Auction Bidding - Does It Change Things?

Does blind bidding work entirely in the buyer's favor?

I had a property listed for sale in Saddleridge last year that went into multiple offers after one day on the market. The first buyer had come through and written an offer, way below asking, and were in a bit of a bully mindset while we were negotiating terms and conditions.


Within an hour of this offer, we received another one. Which was a relief for my seller, who was already put off by the first buyer's approach.


Once I notified the first agent of the second offer, they immediately increased their offer price to ask. Which makes sense since you want to muscle out the other buyer. And in most cases, this would work.


However, my sellers, which the first agent didn't know, lived in this home for almost 15 years. Their 3 daughters and one son and two grandkids all lived in this home. They grew up, had birthday parties, family milestones, etc in this home.


The second buyer, although could not come up to asking presented their offer with a note from the buying agent about how their family is new to the country and they have young children who would benefit from this home because their extended family was nearby.


My clients are first-generation Canadians as well. Which offer do you think they took?


Although they weren't getting as much in their hand, they understood where this family was coming from and were more than happy to pass their home along to this new family. They also had the option to pick the best offer for them.


In an auction-style (anti-blind bidding) market, these new homeowners wouldn't be enjoying their homes today.


The Fasade of Buyer Benefits Are Untrue


The way anti-blind bidding changes were presented during the last federal campaign was a bit misleading. It was presented as a solution for housing prices.

The goal of the change is to make it so that buyers aren't paying grossly over the asking price because they are unaware of the other offers on the table. That is understandable. For all the buyer knows, the other offers are only off by hundreds of dollars and they are willing to spend thousands over asking for the home.


But it is a private seller entertaining offers for their property and has their own prerogative to select which buyer they would like to work with.


I've had selling agents choose to work with me and my buyers because they know I've had the conversation about financing with the buyers. All the checks have been made before they write an offer. Even in situations where we weren't the strongest offer in terms of price or conditions.


This is important to a seller because the last thing they want is to come back on the market.


So price is not all that counts.


In my story above, the seller took the lower offer because of things outside of price.


The process of an open auction does not allow buyers to present anything else other than the best price and lowest conditions. Which in its self hurts buyers because they are forced to remove conditions to get their foot in the door.


In Australia (which by the way is the model Canada is looking at), most buyers are unrepresented when submitting their offers. They haven't had someone complete these checks for them beforehand and are put into a stressful situation of an auction and are forced to decide right away about the price they can go up to. They are also left to fend through all the due diligence on their own.


That doesn't sound like a great way to buy a home. To win your home by competing with other buyers rather than taking the time, doing the research, preparing yourself, and being able to present your best foot forward after all the work is done.


Not to mention, it still doesn't solve the goal of rising prices. We will still continue to see higher prices for homes in cities like Toronto or Vancouver regardless of this new way of buying a home is implemented. Just check out the sales trend of homes in Australia. From June 2020 to June 2021, the 8 major cities in Australia had an overall growth of prices of 16.8%.


Sellers Lose All Control Of The Sale


Let's be honest, sellers haven't had any control in the Calgary market for 6 years. Finally, in 2020 we had a market shift. And of course, right when this shift happens the debate about auction-style sales becomes a hot topic.


Sellers are at a complete loss of negotiation power in this type of sale. They aren't able to take the time to understand anything about the buyer, what their intentions are with the home, how their financial situation is, see which offer works for them best, etc.


Our market is very different than the other large markets and the scarcity of inventory they have experienced. In those markets, I can appreciate that this style of sale might be something to consider.


But remember, all buyers may become sellers at some point.


I would also argue the bigger problem is the lack of competition of homes available.


In Calgary, we don't have sellers gouging buyers for thousands over the asking price. We simply have sellers that getting market value for their homes currently.


The same way buyers have been able to drive the market value down for the last 6 years.


The Root Problem Still Exists For Skyrock Prices


The fundamental issue of the higher prices is not answered. Lack of inventory is the underlying and most prominent issue for all the larger markets in Canada.

Solve this issue, you solve the housing prices issue.


We live in the second-largest country in the world and unlike Australia, we don't have constraints of where we can develop.


The main issue we have is areas in the country that have more appeal to buyers than others. When the area outside of Toronto has 3.7 million people to our entire province of 4.6 million, there is an issue of distribution.


So is the issue the process of buying or selling a home? Or the availability of homes to buy and where we as Canadians decide to live?


And there you have it. Although anti-blind bidding does offer more transparency to the buyer, which I agree is important, it doesn't protect them from growing home prices. In Australia, where this type of market exists, buyers are literally competing with one another for a home. It reduces support for buyers and does nothing to slow prices.


That first buyer with a minimum down payment and hefty mortgage doesn't stand a chance to compete for homes in markets like Toronto or Vancouver. The only difference is now they can see who they lost the home they love to.


So is this the change that we need in our industry to allow for better housing opportunities for all? I would argue no, and that supply issues are the problem. But of course, I'm biased.


We in Calgary have tons of building opportunities with attainable pricing for all types of buyers. We just need new buyers to see the potential of making Calgary their home.


As always thanks for check out the post. You can reach me by email at aly@calgaryareahomes.ca or on Instagram at @alyjanmohamed


I'd love for you to hit the heart if this helped you. Please feel free to share and comment below. Take care, stay safe, and I hope we can connect soon.


- Aly







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