It’s not here yet, but I feel it’s just a matter of time. The process we currently have in place right now in real estate for submitting offers in a multiple offer situation is going to change. Transparency is what people want and transparency is what they should have soon. The “blind” will be taken out of blind bidding. And I’m all for it. Before we celebrate with streamers and fireworks, let’s take a look at what this all means.

To start, let’s have a closer look at what happens now with blind bidding in Toronto real estate. Let me provide an example. There is a great condo for sale in a coveted Toronto neighbourhood. The seller and the selling agent tell everyone that they will be reviewing offers a week after the condo is put on the MLS for viewing. Said condo has 25 showings, and 5 interested buyers. Each of the buyers has been told to submit their offer by 5pm on Tuesday. The five buyers submit their offers, BUT none of these buyers know the content of the other buyers’ offers. This is what makes it blind.

That means you can submit an offer and not have any idea what the other offer contains. You don’t know if there are conditions for the sale to go through on the other offers. You don’t know their price. You don’t know their closing dates. For buyers, this process seems understandably secretive. The buyer who ends up beating out the other four offers will ask themselves as soon as the obtain the condo: Did I bid too high? What was the second highest offer? These questions cannot be answered by the buyer agent because he/she does not know the content of the other offers as well. Buyers don’t like it. And I don’t blame them.

So, there’s been a big push as of late to remove the “blind” for blind bidding. What many people don’t know is that we have had the option to have auctions in Canada for real estate for a number of years. In an auction, you can have a bid on a property that everyone knows, and you can bid up the price until there is one buyer standing – like with a painting or a vintage coin. No “blind” in the bidding already exists. Every bidder knows what the other bidder has offered. This option just really hasn’t taken off. It’s the way Australia sells all of their real estate. I think Canadian sellers prefer the blind bidding process. I think buyers do not. But the buyers will likely have their way soon because the blind bidding lacks transparency.

So, let’s look at the implications of open bidding. Here are some of the big changes.

SHIFT IN BUYER STRATEGY

When you know the content of the other offers in an open offer situation, you can plot your course a little better. You will learn pretty fast what other people think of the property and what they are willing to do to land it. I often hear, “That buyer overbid to obtain this property.” And sometimes that is the case, but often there are a few bids very close to where that buyer landed. For a buyer, it’s a great way to educate yourself on the market, and what other people are offering. Then you can confidently choose the route you want to take based on a clear indication of what kind of interest exists for a given property. In blind bidding you are working off of recent solds in a building or in a neighbourhood to arrive at price. In an open system, you may be focused more on the other offers.

TRANSPARENCY IS GOOD

Why be so secretive? I like transparency. You should know the content of the other offers. It makes for better decision making as a buyer, and it makes the real estate process less mysterious and more trustworthy. At some point, the blind bidding will feel strange. Some may argue that it protects the privacy of the buyers who are offering on a property. These days, I’m pretty sure this privacy would take back seat to transparency. That seems to be the case in many industries.

NO LOWER PRICES

Before you become too excited that taking the blind out of blind bidding will lead to some real estate nirvana, let me be clear: This process will not make properties less expensive. In same cases, it will make them more expensive. Auctions or open bidding cultivates an emotional state that could drive up the price even higher when people are jockeying to win the property. Homes in Sydney, Australia, where auctions are the norm, are not less expensive than Toronto. There is a reason valued items are sold in auctions. They bring in top dollar. The same would be true for real estate. If the top bid is only $5000 higher than your offer, would you up your budget to land that property if you could? An open bidding process could very well drive up the prices if the property is in demand well beyond the limits of a blind bidding process.

That said, at least you know where the other offers landed. So, if you win the property against four other offers, you’ll know you bid higher than they wanted to go. This change will bring in a whole new way of strategizing to win the bid or to offer your own property for sale. With the blindfold off, you’ll know exactly what you are competing against.