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Ontario real estate law update with open bidding option enters into force

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TORONTO — New rules for Ontario real estate are coming into force that are meant to provide more clarity and choice for buyers and sellers, though they don’t go as far as some had hoped.

The rules, which took effect Friday, include the option for sellers to use an open bidding process, improvements to broker and brokerage disclosures, and ways to avoid conflicts on multiple representation.

The open bidding option gives the seller the choice to disclose submitted bid prices to potential buyers, something they were previously banned from doing.

Open bidding has been advocated by some, including Ontario Green Party leader Mike Schreiner, as a way to reduce rampant overbidding in real estate and help reduce prices.

“A consistently transparent bidding process will help bring down the skyrocketing price of houses,” he said when the Ontario government announced open bidding would be an option for sellers.

The federal Liberals also promised in their 2021 election campaign to end blind bidding because it said not knowing other bids ultimately drives up home prices.

Joseph Richer, registrar at the Real Estate Council of Ontario, said however that there’s little research on how blind bidding affects prices, adding there are some indications that open auctions in Australia put upward pressure on prices.

He also said mandating open bidding could lead to negative effects for sellers.

“Keep in mind that in every transaction, there’s a buyer and a seller, and that whatever you mandate for one, might be, and probably is at the detriment of the other.”

Making it optional gives more options to sellers, Richer said.

“We don’t anticipate a big market swing. It might help some parties in some transactions.”

Sellers who are having trouble finding buyers might want to allow their agent to disclose bids to attract more, he pointed out as an example.

The option doesn’t look that appealing to most sellers in the current market, but real estate agents will likely find some uses, said Randy Oickle, president of Innovation Realty Ltd. in Kanata, Ont.

“(There’s) likely going to be some new business models that come along to try to take advantage of new possibilities.”

He said he would have liked to see some rules around the process of using open bidding.

“The fact that there’s no sort of framework for using it, I think potentially creates challenges.”

Oickle said, overall, he sees the changes in the act as quite significant.

Other notable parts of the law include the ability to choose a designated representative.

Previously, if the buyer and sellers’ agents worked at the same brokerage, then, given the potential conflict of interest, they would fall under a multiple representation scenario. In these cases, agents were generally only able to act as facilitators, and were limited on how much they could advise clients, including on what is a good price.

By designating specific agents, the buyer and seller under the new rules would free themselves from multiple representation, and agents could advocate more actively on their behalf, said Richer.

“It allows you, if I hire you, you now are free to continue to advocate for me and to offer the services and all your experience that you can bring to bear on my behalf, which you were prohibited from doing under multiple representation.”

The updates, Phase 2 of changes under the act, also include an amended code of ethics, new enforcement tools for RECO, and an information guide from the agency that prospective clients are to receive before they agree to having an agent represent them.

As for the federal promise of open bidding, Housing Minister spokesperson Micaal Ahmed said that since real estate generally falls under provincial and territorial jurisdictions, the federal government continues to consult with stakeholders to make a home buyers’ bill of rights.

The work is well underway and nearing completion, he said.

This report by The Canadian Press was first published Dec. 1, 2023.

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