New rules for Ontario real estate are coming into force that are meant to provide more clarity and choice for buyers and sellers. Let’s examine what these new Ontario real estate rules are, and how they can affect the sale of your home.
What are the new Ontario real estate rules?
The latest rules for real estate in Ontario, which recently took effect, include:
- The option for sellers to use an open bidding process
- Improvements to broker and brokerage disclosures
- Solutions to avoid conflicts on multiple representations
What is the open bidding option?
If you are thinking of selling your home, the open bidding option gives you the choice to disclose submitted bid prices to your potential buyers. Previously, as a seller, you were banned from disclosing this information. Making it optional gives more options to sellers. If you are having trouble finding buyers for your home, you may decide to allow your agent to disclose bids to attract more attention. Supporters of open bidding see it as a way to reduce rampant overbidding in real estate and help to reduce prices.
Not all support the new Ontario real estate rules
The Ontario government says new regulations that take effect in 2024 will help to make the home-buying process more transparent. However, critics disagree, saying the new rules can add confusion and will do little to bring down inflated prices. Ross Romano, Ontario Minister of Government and Consumer Services, says the regulations will enable home sellers to disclose details of competing bids on their properties if they choose. He says the province wants to give sellers the option of what it calls an “open offer” process. “Sellers will no longer be limited to selling their property through a closed or traditional offer system,” Romano said in a statement on Tuesday.
Differences in the bidding process are outlined below:
- Under the current system of blind bidding: Potential homebuyers can submit their offers but do not know the contents of competing bids. The law states that real estate brokerages who represent clients must disclose the number of written bids, but not the substance of those bids.
- Under the new regulations: Sellers will have the option to open the bidding process and make all offers transparent. This means brokerages who represent them can disclose details of competing bids.
The open bidding option doesn’t look that appealing to most sellers in the current market. However, real estate agents will most likely find some uses, says Randy Oickle, President of Innovation Realty Ltd. in Kanata, Ont. “(There’s) likely going to be some new business models that come along to try to take advantage of new possibilities.”
Green Party says, “End blind bidding properly”
Green Party Leader, Mike Schreiner, believes blind bidding cannot be left at the discretion of the seller. If the government wants to end blind bidding, it should do so properly. “Home-sellers shouldn’t be able to pick and choose when the bidding process is transparent and when it is blind. That defeats the purpose of ending blind bidding since it’s in the sellers’ best interest to keep buyers in the dark. A consistently transparent bidding process will help bring down the skyrocketing price of houses, ” Schreiner says.
Those in the industry that oppose the new rule also say that it does not go far enough. Lesli Gaynor, a real estate sales representative in Toronto, says blind bids should not be one of many choices. Blind bidding should either be the only method or not allowed at all. “I think in the context of today’s real estate market and the way that it functions, nobody is going to choose to have an open bid process if there is still the option to have a blind bid process,” she said. Gaynor also believes that the blind bidding process isn’t solely responsible for Toronto’s inflated real estate market. However, it does create opportunities for agents and sellers to drive up prices.
Other notable parts of the new Ontario real estate rules
Other notable parts of the law include the ability to choose a designated representative. Previously, if the buyer and sellers’ agents worked at the same brokerage, then, given the potential conflict of interest, they’d fall under a multiple representation scenario. In these cases, agents were generally only able to act as facilitators and had limits on how much they could advise clients on what a good price was.
Under the new law, designating specific agents, buyers and sellers under the new rules will free sellers from multiple representations. In addition, agents can advocate more actively on their behalf. Finally, under Phase 2 of changes, the act also includes an amended code of ethics, new enforcement tools for RECO, and an information guide from the agency that prospective clients are to receive before they agree to have an agent represent them.
Home insurance needs
Buying a home
Buying a new house is exciting, whether you’re a first-time home buyer or an experienced homeowner. While starting the buying process is thrilling, it can also be stressful. Price negotiations, home inspections and mortgage terms are important considerations; but so is home insurance. Many experienced home buyers will get a home insurance quote before buying the house, or even before deciding on any specific property. You can sometimes learn essential information about the property when buying homeowners insurance. Your insurance company will normally pre-approve the policy and then wait for your escrow/title company to send a request for Proof of Insurance when the final closing date is near.
Cancelling your home insurance policy
There are several reasons why cancelling your home insurance policy may be necessary. Some of the main reasons a cancellation might be for you are:
- Buying a new property: If you’re switching homes, it makes sense to cancel your current policy in favour of another, since your provider might not offer as much coverage or good enough rates once you’re in a different area. The new home may also have different factors that change your policy’s costs and conditions.
- You no longer have a mortgage: Home insurance is only a requirement if you’re still mortgaging your property. So, you’re no longer legally obligated to have it, though that’s something you should discuss with your broker.
The best time to cancel your home insurance is when you are selling your home. It’s likely to be a condition of the sale that you’ll maintain insurance until the date the new owners take possession. It’s best to hold off on cancelling your policy until after the sale closes so you won’t be left uninsured if the deal falls through.
- Your rates increase: Your insurance rates go up due to your provider’s policies or a change in the housing market.
- Downsizing/deciding to rent: If you’ve sold your property and are now renting a unit, like a basement apartment, home insurance is no longer a requirement. You may want to look into tenant insurance instead.
Final thoughts on Ontario’s new real estate rules
Currently, there’s little research on how blind bidding is affecting prices, although there are some indications that open auctions upward pressure on prices. Many in the industry are commenting that seeing some rules around the process of using open bidding would be more helpful. Some experts feel that there’s no sort of framework for using the new rule, which can potentially create challenges.
If you are looking to buy or sell your home, you don’t have to navigate this journey alone. These new Ontario real estate rules can be confusing during the home buying or selling process. Contact one of our isure representatives to help assist you with your home insurance needs along the way. Doing so will help the transition go smoothly while protecting your interests as a homeowner!