House prices

Denley: In a crazy housing market, consumers deserve fairer rules



With multiple auctions now the norm, buying a home has become an auction – but with one critical difference.

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When will the provincial government wake up and offer buyers basic consumer protection? People who buy a million dollar house have less collateral than those who buy a used car for $ 10,000.

Ottawa’s housing market isn’t the craziest in the country, but it’s dead crazy. Figures from the Ottawa Real Estate Board for February show home prices up 27 percent in one year and condos up 17 percent.

That’s a lot, but the numbers for February are now old news. Over the past month, I have helped my youngest son sell his house and buy a condo. In the few weeks we were in the market, prices went up by tens of thousands of dollars. If you wanted to bid on a location based on last month’s sales, you were ridiculously overwhelmed.

It’s a good situation for sellers, not so good for buyers. Before the buying panic, an asking price was generally a reasonable approximation of what the seller hoped to get. Buyers naturally wanted to spend a little less. Now, demand is really just a small indicator of where the auction might start.

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At the end of the day, everything is worth what people are willing to pay for it, but how you come up with that number matters. With multiple auctions now the norm, buying a home has become an auction – but with one critical difference.

In a real auction, you know what your competition is bidding for. When buying a home, you have no idea what the competition has offered. Real estate agents are not legally allowed to say what the offers are. You could easily exceed everyone else by $ 50,000. At least they have the decency not to tell you that was the case.

The blind auction not only puts individual buyers at a disadvantage, it hurts buyers of other homes by driving up neighborhood prices. When my son decided to sell he had a price in mind and would have been happy to take it. Then, a similar, less modern house around the corner sold for $ 100,000 above expectations. It has become the new benchmark for the neighborhood.

An auction where buyers had full information on competing bids wouldn’t stop people from overspending, but at least that would be an informed decision, not guesswork. It would require changes to the rules and procedures for real estate agents, but it would be much fairer than bidding blindly. We wouldn’t do this when buying a used table at an auction. Why should we do it for a house?

Now that all the power is in the hands of the sellers, conditional offers of any kind are considered unacceptable. It is a big problem for buyers. Before the housing frenzy, one would have been considered an idiot to buy a house without a home inspection. Now it is common practice not to have one.

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Buying a used car requires a safety certificate so you know it is mechanically sound. That’s fine, but why not do the same for houses, the most expensive thing we’ll ever buy? The house you blindly bid on after a brief visual inspection may have major electrical faults, bats in the attic, and a leaky foundation. In the current situation, this is both a surprise and the problem of the new owner.

This is not fair and is easily remedied by forcing sellers to have their homes inspected and presented to buyers.

These are basic steps the Ontario government could take, but it did not. He is consulting on changes to real estate rules, but the closest to a fundamental change is allowing sellers to reveal details of the offer to buyers. Why would they do it?

Ultimately, the only way to moderate house prices is to match supply with demand, but it won’t happen quickly. In the meantime, let’s show buyers a little fairness and a little more transparency.

Randall Denley is a political commentator and author in Ottawa. Contact him at [email protected]

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