Ontario Real Estate Law - Open Bidding
Did you know that the rules for how offers can be submitted on a house for sale have changed?
Truly - the changes aren’t exactly new (dating back to December ‘23), but unless you work in real estate or have sold a house recently, you might not be aware that open bidding is now an option.
So whether you’re buying your first home, or investigating selling your house, you’ll want to learn about open bidding.
What is Open Bidding in Real Estate?
With open bidding for real estate people who submit an offer on a home will be able to see what others have offered. The bidding is ‘open’ for all to see.
It’s important to note though that in order for open bidding to be an option on a home, the seller has to have chosen to use the open bid process. If the seller does not wish to use open bidding, that’s it, case closed (or perhaps more appropriately here: bid closed).
In contrast to open bidding, closed bidding (also known as blind bidding) does not allow potential buyers to see what other offers are on the table. They simply have to put their best offer together, cross their fingers and hope.
Pros and Cons of Open and Closed Bids
Open bidding and closed bidding both offer various pros and cons for both home sellers and buyers.
According to a CBC article announcing the new changes to real estate bidding, open bidding has been advocated by some, including Ontario Green Party leader Mike Schreiner, as a way to reduce rampant overbidding in real estate and help reduce prices.
"A consistently transparent bidding process will help bring down the skyrocketing price of houses," he said when the Ontario government announced open bidding would be an option for sellers.
In reality though, which form of bidding (open or closed) is not as clear cut for a myriad of reasons. Here are some pros and cons to consider.
Open Bidding Pros and Cons For Buyers
Pros
Transparency to see what others are offering means you’re less likely to overpay for a property
Quickly and easily see how competitive your bid is and therefore, how likely it might be that it’s accepted
Ability to update the conditions on your offer to make it more competitive (e.g. closing date, deposit amount, conditions on home inspection/financing etc, overall amount offered for the home etc).
Cons
Other buyers can see the terms of your offer, making it easier for them to submit for a little bit more and become the top offer.
Less likely to scoop a home for well below ask, unless you’re the only offer.
Open Bidding Pros and Cons For Sellers
Pros
Potential to get more for your home. For example, when buyers can see what the top offer is on a home, if other buyers’ budget allows, then they’re likely to submit a competitive bid over and above the last one.
If your property is having trouble attracting offers, allowing offers to be disclosed in an open bid may help to drum up some interest.
Cons
Potential to get less for your home. For instance, if the only offer that comes in on your house is significantly below ask, other bidders won’t feel incentivized to go much higher on their bids in order to become the top offer.
Trust In Real Estate Services Act (TRESA)
The changes to the bidding process were unveiled as part of a wider industry shift meant to increase trust and transparency via the Trust in Real Estate Services Act, also known as TRESA.
You can learn all about TRESA, including new rules around multiple representation (e.g. when one real estate agent represents more than one party in a single transaction), as well as a new code of ethics for realtors.
Get the frequently asked questions on TRESA from the Real Estate Council of Ontario (RECO).
Proposed Future Law Changes: Home Buyers’ Bill of Rights
While this amendment to the bidding process is already a huge change on it’s own, but the truth is, they’re just one small step on a path to more broad changes.
being proposed by the Liberal Government, which is proposing a Home Buyers’ Bill of Rights.
According to their proposal, the Liberals would like to completely ban blind bidding in the future, and establish that a home inspection is a right. Currently, home inspections are added onto an offer as a condition of sale. This is an option exercised by the buyer, but can sometimes be seen as a disadvantage in a highly-competitive real estate market (as we’ve seen in Ontario for many years now). For instance, sellers often see offers with ‘no conditions’ (such as home inspection or financing conditions) as more attractive than those with conditions included. Sometimes, this is true even if the conditional offer is for a larger amount.
What Do You Think About Open vs. Closed Bidding?
Do you see the changes as being a step forward to better real estate transactions? Or do they not make a difference for you?
Let me know in the comments!
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