Winners & Losers: Why Participation Badges Don’t Work In Real Estate

There has been a lot of talk lately about opening up the bidding war process for houses because people feel the current process isn’t fair to them.

It sounds like the kids who were given participation badges when they were young instead of first, second and third place badges like the rest of us want to ruin the housing system too.

We need to have a winner and, dare I say the word, a loser for some outcomes. When you lose, you start to learn how to become better. You start to learn what you can to improve so you can win the next time.

We all can’t win at everything and nor should we. We all need to be inspired to do better.

So how does this relate to housing? Lately, there has been a lot of noise about the unfairness of the bidding war process for homes and why some feel it needs to be opened to live auction style of bidding to give everyone a fair chance. Really? Really?

Let’s peel this back for a minute.

If you have a live open auction bidding process where people see each others’ bids, they are given the opportunity to improve their offer in a split second. They get to observe everyone else’s bids/offers and can get caught up in their own egos as they size up the competition and feel they should spend more than the person standing beside them.

In the current multiple offer system, when you are given a chance to improve your offer, you’re given time to think about your decision, call your bank, your mortgage broker and your parents if necessary. Essentially, you’re given the opportunity for that lifeline call and can take a moment to cool off so you don’t make a hasty decision. Given the prices of homes in Toronto, we are talking about a $1 million+ decision.

Why shouldn’t you have more time to make that decision and consult with experts?

With a live and open bidding process, there is no opportunity to cool off, think and consult with others.

It’s easy to lose sight of the fact that people are parting with hundreds of thousands of dollars, their life savings and purchasing the biggest asset of their lives.

Shouldn’t we give them a real opportunity to think about their decision?

Live, open bidding works well for cars and other less expensive items but for a house the biggest investment of your life? I think not.

Thoughts? Questions?

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