As part of a larger update to Ontario real estate regulations, today sellers in Ontario can sell their property in an open bidding process. In this article, we’ll discuss how this came about, how sellers can opt in to open bidding, how buyers can opt out of having their offer shared, how this will affect the way real estate is practised, and how your real estate agent can keep you informed throughout the buying and selling process.
How Open Offers Became Possible in Ontario
Until now, in a practice known as “blind bidding,” Ontario real estate agents were required to disclose the number of offers received to all buyers. However, they were forbidden from disclosing the contents of those offers. In times of high demand and low supply, this has been a source of frustration for the public. Buyers, and even policy makers often blamed the blind bidding process itself for contributing to the recent rapid growth in home prices.
CREA cited supply and demand as the real problem, and warned policy makers that unless housing supply was addressed, homes would still sell in multiple offers, whether there was open bidding or not. They hired the Smart Prosperity Institute, an independent think tank, to study how switching from blind to open bidding affected home prices in other jurisdictions. Evidence from Australia, Sweden, New Zealand, Ireland, Singapore and the United States showed that, “bid transparency can lead to higher, not lower, prices in a hot real estate market.” To find out why, you can read the full report here.
Even so, when an outright ban on blind bidding gained traction during the 2021 federal election campaign, the real estate industry was busy advocating for consumer choice instead. In Ontario, this approach is now enshrined in the Trust in Real Estate Services Act (TRESA). The part of the Act that allows for open bidding comes into effect today, December 1, 2023.
Here’s what consumers need to know:
Sellers Can Opt In to Open Bidding
Starting December 1, 2023, sellers can instruct their agents in writing as to whether they want to sell their property using blind bidding, or open bidding. If open bidding is chosen, sellers must also state which parts of each offer are to be shared with all other buyers. The names and private information of the buyer are excluded, for privacy. What the seller’s agent can share with other buyers might include all or some of the:
- Purchase price
- Deposit amount
- Closing date
- Other terms
If blind bidding is chosen, only the number of offers is communicated to all buyers. Under the new rules, if open bidding is chosen by the seller, the contents of offers will be communicated to all buyers, according to the seller’s directions.
Can the seller change their mind? Yes, and at any time before or during the offer process. This is an important consideration, because it means that buyers could potentially submit an offer, believing it will not be shared, then have it shared with all other buyers anyway.
Buyers Can Opt Out of Allowing Their Offer to Be Shared
What if a buyer doesn’t want their offer shared with other buyers? As an option, their agent can add a clause to protect them from this, though that could come with its own consequences. Buyers who clamoured for open bidding did so because they wanted to know what their competitors’ offers were. Under open bidding, it will be interesting to see how many of them actually want their own offer shared with their competitors, when given the choice. After all, this could give competing buyers an advantage they never had under blind bidding (see study, above).
Open Bidding Will Give Rise to New Practices
The real estate industry is always adapting to new market conditions, technologies, practices and regulations. It remains to be seen what new practices will emerge as open offers become more common. There has been some concern about the possibility of agents holding auctions or even hiring auctioneers, for example, though concerns like this may prove to be unfounded.
The prospect of open offers has already inspired new online innovation, however. CREA has partnered with Openn, a technology company that integrates with Realtor.ca to make offer information publicly visible on a listing. This feature is already available in some parts of the country, when viewing certain listings on realtor.ca.
While TRESA does provide clear regulations for open offers, it is silent on how the open offer process itself is to be conducted. This leaves room for creativity, and it will be interesting to see how agents, teams and brokerages adapt their business models and policies accordingly. As practices evolve, so too will the way that buyers, sellers and their agents respond, giving rise to new strategies.
Get Advice from Your Agent
As open bidding is adopted by more sellers across the province, it will take time for the market to figure out how to respond, and then to evolve. If you are a buyer or seller, the best person to help you navigate this is your own REALTOR©.
Like most things in real estate, no one answer will be right for everyone all the time. It really will depend on the market you’re in, what offer strategies are working there, and many other variables that a good agent will take into account before advising you.
Open offers are here, and for some, this is a welcome change. Understanding the open offer process is now an important aspect of buying or selling your property. This will bring a host of changes to how real estate is conducted in Ontario, and it will take time to fully appreciate its impact. Whether you are buying or selling, it’s essential to choose a competent agent that you can trust to keep you informed and who can advise you on the best current strategies to reach your desired outcome.