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REALTOR® vs. Online Digital Auction
Thinking of selling your home using a digital online auction? Here's what you need to know when comparing the proven services of a REALTOR® with a real estate auction company in a red hot market.
Many homes in today's market sell in bidding wars. Understanding the differences between blind and open bidding will allow you to make informed decisions when it comes to the sale of your biggest asset.
REALTOR® vs. Online Digital Auction
Thinking of selling your home using a digital online auction? Here's what you need to know when comparing the proven services of a REALTOR® with a real estate auction company in a red hot market.
Many homes in today's market sell in bidding wars. Understanding the differences between blind and open bidding will allow you to make informed decisions when it comes to the sale of your biggest asset.
Blind Bid Auction vs. Open Bid Auction Explained
Blind Bid Auction (REALTOR®)
Blind bidding (or silent bidding), is a process in which a seller receives offers on their home, and elects not to disclose the details of competing bids to buyers. This process is generally used by REALTORS® when representing home selling clients due to its success at generating high selling prices in hot real estate markets. REALTORS® are licensed and regulated in the province of Ontario under the Real Estate and Business Brokers Act (REBBA 2002).
REALTORS® have access to the local MLS® System.
Open Bid Auction (Online Digital Auction)
Digital auctions offer home sellers a platform to sell real estate online through a process of incremental online open bidding. Think of it as an eBay for housing. Digital home auction sites are often unregulated, and as such do not fall under the Real Estate and Business Brokers Act of Ontario (REBBA 2002). They operate in a gray area of the law under an auctioneer's exemption.
Online Digital Auctions do not have access to the local MLS® System.
Blind Bid Auction vs. Open Bid Auction Explained
Blind Bid Auction (REALTOR®)
Blind bidding (or silent bidding), is a process in which a seller receives offers on their home, and elects not to disclose the details of competing bids to buyers. This process is generally used by REALTORS® when representing home selling clients due to its success at generating high selling prices in hot real estate markets. REALTORS® are licensed and regulated in the province of Ontario under the Real Estate and Business Brokers Act (REBBA 2002).
REALTORS® have access to the local MLS® System.
Open Bid Auction (Online Digital Auction)
Digital auctions offer home sellers a platform to sell real estate online through a process of incremental online open bidding. Think of it as an eBay for housing. Digital home auction sites are often unregulated, and as such do not fall under the Real Estate and Business Brokers Act of Ontario (REBBA 2002). They operate in a gray area of the law under an auctioneer's exemption.
Online Digital Auctions do not have access to the local MLS® System.
What are the benefits of each type?
Blind Bid Auction (REALTOR®)
Blind bidding almost always favors sellers. In a blind bid auction, buyers put their 'best foot forward' and offer what they feel is fair value for the home. As a general rule, the higher the number of offers received, the higher the selling price. Depending on the home's location, type, and condition, blind bid sales often sell for significantly over asking in a hot real estate market, with a substantial differences in price between the winning bid and second-highest bid.
Open Bid Auction (Online Digital Auction)
The advantages generally favor the buyer as they can bid on a property in real-time, see competing bids, and choose to continue or abandon the bidding process at any point. Moreover, a buyer isn't legally bound to purchase the property until a fully executed purchase and sale agreement is signed. As Ontario law requires all real estate transactions to be committed to writing and signed by all parties, a winning bidder who gets cold feet can walk away without ever having signed the agreement, and without legal repercussions.
What are the benefits of each type?
Blind Bid Auction (REALTOR®)
Blind bidding almost always favors sellers. In a blind bid auction, buyers put their 'best foot forward' and offer what they feel is fair value for the home. As a general rule, the higher the number of offers received, the higher the selling price. Depending on the home's location, type, and condition, blind bid sales often sell for significantly over asking in a hot real estate market, with a substantial differences in price between the winning bid and second-highest bid.
Open Bid Auction (Online Digital Auction)
The advantages generally favor the buyer as they can bid on a property in real-time, see competing bids, and choose to continue or abandon the bidding process at any point. Moreover, a buyer isn't legally bound to purchase the property until a fully executed purchase and sale agreement is signed. As Ontario law requires all real estate transactions to be committed to writing and signed by all parties, a winning bidder who gets cold feet can walk away without ever having signed the agreement, and without legal repercussions.
What are the drawbacks of each type?
