One of the latest trends in the market for Canadian real estate today is the practice of a blind bid on real estate. With so many investors buying homes without even visiting the property first hand, it is leaving many prospective homeowners and families without a chance to even enter into the market.
Blind Bidding explained
Blind bidding is the process that is submitting a bid without knowing what another homebuyer has offered. This generally involves using aggressive tactics such as submitting a bid above asking price shortly after a home has been listed. What often happens in these situations is a listing will come up, an investor will submit a blind bid of say $30,000 above asking price and without knowing about the other bids or even giving other people a chance to bid, they will seem like the most attractive offer. A blind bid puts the pressure on any other buyer. If the homeowner waits to receive offers from people touring the house, they could be presented with bids closer to asking price or there can be a bidding war which inflates the property value further.
This tactic is especially popular in areas with desirable investment property values. Toronto and other urban areas are having blind bidding occur on almost any property in a core urban area. This automatic inflation on any listing is making it difficult for many buyers to enter the market and the behavior is being considered as unethical as it compounds the inflated price of real estate that is occurring all throughout the housing market.
Beyond blind bidding in urban environments where property values have a tendency to rise steadily, the same effect is happening in cottage country and throughout rural property listings now. The competitive pricing is moving into small towns and rural communities nationwide. Industry professionals are suggesting that there should be some form of government intervention to prevent this bidding behavior.
Blind bidding in Canadian real estate
The Canadian Real Estate Association is placing the value of the average home at a national level at $700,000 with Ontario and BC standing at averages of $912,000 and $862,000 respectively. The demand continues to heat up across the nation and the interest rates on these inflated mortgages are set to rise as well.
Before the pandemic there was an increase of bidding wars and higher offers, especially in the Vancouver and Toronto market, but now these techniques have moved out into areas less effected by lockdown conditions like the Prairies and Atlantic Canada.
Many are calling for a market that is more transparent for all buyers and less chance for the blind bidding process to effect people trying to enter into the market. Creating tighter regulations on the industry will mean working with the Real Estate council’s of each province, The Office of the Superintendent of financial institutions and the Ministry of Finance.
Blind bidding will continue to be a problem as long as cheap lending rates continue and as long as there are markets which remain highly competitive. Until a change is made, buyers are going to face great difficulty competing in the market while continuing to inflate real estate prices nationwide.
