What is “Blind Bidding?” An Introduction for REALTORS®

Nov 24, 2021

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Posted by
Matt Mayers
Senior Policy Analyst

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As a result of 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 regulatory changes to real estate transaction could improve protection for homebuyers. This announcement was paired with news in early-November that the BC Government intends to institute a cooling off period for real estate transactions next spring.

Blind bidding has also been discussed federally, where in the recent federal election campaign the Liberal Party promised to create a national Home Buyers’ Bill of Rights that would include a ban on 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 improve affordability. In fact, it could have unintended negative consequences for the buyer, potentially worsening BC's pre-existing 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. 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 pre-existing 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 consumer protection measures, including:

  • a cooling off period,
  • mandatory conditions, such as home inspections or financing and
  • other practices that may be identified as consumer protection risks.

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