A startup in Ottawa says it wants to bring more transparency into the home sales process through online auctions in hopes of reducing the blind bidding rounds and bullying bids that have been heavily criticized in the Canadian housing markets.
Unreserved Inc. has already hosted nearly 80 real estate auctions in and around Ottawa, where it is based, since July last year. The company announced Thursday that it had raised $ 33.85 million from a group of investors, including commercial bank Intercap Equity Inc., former CEO of Brookfield Real Estate Services Ltd. Simon Dean, an unnamed group of real estate investors and others.
Canadian homes are filled with record high prices in many markets. Some experts say sky-high prices have been driven in part by blind bidding wars, with buyers competing without knowing the amount of bids by others. Although the federal liberals promised to introduce greater transparency in the home buying process ahead of last year’s election, including by banning blind bids, the government has not yet followed up on its promise.
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Unreserved started pitching itself last year as a private solution to this problem. “Our job is to create a fair bidding environment,” Ryan O’Connor, founder and CEO of Unreserved, said in an interview. Through auctions on the company’s website, buyers and their agents can see the latest bids for a home effectively in real time, which Mr O’Connor said should help prevent wild bidding.
‘What really hurts the market is when someone makes a mistake and pays $ 100,000 over what they should have paid. It now becomes a comparable [for the value of similar properties], which drives up prices even more. ”
Christopher Alexander, president of Re / Max Canada, said Thursday that “the state of the market is really ripe for a new entrant like” Unreserved. He added that Mr. Dean, who is also the company’s chairman and former CEO of Royal LePage Real Estate Services Ltd., will bring critical industry knowledge to the company.
Re / Max’s Mr Alexander said he was unsure whether a company like Unreserved would be effective in a buyer’s market when there is less competition for housing. But Mr. O’Connor said that even with a surplus of supply, “we feel our auction will perform its best” as the auction process attracts interest from potential buyers.
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Open real estate auctions are common in some markets, such as Australia. While many moved online there during the pandemic, a large portion have remained personal when it is safe to do so.
Unreserved charges an auction fee of 1 percent to sellers, taking on the role of a listing agent and charging less than the traditional real estate commission of about 5 percent. In an auction that closed Thursday for a detached two-story home in Barrhaven, in the suburb of Ottawa, more than 2,700 people watched the last moments in real time – some of them cheering on bidders from an active comment section.
After 85 bids, many of them in the $ 2,500 minimum, the winning bid came in at $ 857,500 – a 32 percent increase from the starting price of $ 650,000.
Mr. O’Connor took a pretty roundabout for housing auctions. After owning a used car company in his 20s, he pleaded guilty to fraud charges in 2009 after the RCMP alleged that the company entered misleading or incorrect information about car loan applications. He now says there was a problem with the loan approval system, but that he was “consciously blind to what was going on in my stores” and that “I took responsibility for everything that happened.”
Mr. O’Connor co-founded and operated E Automotive Inc. last decade and expanded its used car expertise into a world of online car auctions. The company was listed on the Toronto Stock Exchange in November and was valued at more than $ 1 billion before shares fell in recent weeks to value it at around $ 760 million. But at the time of the listed offering, Mr. O’Connor left the company – and brought with him the relationship he had formed with Jason Chapnik, E Automotive’s chairman and Intercap’s CEO.
Intercap led the round of funding that Unreserved announced Thursday, while Mr O’Connor says he put $ 10 million of his own money into the round. (None of the company’s other investors were available for interviews Thursday.)
Unreserved describes itself as a “full-service” company that takes care of staging and housing condition reports, and offers a guaranteed price to sellers based on the sales prices of the latest comparable homes. “Ninety-five percent of the time we exceed the guarantees,” said Mr. O’Connor. He expects to use the company’s new capital to hire, expand the company’s software and expand its staging department.
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