In Sun Tzu’s famous and ancient strategy treatise The Art of War, he devotes the final chapter to spying because spies give the general the superior intelligence needed to win wars. When making real estate deals, you’re not going to have spies, but you do need to know what’s going on.
Transparency is everything in real estate for a few reasons. Read on to learn what they are.
Pricing
Buying a home is usually the most expensive thing a person ever purchases. Transparency in pricing effectively means knowing everything about the home’s condition. You can’t buy a property expecting to move in only to find out it needs serious work done before it’s ready for habitation.
In the age of bidding wars, it helps when the listed price is the actual price. Sometimes sellers list their home for far under what they’d accept in the hopes that multiple people get attracted to the listing, and after a bidding war, end up paying well more than the listed price.
Reviews
More buyers today use the digital world for transparency, relying on verified user reviews to get trustworthy information. The digital innovator Regan McGee encourages transparency by refusing to let real estate agents pay to get ranked on his real estate technology platform, Nobul.
“Nobul brings choice, accountability, and transparency to an industry that has, for decades, been widely regarded by homebuyers as opaque and challenging,” McGee said in an interview.
Make sure you know everything possible about the home you’re set to buy, the pricing, and the agent helping you.
Legally Mandated Transparency for Bidding Wars
How can buyers be sure that bidding wars raising home prices are real? In Ontario, real estate legislation is written by the government and prevents bidders from seeing the contents of other bids. Only the final sale price eventually becomes public.
However, there are laws governing what agents and brokerages must keep in their files for at least a year. If a bidder who didn’t win their bid wants to know how many other bids there were, they can ask the Real Estate Council of Ontario to pursue that information from the brokerage on their behalf.
Transparency is also required when brokerages serve multiple parties. For example, if the same broker represents the buyer and the home seller, they must disclose this in writing to all parties involved in the transaction.
To be sure, this is perfectly legal, and it’s known as multiple representation. But everybody needs to be aware from the start, and the brokerage gets written consent from the affected parties. That isn’t the only rule dealing with financial disclosures, though.
If the brokerage representing a seller agrees to reduce their commission, they need to disclose this fact to all parties so one buyer doesn’t get an advantage over another.
Transparency in the real estate sector, like anywhere else, can be like whack-a-mole; you make a law to increase information awareness in one place just for secrecy to crop up elsewhere. The good news is that with real estate technology and governments writing laws to increase transparency, homebuyers should have reliable data to make an informed decision.