The Real Estate Council of Ontario has launched a new public education campaign aimed at curbing bidding wars by warning buyers not to be overly influenced by emotion when purchasing a home.
The regulatory body has no plans, however, to probe whether the practices of the realtors it regulates are contributing to the escalating problem of bidding wars, especially in the Toronto market, says RECO registrar Joe Richer.
Such practices include the drastic underpricing of properties to draw bigger crowds, and holding back considering offers for six to eight days. Increasingly frustrated, angry buyers complain those tactics are leaving them further disadvantaged in the face of a sellers’ market compounded by sales listings that have fallen far short of demand.
“Our focus is on taking as much of the emotion out of the transaction as possible,” says Richer, pointing to a recent survey of 505 Ontario homeowners done for RECO by pollster Angus Reid.
It shows that 51 per cent of those surveyed admit to having been influenced by emotion when buying their home, a number that jumps to 64 per cent among owners aged 18 to 34.
While only 15 per cent of those surveyed said they went over budget and over asking price to get a home, that number jumps to 25 per cent among home buyers age 34 and under.
“Despite the fact that Ontarians are fairly home smart, we’re seeing more and more people — especially younger home buyers — getting swept up in the frenzied market, making emotional decisions they could later regret,” says Richer. He says that multiple bidding is rare outside of Toronto.
The campaign, which features a “choose your home adventure Facebook game,” an “are you home smart or home emotional quiz” and a homebuying and selling checklist, is aimed at arming buyers with the tools to make rational, smart decisions, says Richer.
Ironically, the campaign was prompted by complaints from parents, not young buyers.“We’ve had a number of people say, ‘My kid has gone out and overspent (on a house), how do we get out of this?’,” said Richer in an interview.
“It’s difficult for us to give advice, other than to say you need to go talk to your lawyer and see what you can do.” Richer is growing concerned that young buyers may not be doing enough homework before putting in offers that could leave them financially crippled.
RECO could do far more to ensure properties aren’t purposely priced to stimulate bidding wars, says Toronto house-hunter Jason Brander, 29, a city planner who recently lost out on two bidding wars in the east end. Realtors counter that they are often being told to underprice properties by sellers, who see such tactics paying off elsewhere.
Brander is in the process of filing a complaint with RECO after finding out the winner among nine bidders on his most recent loss was the client of the same agent who listed the home for sale.
“Something needs to be done to improve the transparency of the process,” says Brander. He was shocked to find out the agent had no other member of her office, or an independent realtor, sitting in on bids when she was representing both seller and a buyer, a process known in the industry as “double ending.”
Richer says RECO hasn’t taken any “formal look” at how pricing and other realtor practices may be factors in the recent bidding war frenzy, which has been especially pronounced in some east-end neighbourhoods along the Danforth subway line, and the council has no plans to do so.