Why can't we sell homes by open auction?

[Admiral Beez]

AIUI, in Australia homes are bought and sold on open auction.

http://www.cbc.ca/news/business/her...ralia-should-canada-follow-its-lead-1.3826727

This means the buyer and the seller have full visibility to the deal, know what counter offers have been made, know the values of recently sold local homes, know the reserve price, can avoid fake bids, and homes are posted for all to see, not just by a cabal of realtors, and other benefits of removing the smoke and mirrors of real estate. Apparently in Australia, many homes are sold without an agent.

Is there any downside to the Australian model?

 

[Skeezix]

A few years ago, I was watching an Australian drama, Offspring, and one of the characters was shown buying a house in Melbourne. When they showed the auction on the sidewalk in front of the house, I wasn't sure what the heck they were doing.

It's not just the open auctions, but also the availability of data, that is key to why the Australian model seemingly works better.

Your cabal comment is apt. In the article you cited:

"Australians have access to a lot more real estate data than we do in most parts of Canada. Buyers can obtain home inspection results, sale-price histories and information on recent sales of comparable and neighbouring homes — without going to an agent to get the information.

"The result? Most buyers don't use agents."

That's why it would be difficult to move to the Australian model here. The whole real estate industry would lobby and litigate against any changes. As it is, TREB is in court all the time to maintain the MLS monopoly on information and listings.

The one aspect of the Australian model I don't like is the fact that auctions can attract spectators. Personally, I'd prefer if they were limited to bidders. The system can be open and transparent without entitling gawkers.

Also, given Canadian winters, auctions might be best held indoors here.

 

[Admiral Beez]

These guys seem to be making a go of it http://www.gogordons.com/real-estate-auctions/

The FAQs are informative about the auction option.

Here's another http://real-estate-auctions.ca

The author here is overtly biased due to his relationship to the industry, but still it lists some of the potential downsides https://www.thestar.com/life/homes/...perty-by-auction-faster-but-also-riskier.html

 

[rbt]

"Australians have access to a lot more real estate data than we do in most parts of Canada. Buyers can obtain home inspection results, sale-price histories and information on recent sales of comparable and neighbouring homes — without going to an agent to get the information.

Home inspection results could be done if the seller ordered the inspection. Sale-price histories are (more or less) public information a little while after closing BUT not for free as our Land Registry charges for copies of the records (see Teranet).

The value-add information MLS has is transactions which are in progress but not yet closed; but agents aren't really supposed to share that information. I'm a former agent.

So, in short, if you want to do this as a seller nothing really stops you. You would probably want your real-estate lawyer on-site if you do a real-time auction just to ensure the final agreement is legal before your crowd disperses.

 

[Skeezix]

Yeah, but correct me if I am wrong, I cannot just go online here and quickly get the sales and inspections history on any property which interests me. Teranet is hardly a realistic option for 99% of the population. Which, as I understand it, is what they can do in Australia.

 

[TOphotog]

The majority of houses sold in Australia are NOT sold at auction, if you analyse the stats. Some have bully offers so the house is sold before auction, almost half have the owners withdrawing the property during auction as it doesn't meet the minimum bid (said minimum isn't known to the buyers standing around), the buyers must buy the property as is without an inspection, and real estate agents/auctioneers have been know to use "plants" in the audience to drive the prices up. In some areas of Australia, even the sellers are allowed to bid up the price. Never assume some other system is "better", there are benefits and pitfalls in each.

BTW, auctions in Canada are legal - they just don't seem to be working out well. The few houses that have sold at auction have been put back onto the market via MLS when the auction-buyers have pulled out.

 

[Skeezix]

The majority of houses sold in Australia are NOT sold at auction, if you analyse the stats. Some have bully offers so the house is sold before auction, almost half have the owners withdrawing the property during auction as it doesn't meet the minimum bid (said minimum isn't known to the buyers standing around), the buyers must buy the property as is without an inspection, and real estate agents/auctioneers have been know to use "plants" in the audience to drive the prices up. In some areas of Australia, even the sellers are allowed to bid up the price. Never assume some other system is "better", there are benefits and pitfalls in each.

BTW, auctions in Canada are legal - they just don't seem to be working out well. The few houses that have sold at auction have been put back onto the market via MLS when the auction-buyers have pulled out.

I don't think anyone here assumed the other system was "better". In fact, AB specifically asked about downfalls of the Australian system. But it was noted how the system in Australia does address some perennial complaints about the system here in Toronto.

I don't doubt traditional auctions have not been popular in Canada for house sales. I don't see the appeal. What is appealing about the system in Australia, as I noted above, is the availability and reliability of information. If prospective buyers here had access to more information, most importantly more transparency as to bids and counter offers, I doubt Canadians would all gather on the sidewalk around an auctioneer, but I suspect that the bidding process here would more closely resemble a silent auction.