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Mm-mm, yeah, yeah, yeah, Ontario has implemented new real estate rules that will allow sellers and buyers to enter into an open (transparent) bidding process.
What does this mean for the average real estate gyrator? Well, keep reading, my little Tupelo Tornado and find out, because it’s only a matter of time until this article gets subjectively censored from the waist down!
PRELUDE
During the hysteria of COVID, buyers were outraged by the lunacy of unfair closed bidding. Buyers claimed they were forced to overpay or lose out on the palace of their palpitation. Fueled by inexplicable rage, home buyers demanded that the multiple offer bidding system become transparent.
A little less conversation? Let’s get to the point.
THE IMPOSSIBLE DREAM
Before you get too excited, you should know that blind bidding still exists, and sellers can thrust between closed (blind) or open (transparent) bidding systems… mid negotiations! This freedom to flip flop gives sellers more negotiation power and awards deep pocketed buyers with an edge.
Let’s discuss two common scenarios where the general buyer will be hound dogged. There are more scenarios, but I’ll try to keep this as brief and provocative as possible for all the rubberneckers out there.
SCENARIO ONE: THE MULTIPLE OFFER
This is when multiple buyers submit an offer on the same property and ignite a bidding war.
Traditional Rules: In the g’olden days, buyers knew how many offers they were competing against, but not the substance of each offer. Since the substance of each offer was a mystery, the average buyer still had a chance to beat out wealthy plutocrats (e.g. first-time buyers vs. retired downsizers).
New Rules: Sellers can begin with a closed bidding war, baiting buyers into submitting their best offer. From there, sellers can switch to open bidding and reveal (up to and including) everyone’s price, deposit amount, closing date, conditions, and “other” items. This open auction gives bulging… pursed tycoons a financial advantage, driving prices up, up and away.
SCENARIO TWO: THE CONDITION OF SALE
This is when a seller accepts an offer, but the buyer still needs to sell their home (within a specific timeframe) for the deal to firm up. In the meantime, the seller’s home remains active on the market in hopes of a better offer on the horizon.
Traditional Rules: The substance of the original offer cannot be revealed to anyone (minus the conditions, which are now accessible to realtors). This closed system made it more difficult for new buyers to come forward and outbid the original offer.
New Rules: Since the seller can reveal the substance of offers, the original buyer’s offer is now vulnerable. If someone new comes forward, it can create open bidding wars, driving prices up, up and away. In the end, mangy moguls with more moola have the upper hand.
THE “NO OFFER CONTENT DISCLOSURE” CLAUSE
Can home buyers protect themselves against these new rules? The quick answer is “not without checking into the Heartbreak Hotel and sacrificing their chance of winning”.
Let me explain…
In hopes of thwarting these new tactics, the “No Offer Content Disclosure” clause was invented for buyers to insert into their offer, and goes a little something like this:
“Notwithstanding anything to the contrary contained in this Agreement of Purchase and Sale or any Schedule thereto and notwithstanding that the Seller has the right pursuant to the Trust in Real Estate Services Act, 2002 to disclose the details and content of this offer, if the Seller discloses the whole or any part of the details or content of this offer prior to acceptance then this offer shall forthwith upon such disclosure be revoked and become null and void and any deposit shall be returned to the Buyer in full without deduction.”
Quite frankly it’s trounce-ingly flawed and is as dangerous as a forbidden hip swivel on the Ed Sullivan Show. Why? Because contracts aren’t valid until both parties have signed, making this “No Offer Content Disclosure” absolutely thrustless during a multiple offer, rubber legged dance party.
Think about it, why on unearthly would a seller sign a contract that would instantly become null and void? Why would a buyer submit an offer that would become null and void on a home they’re hoping to purchase? In the end, can’t a buyer just simply scratch out the “No Offer Content Disclosure” and win anyways?
BUYER’S TURN TO CRY (BUYERS WITH BROKEN HEARTS)
To sum this up quickly: open bidding is good for sellers/wealthy buyers and bad for median buyers.
If you’re a shelter shopper thinking “why me lord?”, just remember that homeowners can sell their residence however they like to, and one day you’ll be in their blue suede shoes.
Only fools rush in without reaching out to everyone’s favourite Beaver of Record. So, when you’re ready teddy to start shoppin’ around and need expert advice, you know whom to call!
Johnny ‘Chew’erdine | Real Estate Beaver of Record
https://www.johnnyhewerdine.com 🪵🦫
