What is "Blind Bidding?" An Introduction for REALTORS®

Nov 24, 2021

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Posted by
Matt Mayers
Policy Analyst

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As a result of highly competitive market conditions and escalating housing prices, BC's real estate regulator, the BC Financial Services Authority (BCFSA), is developing a consultation on "blind bidding" to understand whether changes to the offer process in real estate transactions could improve protection for homebuyers.

This announcement was paired with recent news that the government also intends to institute a cooling off period for real estate transactions in BC next spring. Additionally, in the recent federal election campaign the Liberal Party promised to create a national Home Buyers' Bill of Rights that would also include a ban blind bidding.

But what is "blind bidding" and how might it impact you and your clients?

Blind bidding is when home buyers submit offers to sellers and sellers choose not to disclose the details of competing bids. While Canadians are not mandated to use this process to sell their homes, blind bid negotiation is by far the most common in residential real estate. By banning blind bidding, homeowners would be required to use more transparent bidding processes.

While restricting blind bidding would increase transparency within a transaction, it in unclear whether it would. In fact, it could have unintended negative consequences for the buyer, potentially worsening BC's preexisting housing affordability crisis. While the Liberal Party's platform suggests that blind bidding "ultimately drives up home prices," available research and case studies do not support that assertion.

No provinces in Canada have implemented restrictions on blind bidding, however other countries can serve as case studies, with impacts likely to be comparable to Canada. In Sweden, blind bidding has been banned, however the country has experienced even faster home price growth during the pandemic than Canada. Open bidding methods are also common in Australia and New Zealand. All three of these countries have also experienced dramatic increases in real estate price growth at rates higher than Canada during the pandemic. While the root causes of increased price growth are the imbalances between supply and demand, restrictions to the bidding process may exacerbate preexisting problems.

Unfortunately, there are no peer reviewed studies examining bidding rules in the Canadian real estate market, however a report published in October 2021 investigated whether banning blind bidding slows the growth of real estate prices. The report found that while evidence is limited, increased bid transparency would likely lead to higher, rather than lower, prices in a hot real estate market.

Of literature examining other jurisdictions, six studies found transparent bidding practices were associated with higher house prices, while two others found transparent bidding to be associated with lower prices. These varied results are not surprising given different methods in different markets.

Before measures to increase transparency and consumer protection are decided upon and implemented in BC, it's important to first understand its impacts on housing affordability, the regional nuances, the different market conditions in which they would apply and other unintended consequences so Canadians are not negatively affected by the changes.

The BC Government has announced its intent to introduce legislation in spring 2022, mandating a cooling off period for all buyers of residential real estate. We encourage you to learn more here.

In addition, BCFSA is consulting on other measures, including:

  • "blind bidding,"
  • "price baiting,"
  • risks related to waiving conditions such as home inspection and financing, and
  • other consumer protection measures.

BCREA supports consumer protection policies that consider the interests of all parties, changing market trends, give consideration to regional impacts, potential unintended consequences and also include a defined process to monitor efficacy. We encourage REALTORS® to respond to BCFSA's consultation by emailing [email protected] and CC'ing [email protected].

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