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When Toronto Real Estate Board president-elect Maureen O'Neill pronounced the city's multiple bidding process as transparent as possible, she likely didn't have Australia's approach in mind.
In Sydney and Melbourne, an auctioneer stands in front of a home for sale and takes competing bids until the slam of a gavel declares it sold. Imagine that happening in Toronto. "The bidding war goes on right there on the spot," said Graham Joyce, president of the Australia Real Estate Institute, which represents 85 per cent of the country's real estate agents. "It's certainly very public and you know how much you have to bid to get the property," he said, adding that the vendor sets a reserve price. Told of Toronto's multiple bidding process – closed offers presented at a set time – Joyce said: "It's certainly not very transparent, is it." He wasn't surprised to hear that Michael Manley, defeated by O'Neill in recent elections for Toronto board president, complained of "phantom offers" – fake bids designed to fuel a bidding war. Australia guards against "dummy bids" – what Joyce described as the auctioneer "taking a bid off the tree across the road" – by having potential buyers register prior to the auction. They're identified by the paddles they wave to make bids. He's also convinced public auctions generate the highest sales prices. In Toronto-style bidding wars, "People may not feel comfortable going to their limit because they don't know what others are prepared to pay," he said. About half of the homes sold in eastern Australia are auctioned publicly. The rest are sold through one-on-one negotiations: A buyer registers an offer, the seller may counter it, and they go back and forth until a deal is struck. People who purchase homes this way get a "cooling off period" of several days that allows them to change their minds between the initial agreement of purchase and the exchange of title, Joyce said. A further difference with Toronto is that 95 per cent of buyers don't use real estate agents. And agents by law must compete on the commissions they make. Commissions run between 1 and 3 per cent of sale price, compared with Toronto's unshakable 5 per cent. "If there's any collusion amongst agents in relation to fee structures they're right on to us," Joyce said, referring to regulatory bodies. Toronto residents don't need to look as far as Australia to find a different approach to selling homes. While Toronto-style bidding wars are common in Calgary and Vancouver, Montreal residents indicate yet again that they're part of a distinct society. The average price of a home in Montreal has increased 60 per cent since 2000 – more than in Toronto. Yet real estate agents can't get Toronto-style bidding wars going. Montrealers are extremely reluctant to pay more than a home's asking price, let alone get involved in a blind bidding war. "It's a cultural thing," said Andre Campeau, co-owner of a RE/MAX branch in Westmount, Montreal's wealthiest community. Montrealers approach real estate like an Arab souk; the asking price is an upper limit that has to be bargained down. "When we see houses sell above asking, there are so few of them compared to Toronto that we say, `Oh, look at this.' They stand out," Campeau said. One-on-one negotiations is the widespread method in Montreal. Vendors can negotiate more than one offer at a time, and should consider themselves lucky if they get a chance to do so. "In Montreal, often, when a buyer hears there's already an offer on a house he will stay away. He'll say, `I don't want to be caught in a bidding war,'" Campeau said. The Quebec Association of Brokers and Real Estate Agents, which administers the province's real estate act, restricts competition for homes. If a second offer comes in, the vendor can inform the first bidder and give him a chance to increase his bid. If bidder number one does so, the vendor can't tell bidder number two of the increased bid, Campeau said. The Quebec association insists "you have one kick at the can ... no back and forth, don't fuel a bidding frenzy," Campeau said.
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