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.