These realtors think auctioning houses is best for buyers and sellers in Kamloops, Okanagan
The “new normal” in the Okanagan and Kamloops real estate markets is to have multiple buyers bidding on the scant offerings currently available.
But, they’re going in blind, not knowing how high they actually need to bid in order to win the chance to buy a home.
“There is really a lack of transparency going on,” Daniel Lambert, president of Precision Real Estate Auctions, told iNFOnews.ca. “A lot of people have no idea of how high to bid. Are they overpaying for the property? Or, oftentimes, you’re hearing that someone is saying: ‘A property sold and I would have paid ten grand more for it but I had no idea.’”
Given the speed at which bids are being made in the current hot market, potential buyers are rushing in and making offers without having the home inspected or imposing conditions on the sale, leaving themselves unprotected.
While having numerous people bidding blindly may sound good for sellers, it can still leave money on the table that could have been paid by live bidding, Lambert said.
The open bidding process, with a set auction date, also gives buyers the time to examine the properties. While Precision pays for an independent home inspection, potential buyers can also hire their own inspectors and tour the home.
Bids are generally made without the buyers imposing conditions of sale but the buyers will know, for example, if the roof might need replacing in the next few years and adjust their offers accordingly.
Each bidder has to demonstrate they can finance their purchase and put down a deposit that is non-refundable if they are the successful bidder.
Precision has been around for the last decade so their approach is not new. What is new is that they are no longer just tapping into the high end real estate market. They will handle properties down to the $500,000 range.
Their history also shows that the process can be effective in slower markets as well.
In a traditional market, homes are generally sold for less than the asking price. An open bidding process can drive the offers closer to the asking price.
Precision has an “express” option where videos and photos are used in a marketing campaign designed to draw interest from multiple buyers in order to generate active bidding.
This is the video for The Cottage at Wild Rose Bay.
That’s a six-week program, usually aimed at lower-priced homes. For higher-end properties, launching national and international campaigns is generally part of a three-month process.
Come auction day, bidders can watch live online and jump into the bidding at any time.
Lambert said he brought the live auction concept to Western Canada 10 years ago by building a house in the Shearwater neighbourhood of Kelowna and selling it at an unreserved auction.
Since unreserved auctions can be scary, especially in slow markets, most have reserved prices.
Lambert started the company in Kelowna but it is now headquartered in Vancouver with agents, himself included, living throughout the province.
A couple of the company’s more recent efforts involved homes in the Shuswap area.
One, on Swansea Point on Mara Lake, sold at an unreserved auction last fall.
While Precision is one of a very few firms that promote the auction concept, it’s unclear whether the idea will catch on as real estate continues to be a hot commodity.
One thing it’s not likely to do is moderate the rising prices.
“There are a lot of complexities to this process,” Brendon Ogmundson, chief economist of the B.C. Real Estate Association said in an email when asked if open bid auctions were a good idea in the current market. “I don’t think this is a clean ‘good vs bad.’
“The Okanagan is currently at record low levels of inventory while experiencing an enormous influx of demand, partially driven by a pandemic-motivated desire for space and an ability to work remotely, and partially by very low mortgage rates and a recovering provincial economy. Those conditions will translate to rapidly rising prices regardless of how the offer process works.”
He pointed out that Australia uses an “auction offer process” and has similar affordability issues to Canada.
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