The prospect of revealing the offer of buyers wishing to acquire a house is shaking up the world of residential real estate brokerage.
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Objective: to avoid overbidding. Some frown, others welcome this change, delighted to put an end to the game of hide and seek surrounding the proposals tabled. Which side will the legislator lean towards?
Indeed, the law will have to be changed.
Currently, the legislation obliges the broker not to disclose the amount of the offers received. He also has the obligation to inform all buyers if he receives several proposals.
A buyer who has fallen in love with a house will then be tempted to improve his offer, without knowing where it is in the range of offers presented. Is he in the lead or in the middle of the pack? In 2021, in the Montreal region, 48% of single-family homes, or nearly one in two, were sold at higher prices.
And overheating!
If the display of purchase offers is not unanimous, everyone agrees that this will not prevent the current real estate overheating.
This could be explained more by the scarcity of houses for sale. Demand far exceeds supply.
This scarcity inevitably causes a price increase. When buyers are lining up at the door, sellers have it all.
Over time, this phenomenon will subside, the laws of the market will restore the balance.
Brokers overwhelmed?
By revealing the amount of the offers, I am sure that the counter-offers will multiply, because the people who have the means will not hesitate to improve their initial proposal.
Will the price go up as much as now? Based on my auction experience, I believe so. When there are multiple offers on the table, the prospect of winning the bet for a few more dollars entices all buyers to bid higher.
This increase in offers and counter-offers will become difficult for brokers to manage.
Imagine that this one receives 60 offers for a single property.
He must then reveal to each the amount of the highest bid. If half of them make a counter offer. And a second… And a third… Soon, due to lack of time and resources, the broker loses control of the situation. From there, an electronic platform should be created to ensure efficient management of exchanges. Kind of like auctions on eBay.
If we opt for an auction
The prospect of creating an electronic platform that would manage purchase offers would probably be a good solution.
It remains to be seen how to develop this tool, which has the merit of bringing more transparency to transactions, thus reducing buyer frustration. One thing is sure, the rules must be clear, known to all.
Regarding the platform itself, several question marks remain. Who will lead the operation? The client or the broker?
Should we draw up a financial profile of the buyer during registration and record a maximum amount not to be exceeded before even making the first offer? What time frame should be set between offers and counter-offers?
In conclusion
The real estate market obeys cycles, the current overheating will not escape it.
And the storm will eventually calm down. If the legislator absolutely wants to disclose the price of tender offers, an electronic platform has many advantages and the technology is available.
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