Blind Bid Auction (REALTOR®)
Some buyers feel that the process favors the seller. Further, buyers may think that the number of offers received by the seller may be exaggerated or simply fabricated. The Real Estate Council of Ontario (RECO) has implemented consumer safeguards to eliminate 'phantom' offers and validate the number of offers received vs. reported. Buyers who participate in a blind bid auction can ask the registrar to review the number of offers received. As a regulated industry, penalties to REALTORS® who are found to have misrepresented this number include license termination, substantial fines, and criminal prosecution.
You can read more about offer audits here.
Open Bid Auction (Online Digital Auction)
The selling price in an open bid auction is determined by the bid/budget of the second highest bidder. And that can impact the sellers' bottom line.
Consider this example. Ten buyers place a bid on a home listed at $500,000. Let's assume the first eight buyers exit the auction at $600,000, leaving two bidders competing for the home. Limited by a mortgage pre-approval, the second last bidder makes a final bid of $650,000, and the winning bid wins with an incremental bid price of $652,500. What if that winning bidder was ready to pay $700,000 for the home?
It's not uncommon to see a considerable difference in price between the 2nd highest bid, and the highest bid, even exceeding 6 figures in a blind bidding war.
What are the drawbacks of each type?
Blind Bid Auction (REALTOR®)
Some buyers feel that the process favors the seller. Further, buyers may think that the number of offers received by the seller may be exaggerated or simply fabricated. The Real Estate Council of Ontario (RECO) has implemented consumer safeguards to eliminate 'phantom' offers and validate the number of offers received vs. reported. Buyers who participate in a blind bid auction can ask the registrar to review the number of offers received. As a regulated industry, penalties to REALTORS® who are found to have misrepresented this number include license termination, substantial fines, and criminal prosecution.
You can read more about offer audits here.
Open Bid Auction (Online Digital Auction)
The selling price in an open bid auction is determined by the bid/budget of the second highest bidder. And that can impact the sellers' bottom line.
Consider this example. Ten buyers place a bid on a home listed at $500,000. Let's assume the first eight buyers exit the auction at $600,000, leaving two bidders competing for the home. Limited by a mortgage pre-approval, the second last bidder makes a final bid of $650,000, and the winning bid wins with an incremental bid price of $652,500. What if that winning bidder was ready to pay $700,000 for the home?
It's not uncommon to see a considerable difference in price between the 2nd highest bid, and the highest bid, even exceeding 6 figures in a blind bidding war.
Are REALTORS® more expensive?
REALTOR®
A common misconception is that all REALTORS® charge 5-6% commission. While some REALTORS® do, sellers are often surprised to learn that commissions cannot be fixed by law, and that rates are negotiable. Equity One has been charging a 1% listing commission since 2008. When you include the commission offered to the REALTOR® representing the buyer, our total commission is 3% to 3.5% of the selling price for full service.
The vast majority of properties listed on the MLS® system operated by the Ottawa Real Estate Board are sold by full service real estate agents using time-tested strategies.
Online Digital Auction
Some online digital auction offer a 1% listing fee. Those properties simultaneously listed on the MLS through a third-party typically offer an additional 2% when the buyer is represented by a REALTOR®, for a total of 3%. Properties not listed on the local MLS® system receive a fraction of the exposure afforded to those listed.
In the year ending December 31st, 2021, online digital auctions made up less than 0.01% of all property sales listed through the MLS® system operated by the Ottawa Real Estate Board.
Are REALTORS® more expensive?
REALTOR®
A common misconception is that all REALTORS® charge 5-6% commission. While some REALTORS® do, sellers are often surprised to learn that commissions cannot be fixed by law, and that rates are negotiable. Equity One has been charging a 1% listing commission since 2008. When you include the commission offered to the REALTOR® representing the buyer, our total commission is 3% to 3.5% of the selling price for full service.
The vast majority of properties listed on the MLS® system operated by the Ottawa Real Estate Board are sold by full service real estate agents using time-tested strategies.
Online Digital Auction
Some online digital auction offer a 1% listing fee. Those properties simultaneously listed on the MLS through a third-party typically offer an additional 2% when the buyer is represented by a REALTOR®, for a total of 3%. Properties not listed on the local MLS® system receive a fraction of the exposure afforded to those listed.
In the year ending December 31st, 2021, online digital auctions made up less than 0.01% of all property sales listed through the MLS® system operated by the Ottawa Real Estate Board.
I have more questions.
Let's chat!
Give us a call, or take advantage of a free in-home consultation. We will help you determine what's best for you, without gimmicks, obligation, or pressure.
(613) 655-9992
Request a call back
I have more questions.
Let's chat!
Give us a call, or take advantage of a free in-home consultation. We will help you determine what's best for you, without gimmicks, obligation, or pressure.
(613) 655-9992
or request a call back
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