On the Block, a Vaughan-based real estate brokerage,is trying out whether selling homes via auction will fly in the Toronto area.
Auctions tosell real estate have been popular in Australia and the U.K., the company said.Screengrab/On The Block
It’s like eBay, but for Toronto real estate.
On The Block, a Vaughan real estate brokerage is banking on a new way to sellhouses, which it says will make the process more transparent
for buyers and still fetch the highest price for sellers.
The company is employing a “selling-by-auction” technique as an option forclients.
When a seller lists a home, it will appear on MLS for about six to sevendays and also on the brokerage’s website with a countdown,
letting people know when the auction will go live. During that time,potential buyers can view the staged house and get details of a homeinspection.
A real estate sold sign hangs in front of a west-endToronto property.
Then, the auction will go live online and usually endafter three or four days with the home going to the highest bidder.
The seller also sets a “reserve” price to ensure that a minimum is reached.
“I’ve been in the business for 10 years and with bidding wars, I’ve noticedthere’s a lack of transparency in knowing what the other buyers are offering,”
said On The Block president Katie Steinfeld.[FONT=Times New Roman][size=3]“That’s a big drawback right now in the traditional sale. If they’re competingwith another buyer, that’s a key piece of information they don’t have andthey’re reluctant to go higher. [/size][/FONT]
If a listing agent tells you you’re close or far off, that’s verysubjective. By seeing what others are offering, it allows them to make acomfortable decision with their offer.”
For sellers, Steinfeld added, an auction provides knowledge that every buyerhas maxed out on the price they’re comfortable offering for the home.
“They’ve got control through the process,” she said.
“Rather than taking offers within thefirst couple days of listing and not knowing if they would have gotten a higheroffer,
this model allows their home to be marketed for a sufficient amount of timebefore reviewing offers.”
According to Forbes, 20% of Australian home sales were completed by auctionfrom September, 2014 to September, 2015.
Auctions have also been popular in the United Kingdom.
But while the Ontario Real Estate Association (OREA) said auctions are anoption,
very few people choose them becausepeople can be uncomfortable making the process such a public spectacle or therisk of a meddling scam artist who may try to run up the bids.
“Auctions are not the answer to Ontario’s home affordability challenge,”said Tim Hudak, CEO of OREA.
Hudak suggested increasing supply, especially townhouses, stacked flats, andmid-rise buildings is the best way to tackle the affordability problem.
“While it’s not perfect, the closed offer process is designed to give homebuyers and sellers more space to make informed decisions,” he said.
“Buyers have an opportunity to put their best foot forward with theirinitial offer and, provided that offer is not accepted,
they may have an informed discussion with their realtor about next steps.”
Right now, On The Block’s firstauction — set to go live on Nov. 16 — is a condo at 37Helendale Ave. The current list price is $399,000 with an option to
“Buy it now” at a higher set price of $450,000. The seller can’t back out ofthe deal once the reserve price is reached, which offers some protection forthe buyer. jyuen@postmedia.com
May not work now. It seems like the panic buying that occurred this past year or two has fizzled out.
Homes listed in my area are taking quite a while to sell and at significantly lower prices. Just might have something to do with rising interest rates.
For a short while I was on a local agent’s short list of investors to call when she got a short sale or distressed property. On the last one, I had what I thought was an accepted offer, but then the bank that held the mortgage insisted that it be put on an auction web site. Between the increased price and a $5,000 fee from the auction house, I ended up paying 15% more than I would have otherwise. I only went through with it because I had a tenant in place that would not require that I update the home immediately.
After that, I quit getting phone calls from her.
The auction process has significantly increased exposure for distressed properties and reaches a much larger pool of buyers. This benefits the banks, since they are getting more for the properties, and may benefit those in a short-sale or foreclosure position, as a higher sales price mitigates the banks loss, thus reduces tax burden on the mortgagee since the IRS taxes the bank’s loss as the mortgagee’s gain.
It hurts the occasional investor since it results in higher prices, thus reducing the ROI to the point where cash flow is much lower, or even negative at the outset.
I expect there are plenty of people who will bid on these homes sight unseen, only to find out that they have bought a money pit. I could see a rise in foreclosures if these properties are financed.
Some good, some bad (depending on who you are). It all goes back to the bastardized version of the Golden Rule; Those who have the gold, make the rules".