Ottawa startup says it wants to bring more transparency to the process of selling homes through online auctions, hoping to reduce blind bidding rounds and bullying bids which have been widely criticized in Canadian housing markets.
Unreserved Inc. has already held nearly 80 property auctions in and around Ottawa, where it is based, since last July. The company announced Thursday that it has raised $33.85 million from a group of investors, including merchant bank Intercap Equity Inc., the former chief executive of Brookfield Real Estate Services Ltd. , Simon Dean, an anonymous group of real estate investors and others.
Canadian housing is facing record prices in many markets. Some experts say the price spike has been fueled in part by blind bidding wars, where buyers compete without knowing how much each other is bidding. Although the federal Liberals promised to introduce greater transparency into the home buying process ahead of last year’s election, including banning blind bidding, the government has yet to followed through on his promise.
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Unreserved began marketing itself last year as a private-sector 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 bidding on the company’s website, buyers and their agents can see the latest offers on a home efficiently in real time, which O’Connor says should help prevent wild bidding.
“What really hurts the market is when someone makes a mistake and pays $100,000 more than they should have paid. Now it becomes comparable [for the value of similar properties], driving prices up even further.
Christopher Alexander, president of Re/Max Canada, said Thursday that “the state of the market is really ripe for an entrant like ‘Unreserved.’ He added that Mr. Dean, who is also Chairman of the Company and former CEO of Royal LePage Real Estate Services Ltd., will bring essential industry knowledge to the Company.
Re/Max’s Mr. Alexander said he’s not sure a company like Unreserved would be effective in the buyer’s market when there’s less competition for homes. But Mr O’Connor said that even with an oversupply, “we believe our auction will then perform at its best”, as the auction process generates interest from potential buyers.
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Open auctions for goods are commonplace in some markets, such as Australia. While many have moved there online during the pandemic, much has remained in person when it’s safe to do so.
Unreserved charges a 1% auction fee to sellers, taking on the role of listing agent and charging less than the traditional real estate commission of around 5%. At an auction that ended Thursday for a two-story detached house in Barrhaven, on the outskirts of Ottawa, more than 2,700 people watched the final moments in real time – some of them cheering bidders from an active comments section.
After 85 bids, many in the $2,500 minimum bracket, the winning bid came in at $857,500, 32% above the starting price of $650,000.
Mr O’Connor has taken a rather roundabout trip to door-to-door auctions. After owning a used car business in his twenties, he pleaded guilty to fraud charges in 2009 after the RCMP alleged the company provided misleading or incorrect information on loan applications automobile. He now says there was a problem with the loan approval system, but he was ‘willingly blind to what was happening in my stores’ and ‘I took responsibility for everything that happened. ‘happened”.
Mr. O’Connor helped found and lead E Automotive Inc. over the past decade, extending his used car expertise into the world of online vehicle auctions. The company went public 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 by the time of the IPO, Mr O’Connor had left the company, taking with him the relationship he had established with Jason Chapnik, chairman of E Automotive and CEO of Intercap.
Intercap led the funding round announced by Unreserved on Thursday, while Mr. O’Connor said he invested $10 million of his own money in the round. (None of the company’s other investors were available for interviews Thursday.)
Unreserved describes itself as a “full-service” company, supporting staging and home condition reports, and offering a guaranteed price to sellers based on the sale prices of comparable recent homes. “Ninety-five percent of the time we exceed guarantees,” O’Connor said. He expects to spend the company’s new capital on hiring, building the company’s software and expanding his staging division.
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