The new law, Changes to the Estate Agents law, passed by the parliament on April 8th and in force from July 1st, also brings in stricter requirements for estate agents and tools for the Norwegian Financial Supervisory Authority to follow up on non-compliance.
Norway wants to make the bidding process more transparent for those purchasing homes and crack down on rogue estate agents, the government announced on Friday.
“This bill is intended to make home purchases safer for people, which for most people is the largest investment they make," the then finance minister, Trygve Slagsvold Vedum, said when the policy was announced in January. "We propose that real estate agents who have lost their license can no longer work as real estate agents without further ado. The companies will have a clearer responsibility for assessing the agents' suitability."
In Norway, house purchases take place after interested parties make bids following a viewing. These offers are legally binding and are made to the estate agent, who works on behalf of the person selling the home.
The intention is for the bidding round to be open and for other interested parties to be made aware of the bids. However, the practice of secret bids has become more common – something the government will try to legislate against.
What are secret bids?
Secret bids (hemmelige bud) are sent directly to the estate agent under the instruction that only the seller is made aware of the offer, with other bidders left in the dark even if they ask.
The strategy, which is particularly common in the Oslo market, means a buyer can believe they have won the bidding on a property only for the estate agent to reveal a "secret bidder" at the last minute.
This will now be outlawed, with all bids required to be transparent.
Grethe Wittenberg Meier, chief executive of the Privatmeglerenbrokerage told the Nettavisen newspaper that the ban on secret bids was overdue.
"Very often bidders feels cheated, while brokers feel they almost have to lie. It puts them in a terribly uncomfortable situation," she said. "I'm very happy about this ban."
Another practice, kupping, is where buyers approach the seller directly before the bidding round or viewing to try and get the home off the market before others have the opportunity to make offers.
READ ALSO: Key mistakes to avoid when bidding on a house in Norway
The government also proposed that real estate agents will be subject to suitability requirements and must provide a police certificate. Real estate agencies will also have an ongoing responsibility to take necessary measures against employee misconduct.
The Financial Supervisory Authority (Finanstilsynet) will be given new tools to follow up on brokerages and estate agents that don’t comply with regulations.
This will come into force later, however. The authority has until November 14th to submit a consultation note to the finance ministry on the changes it wants to real estate regulations.
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