It is officially past December 1, 2023, a big day for Ontario real estate. The second phase of TRESA has come into effect.
The Trust in Real Estate Services Act (TRESA) was originally introduced by the Ontario government in 2020. The new legislation and regulations are designed to provide consumers more choice and protection during their real estate transactions. The first phase was more focused around brokers and salespersons, while this second phase has some implications that will change the experience for consumers (buyers and sellers). There are a few key items that come into play as part of phase 2, including the Open Offer Process.
What is the ‘Open Offer Process’?
It means that the Seller can choose to share contents of an offer. This could be just the closing date, or all parts to the offer, including price, conditions and deposit amount. This is only shared with the competing offer parties, those agents and their buyers with registered and submitted offers. Of course no personal information from the offers can be disclosed.
What does this mean for Sellers?
Sellers will decide upon listing the property, with their chosen agent, whether they would like to conduct a closed offer process or open offer process when it comes to offers on their home. This will then be disclosed on the listing through the Realtor remarks. As the Seller you will have the choice about what specifically within the offers that you are interested in having shared. Can you change your mind? Yes. As the seller, you can decide later after offers arrive that you no longer want to share any information about them with the competing parties, or vice versa.
What does this mean for Buyers?
Buyers need to be sure they are working with an experienced and trustworthy agent to lead them through this process. As the buyer, important conversations need to be had about your comfort level with the contents of your offer being shared by the Seller to the other competing buyers.
Ultimately it is up to the Seller to decide whether they would like to open it up to a transparent offer process or stick with the blind bidding system we have been using. Either way the number of offers registered will still need to be disclosed to all buyers. Whether any other information is shared is up to the Seller.
What does the RK Team think about the change?
Time will tell how this process will play itself out. Certainly there are some advantages for the Buyers. In the current blind bidding process the unknown of what the other party is offering is always the difficult aspect of a multiple offer situation. The transparency found in the open offer system may help buyers feel more comfortable and less uneasy about submitting offers in a competing offer situation, however it is only the Seller who gets to decide whether to have it open or not. The Seller could take the opportunity to share offer details in order to get Buyers to see where they stand and up their chances. But likely, without an experienced and trustworthy realtor, the Buyer could pay more than what is necessary.
As for Sellers, the benefits of an open offer process are not so clear. FOMO is a very real factor in blind bidding and often plays to a Seller’s advantage. The Seller may be taking a risk by sharing the offer details. A Buyer who is uncomfortable with disclosing their offer could choose to include a clause in their offer that prevents a Seller from disclosing any details, and in fact could allow them to walk away should a Seller choose to give out details of offers..
We believe and hope that this new approach will force realtors to counsel their clients to price their home, or offer, using a pricing strategy that is based on real time comparables. The value and skill of a realtor will be shown in that only an experienced and engaged agent will be able to accomplish this. A strong realtor will know the value in the neighbourhood, the local market and the recent activity, all factors that will impact the sale or purchase. There is also a great deal of value in the intuition that so often plays a huge part in any deal. This may remove the novelty of any open offer process.
In the coming days we will share more information on the other new requirements and changes. It may seem daunting or complicated but we are here to walk you through the process as always. Reach out if you have any questions!
If you would like to read more about the new regulations and expectations of real estate in Ontario, check it out at this link - https://www.reco.on.ca/getmedia/da38cca5-8432-4018-821e-57260d6caebc/RECO-Information-Guide.pdf