Housing affordability is always an election hot topic – and this year is no different. Perhaps the most notable pledge in the Liberal party’s housing platform, and the one that’s attracted the most commentary, is a call to ban blind bidding as part of a new Home Buyers’ Bill.
The Liberal’s believe the bill will ensure the homebuying process is fair, open and transparent by:
- Banning blind bidding, which prevents bidders from knowing the bids of other prospective buyers, and ultimately drives up home prices
- Establishing a legal right to a home inspection to make sure that buyers have the peace of mind that their investment is sound
- Ensuring total transparency on the history of recent house sale prices on title searches
- Requiring real estate agents to disclose to all participants in a transaction when they’re involved in both sides of a potential sale
- Moving forward with a publicly accessible beneficial ownership registry
- Ensuring banks and lenders offer mortgage deferrals for up to six months in the event of job loss or other major life event
- Requiring mortgage lenders act in your best interest so that you’re fully informed of the full range of choices at your disposal, including the First-Time Home Buyer Incentive
With blind bidding, prospective homebuyers don’t know the bids other people are making who are also interested in purchasing the property. That means people could overbid in an attempt to successfully purchase the home.
The consensus is, however, that a ban on blind bidding won’t make a significant impact on the final price of a home purchase. There’s no economic evidence to support the ban. On average, open auctions and blind auctions tend to result in similar sale prices. In fact, economists tend to look quite favourably on blind bidding because it means a bid is more likely to reflect exactly how much an item is worth to the bidder. A hot market may lead prospective homebuyers to falsely assume that the type of bidding is what’s causing the outrageous prices, even when other factors are more at fault (eg, low inventory and high demand).
But, regardless of the type of bid being made, it’s important for homebuyers to stick to what the property is worth to them as opposed to getting carried away in trying to win at any cost.
Let’s get you preapproved for a mortgage so you know what you can comfortably afford to spend before you head out home shopping. Answers to all your home financing questions are a call or email away!