It’s a new era in real estate as of December 1, 2023: the new Trust in Real Estate Services Act (TRESA) has updated the previous Real Estate and Business Brokers Act (REBBA) of 2002, bringing many changes to the industry. This week we’re talking about the introduction of optional open bidding in multiple offer situations.
Multiple offer situations have been a growing point of contention among Waterloo Region buyers since the start of the real estate boom in 2016. As buyers started pouring in from the GTA, bidding wars became the norm, and the selling strategies that evolved in response created a frustrating lack of transparency for buyers.
Prior to December 1, 2023, as a buyer in multiple offers, the only information you were provided was the number of offers you were competing against. Nothing was divulged about the value, conditions or closing dates of the other offers, even though these details are critical. Like playing darts blindfolded, buyers were aiming in the dark, unsure of whether they were falling short of the seller’s target, or sailing right past it.
The lack of transparency in multiple offers is the number one complaint I have heard from buyers throughout my career. Listing agents have been unable to address the situation before now, since provincial legislation prevented them from sharing additional details, which of course didn’t sit well with buyers. With the introduction of TRESA, both buyers and sellers have choices that did not exist previously.
Today, sellers have two options in multiple offers: they can sell using a traditional closed bidding process, or opt for open bidding, or an “open offer” process. If a seller chooses open bidding, they decide how much information buyers will receive about the other offers in the mix, and may or may not disclose closing dates, deposit amounts, conditions, or a lack of conditions. The only thing sellers are unable to share is personal information about the buyers. If a seller starts the offer process as a closed bid, they can switch to open bidding at any time. The nature of the bidding process is entirely at the seller’s discretion.
Open bidding is yet to be tested in the marketplace, but my sense is that price will almost always be disclosed as it’s the most important part of the offer in most cases.
Buyers can’t control which type of bidding a seller chooses, but they (finally) have options in the process. A buyer’s agent may draft a clause into the agreement that makes the offer null and void if the seller chooses open bidding; alternately, a clause could make the agreement null and void if the seller chooses closed bidding. These strategies are new and untested as of yet, but I fully expect the marketplace will self-regulate. If a seller fails to get the results they want with their chosen strategy, they will change course and do something else. If buyers become disillusioned by certain strategies, they may avoid submitting offers on properties with bidding styles that make them uncomfortable.
Next week, we’ll look at the option of self-representation in a real estate transaction. #Advice #AskDavid #TheNegotiator
David is a top-selling Broker in Kitchener-Waterloo Region. He works personally with you when selling or buying your home. Call or text today for your free home evaluation! 519-577-1212.