bidding someone. It seems like maybe a first offer should establish a baseline price, and everything subsequent should be transparent, or perhaps have a blind expiry on it, so you'd know if your offer was declined before an offer has been accepted
- throwaway2037 4y agoThis part: Canadian banks has a very conservative “stress test” for securing mortgages. ... is excellent. More places need it. Please stop gambling on housing as an asset class. The middle class doesn't do it in France, Germany, or Japan. In those places, housing prices are kept _fair_ through clear, transparent planning and a blend of free market and regulation. What the hell is wrong with US/UK/AUS/NZ that allows insane leverage to middle class house buyers that drives up the price of houses? It's all silly to me. (I'm less familiar with how much CAN allows middle class people to gamble on housing.)
- jusssi 4y agoThe question is, would an open auction be any better? The process will just happen at smaller increments. And you will have ghost bids to prop up the prices.
- WithinReason 4y agoI would use a Vickrey auction: https://en.wikipedia.org/wiki/Vickrey_auction https://en.wikipedia.org/wiki/Vickrey_auction
- __alexs 4y agoI think the issues with Vickrey auctions for houses is that a lot of buyers really have no idea what price they are willing to pay for a particular property. The open price auction format gives them a (weird and easily manipulated hint) at what price might be sensible for a particular home.
- 1-more 4y agoThis is how real time advertisement bidding is done.
- Ekaros 4y agoI think open auction really would be better. Allow full information on bids and participants can drop out when their absolute limit is reached.
- OJFord 4y agoYes it would be better, because you wouldn't pay your bid (for many it seems to just be max affordable) that was potentially the largest by a long shot. And I don't see that ghost bids propping it up would be much of a problem, they'd risk winning? You could require registering names, putting a deposit down perhaps, no real need for it to be anonymous even?
- jejeyyy77 4y agoThis seems intuitive, but it's wrong. As someone who went through the process, I think blind bidding suppresses prices, not inflate them. When you are making a blind bid, the only information you have is the home itself. The ceiling for your bid is on what you think the house is "worth". You are very conscious about "overpaying" because you have no perspective on what other people are offering. In open bidding, you are competing against other offers and the ceiling is basically what you can afford to pay. Can't tell you how many times we lost offers because we didn't want to overpay - when the sold price was revealed we realized we would've paid another $25K on that had we known.
- adamwathan 4y agoYep, house on my street was listed for $950k a few weeks ago and sold for almost $1.4m. In my area (Kitchener/Waterloo), every house is selling for $250k-$500k above asking.
- TimPC 4y agoHouses are listed artificially below market to expand interest and create bidding wars. No one expected to sell for $950k and if that was the only offer they got it would have been rejected. I had this experience on a property in Toronto where they listed at $1.5 million didn’t get a bidding war, rejected our offer, relisted at $1.71 million and eventually sold. Above asking is a meaningless number because asking isn’t a reflection of what anyone expects a house to go for. It’s a game price designed to attract as many of the right people as possible to the property.
- brewdad 4y agoThere was a time in the not too distant past where asking was exactly what a house was expected to go for. When I bought my current home in the early 2000s, most homes went for under asking price by a small bit.