Buyers fed up with blind bidding, other shenanigans in red-hot real estate market

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Jenny Kim has just about had enough of what’s happening in Canada’s real estate market right now

The mother of three has been living with her in-laws west of downtown Toronto for help with child care. But now she and her husband need some more space so they’re on the hunt for a house of their own.

They’ve viewed dozens of properties over the past few months, and submitted a number of competitive bids, but came up empty handed again and again.

Complaints about high prices may be nothing new for anyone trying to buy into one of Canada’s hottest markets, where average prices have risen by more than 21 per cent in the past year, to just over $1 million.

But Kim said a big part of her frustration is that the system is making things even worse, as opaque rules and nebulous enforcement let realtors bend the rules to benefit themselves.

“The market is already a challenge for regular working Canadians in terms of where the prices keep going,” she told CBC News in an interview. “Then you add this layer of unethical behaviour in the real estate world and it just makes a bad problem even worse.”

Kim is one of hundreds of Canadians who have complained to her provincial real estate broker regulator, RECO, in the past year about the type of funny business she’s witnessed while trying to buy. 

A major source of her consternation is the so called “blind bidding” process of making an offer on a home, where buyers aren’t officially allowed to know the details of other competing offers. But some selling agents seem willing to ignore that restriction and tell buyers whatever they need to hear to open their wallets more and push up prices and selling commissions.

She recalls one instance of a home listed at $899,000. She and her husband were considering an offer, and would have gone as high as $960,000, but “before we put in the offer, the listing realtor disclosed that there were several other offers and they were all over a million,” she said.

“In order for them to accept any preemptive offers I think what they exactly said was ‘it would have to be something out of this world to consider, otherwise we’ll just wait,'” she said.

Rising complaints

They decided there was no point to try and put in a so-called “bully offer” and the home ended up selling for $1.06 million. That’s more than Kim and her husband would have paid, but the incident left her with a bad taste in her mouth, so she complained to the regulator — one of 711 people in the province who did so last year, according to RECO, or an average of nearly two complaints per day. Most provinces have seen similar surges.

Complaints range from things like not following COVID protocols, to conflicts of interest and other breaches of fiduciary duty. Ontario’s code of ethics for realtors says they’re not allowed to “disclose the substance of the competing offers” but that’s not the case across the country. In B.C., a realtor can share information about the number of bids, and how much they are for — but only if their client, the seller, agrees.

Kim said she’s seen Ontario’s rule broken by more than one realtor.

In one instance, the Kims put in an offer on a home and were rejected, “but the realtor called us and said she had a number of other offers higher than ours but because we are young family she really liked us but wanted us to do better.” They declined to go any higher and withdrew their bid, but when the home ended up selling they were shocked to see it went for less than what they had offered in the first place.

“That was definitely wrong,” she said.

House prices have been on a tear across Canada during the pandemic, driven by low interest rates and a desire for more space. (Daniel Acker/Bloomberg)

Russell Hutchings agrees. A realtor with more than 30 years experience, he’s currently focused on the market in and around Collingwood, Ont., about 100 kilometres northwest of Toronto. Hutchings said he’s become so concerned with what he’s seeing in his local market that he himself has complained to RECO, banking regulator OSFI, and even the office of Canada’s Finance Minister about doing away with blind bidding, where would be buyers don’t even know who or what they’re bidding against.

“The blind system does not allow transparency as to what the other offers are,” he said in an interview. He said the smallest number of bidders he’s seen for a property this year was three, a situation that easily “snowballs” out of control. In that instance, the winning bidder ended up offering a price that was “extraordinarily higher” than the second-best offer — and the system as it is currently set up encourages that to happen.

“There’s pressure on the buyers … who may have already lost out on X number of homes that they’ve bid on to just throw a ridiculous number out there, the most that they can possibly afford and maybe even beyond that to not lose the home this time.”

Ontario kicked the tires on changing the rules back in 2018, but nothing came of it. So blind bidding continues to be the way the vast majority of houses are sold in Canada’s most populous province. 

A better way?

Not everyone sells real estate that way. In Australia, home sales happen via an open auction process. While their system hasn’t solved the problem of high prices either, Hutchings said at least the process is more open. “The highest bid is never $150,000 or $200,000 greater than than the next lowest bid, so it creates, I think, a more equal and fair offering system,” Hutchings said.

Another tactic that raised Kim’s ire is the practice of listing a property below its market value to then try to drum up a bidding war. It may work, but if it doesn’t, some properties are delisted and then relisted at slightly different prices in quick succession.

“The amount of terminating suspending and relisting that realtors do, it’s just endless,” she said. “The listing price often feels misleading to buyers.”

That’s also not the norm elsewhere. In many U.S. states, for example, if a bidder offers the asking price, the seller isn’t legally obligated to sell but they may be on the hook to pay their realtor a commission regardless, for setting up the listing in good faith. That’s an incentive to price a home at the level where the seller will actually sell it — not artificially below what they would actually accept in order to drum up interest.

“We go to the table blind, we don’t know who’s offering what,” Kim said. “There has to be more protection.”

Push for transparency

Vancouver realtor Steve Saretsky is in favour of any system that makes the process more transparent because as it stands, it can be as unpleasant for the selling agent as it is for the buyers.

“When I’m on the listing side of it, it’s no fun either because you’ve got to go back to five of the realtors and tell them they didn’t get it. And you’ve got five buyers that are pissed off and you’ve got five realtors that are pissed off,” he said. “It’s sold quick and you made a quick commission, but … it’s a stressful process.”

WATCH | Steve Saretsky explains why reporting bad behaviour isn’t always easy:

Vancouver realtor Steve Saretsky says he’s seen other realtors mislead buyers in multiple bidding situations, but because of the rules it’s overly simplistic to think that the best course of action is to simply report them to the authorities. 0:52

While buying blind doesn’t help, cheap lending rates and a seemingly inexhaustible demand for more space from pandemic-weary Canadians are clearly the biggest factors driving overall prices higher right now. 

Back in Toronto, Jenny Kim wants to make sure that more is being done to enforce the rules to weed out bad actors making the affordability problem even worse.

“I really hope that people who have the power to change and improve things will listen to protect buyers,” she said. 

“It shouldn’t be happening [but] the way the system is designed leaves a lot of room for these behaviours.”



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