April 22, 2022 SEP Dev

How the Blind Bid is Hurting the Canadian Housing Market?

When we are saying “hurting” the housing market, it’s not what you might think. We are using this phrase to describe how this tactic is contributing to the cause of making housing less and less affordable, especially in today’s “hot” housing market. I would also like to mention that many other things are contributing to this problem, but we’ll stick to blind bidding for now…

 

What is a blind bid?

A blind bidding structure is when a home listing is published with a specific, future offer acceptance date. In other words, any offers you would like to make on the property would need to be held until the desired date. When the day finally comes to make the offer, you as a buyer must “go in” with your best offer. You will not know how many other potentials buyers are also interested in making an offer and you will also not be pervy to know what other will be offering on the property. Essentially, you’re trying to place the lowest possible high offer, that will outbid the competition but not by too much. After all, you don’t want to overpay if you don’t have to. In either case, you’ll never know if you did…

 

In my opinion, this tactic is designed to favor the seller and hurt buyers because it creates a Fomo (fear of missing out) response from the potential buyers. It’s supposed to elicit a response that would cause the buyer to perhaps overspend on a home because “others are probably” looking to do the same…More often than not, it works and the buyers are the ones that ultimately suffer…

 

The truth is, this style of listing can cause housing prices to increase rapidly in a short period, at a rate that is not sustainable over a long period. Ironically, this tactic also works best in a hot housing market because the “Fomo Response” is validated by this vicious cycle of Houses constantly selling over asking, prices continuing to rise, and buyers who lost out on previous bids, willing to throw everything and the kitchen sink in their future offers.

 

Blind bidding is a practice that should be banned from the real estate market for its obvious lopsided benefit to sellers at the expense of the buyers. Transparency is always the fair ground on which both buyers and sellers should meet.

 

Whatever you decide to do with your real estate purchase, don’t forget that even your blind offer needs to be in your realm of affordability. In the end, most homeowners make their purchases with some form of mortgage financing and so, it’s always best to consult your mortgage broker to ensure you are well equipped to stand behind your offer. Otherwise, you’re just pulling a “Joey” with your Bid (Friends reference) ….

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