Lift veils off home-buy­ing

Toronto Star - - INSIGHT -

Buy­ing a home is the most sig­nif­i­cant pur­chase most peo­ple will ever make.

But un­til now would-be pur­chasers have had to do it with a blind­fold on, since real­tors are not al­lowed to share the de­tails of an of­fer with any­one other than the seller. That means home buy­ers have to guess at what the win­ning bid might be be­fore sub­mit­ting their own of­fer.

Now the On­tario Real Es­tate As­so­ci­a­tion (OREA) is rec­om­mend­ing that the prov­ince adopt a new open process that would al­low buy­ers to know how much oth­ers are bid­ding on a home and what con­di­tions are in their of­fers.

This is a sen­si­ble idea the Ford gov­ern­ment should en­act when it up­dates the 2002 Real Es­tate and Busi­ness Bro­kers Act that gov­erns how real es­tate is trans­acted in this prov­ince. And it can’t move quickly enough on that file.

Af­ter all, the blind process has been blamed for driv­ing up home prices in the over-heated Toronto-area mar­ket in 2016 and early 2017, when it was com­mon for a prop­erty to at­tract dozens of of­fers.

That’s good for sell­ers but it makes the city more un­af­ford­able, en­cour­ag­ing peo­ple to flee to the sub­urbs. And that has all sorts of neg­a­tive ef­fects, from in­creas­ing the amount of time peo­ple are stuck com­mut­ing in traf­fic, to putting pres­sure on gov­ern­ments to build more high­ways, to los­ing farm­land and green spa­ces, to sub­ur­ban sprawl.

Im­por­tantly, too, an open bid­ding process will bring much-needed trans­parency and fair­ness to the mar­ket.

Un­der the cur­rent sys­tem, for ex­am­ple, some peo­ple lose out on buy­ing a home be­cause they bid a few thou­sand dol­lars un­der the win­ning of­fer — some­thing they might have changed if they had known the de­tails of com­pet­i­tive sub­mis­sions. In this case an open process would be good for sell­ers and buy­ers alike.

At the other end of the scale, it is not un­com­mon for some win­ning bids in Toronto to be well over $150,000 more than the sec­ond-high­est bid be­cause the buy­ers don’t know the ex­tent of the com­pe­ti­tion they are up against. While that’s good for sell­ers, it isn’t good for buy­ers or the city’s af­ford­abil­ity in­dex.

An open process also al­lows peo­ple to take the time they need to weigh their de­ci­sions and de­cide whether they are go­ing to im­prove their of­fer, says OREA CEO Tim Hu­dak. It takes the “cir­cus” out of the process, he says.

This pro­posal would also re­in­force a trend to­ward trans­parency in the hous­ing mar­ket de­manded by con­sumers and the Com­pe­ti­tion Tri­bunal.

In­deed, that bid for trans­parency was bol­stered last Au­gust by no less than the Supreme Court of Canada. It ruled that the Toronto Real Es­tate Board (TREB) could not pre­vent web­based bro­ker­ages from pub­lish­ing “sold data” on their web­sites.

TREB’s seven-year bat­tle be­fore the Com­pe­ti­tion Tri­bunal and the courts to try to pre­vent that data from be­ing posted on­line was seen as a pro­tec­tion­ist strat­egy that forced con­sumers to use real­tors to get that in­for­ma­tion, rather than other sources.

But it had the ef­fect of mak­ing it dif­fi­cult for pur­chasers to eas­ily ac­cess in­for­ma­tion that would help them make make in­formed de­ci­sions about the house they want to pur­chase and the neigh­bour­hood they want to buy in.

Now on­line bro­ker­ages are look­ing at other ways of mak­ing the en­tire buy­ing process more trans­par­ent for con­sumers, such as of­fer­ing sales his­to­ries to their clients on­line, as well as com­mis­sion rates, pre­vi­ous list­ings of the same prop­erty and trans­ac­tions that haven’t closed. That’s all for the bet­ter. For too long home pur­chasers have been kept in the dark by a closed-bid­ding process that made buy­ing their dream pur­chase an angst-filled or­deal. It’s past time the cur­tains were lifted on the whole murky process. The sooner the bet­ter.

It’s time in­for­ma­tion on bids for a house was shared among all would-be buy­ers

It’s time the veil of se­crecy was lifted from the bid­ding process on home buy­ing.

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