The Ontario government is bringing in new rules to standardize the process of buying and selling homes. If you’re looking to buy a home – or sell one – these rules may change how real estate works in the province. Here’s what you need to know:
New rules to standardize the process of selling and buying homes, specifically addressing the practice of blind bidding
Blind bidding is when a buyer submits an offer that can only be seen by the seller and not the agent representing them. The problem with blind bidding is that it creates a conflict of interest for agents. By not knowing what other offers are on the table, their clients are unable to make informed decisions about whether they should increase their bid or walk away from a potential deal because of competing offers. They also don’t know if they’re paying above market value.
Blind bidding opens up opportunities for both buyers and sellers to feel taken advantage of. Until recently, this was the only option available to Ontarians.
Under the new rules, sellers have more options beyond blind bidding
Under the old system, known as “blind bidding” or “sealed bids”, offers were not disclosed to the seller and they had no way of knowing which one was highest without opening them up and reading them in person. The new rules allow sellers to opt into an open offer process. In this way, they may enhance transparency in the bidding process to the benefit of buyers and sellers alike.
Nevertheless, blind bidding will still persist as it hasn’t been banned outright. It is not without its benefits, to be fair. It allows sellers to simply reject lowball offers, thereby streamlining the process. By expanding the sellers’ options and preserving blind bidding, sellers are at least empowered to sell their homes in the way they choose.
The government is also expanding the powers of the Real Estate Council of Ontario
The government is also bringing in an updated code of ethics for realtors with a focus on their ethical obligations towards clients and the public. The code will be enforced by the Ministry of Government and Consumer Services, as well as the Real Estate Council of Ontario. The Real Estate Council of Ontario is the body that certifies and administers the rules for salespersons, agents, and real estate brokers. The body is being given more power to discipline agents that violate consumer trust.
These changes are welcome as recent allegations of price-fixing have led to a proposed lawsuit against Canadian brokerages. Generally, real estate agents and their brokerages will charge a commission on the sale price of a home. This commission is percentage-based, meaning that the rise in home prices has led to a parallel increase in the amount of commission.
The changes are a part of changes announced in 2020
The changes are part of the broader regulatory change first announced in October 2020 through Ontario’s Trust in Real Estate Services Act. The changes were put in place to address consumer concerns and to modernize the rules for real estate brokerages, brokers, and salespersons. This law covers what is required for people to engage in real estate, the code of ethics, disciplinary measures for misconduct, and the powers of the Real Estate Council of Ontario.
It’s still unclear what impact the changes will have on the real estate market in Ontario
The changes to the Trust in Real Estate Services Act were announced in April. They will come into effect on April 1, 2023.
It’s still unclear what impact the changes will have on an increasingly heated real estate market in Ontario. Although it has cooled in recent months, some question whether sellers will actually take the option of an open bidding process. Others are critical that the government hasn’t put an end to blind bidding, which has been posited as a contributing factor to Canada’s high home prices.
Some even doubt that sellers will opt for an open bidding process at all. By being transparent about what competing offers are on the table, sellers may feel that they are losing out on even higher selling prices.
At the federal level, the government of Canada has proposed an outright ban on blind bidding as part of its 2022 Federal Budget. No further details have been provided, aside from a plan to have the Minister of Housing and Diversity and Inclusion engage with the provincial and territorial governments on the issue.
Contact the Lawyers at Campbells LLP for Real Estate Help
We will be sure to keep you up to date on how the new blind bidding rules affect the real estate market in Ontario. If you are trying to sell your home or buy a new one, consider getting in touch with the real estate lawyers to learn you can navigate through these changes.
The experienced lawyers at Campbells LLP in Oakville have been servicing clients in real estate matters since 1999. We have experience addressing all aspects of a real estate transaction, from residential to commercial. We are thorough, efficient, and focused on delivering the best possible outcome for every single client. Contact us online or at (905) 828-2247.