Jason Peschell
Website: soldeasy4u.ca
Phone: 905-877-5211
Fax: 905-877-5154
Email: jason.peschell@rogers.com
Jason Peschell |
When you deal with a listing agent, remember they have a contract with the seller to represent the sellers best interests. You can also sign a contract with the selling agent when purchasing the home, but he is now working for BOTH you, the buyer and the seller in a multiple representation arrangement. This is a conflict of interest of sorts with limitations as to not disclose:
- what the seller will accept less than the listed price
- what the buyer will pay more than the list price
- the motivation of or personal information about the Buyer or seller
- the price the Buyer should offer
- the terms of any other offer
Having buyer representation outside of the listing brokerage could be an advantage to the negotiating power and deal "validity" which should be contemplated when search for a home. This should also be considered when you are shown homes that are listed by your contracted buying agent.
When you are told buying is “free”, remember the commission is paid by the seller which often has the buying agent’s commission included in the price. Most homes other than “for sale by owner” include some sort of commission. Also, if the commission offered by the listing brokerage is less than in the buyer representation agreement, you may be responsible to pay the difference. What happens if the commission is more, who get the difference, this is also negotiable.
Buyer Representation Agreement commission clause:
“...the Buyer agrees that the Brokerage is entitled to be paid a commission of .........% of the sale price of the property or .................... The Buyer agrees to pay directly to the Brokerage any deficiency between this amount and the amount, if any, to be paid to the Brokerage by a listing brokerage or by the seller.”
When entering buyer representation agreement, there is a “holdover period” which is the time after the contract expires that the agent is eligible to collect the commission if you enter into a agreement to purchase a property as per the contract location & type. E.g. if you purchase a for sale by owner property within this period, you are obligated to pay the commission.
As stated above, the commission offered by the listing brokerage may be more or less than agreed in the buyer representation agreement. Depending on the agent, this could affect which homes you are shown so know your rights; you are entitled to see all available homes regardless of the commission. Remember, you will need to pay the difference if seller is offering less than your agreement but you should decide whether or not to see the home. Also, don’t be pressured into buying a home just because it has a higher commission.
When a home has multiple offers, it may be and incentive for the seller to accept an offer if the conditions are remove. But, make sure you know the risks involved since it could be costly, especially if you remove a home inspection or mortgage financing clause which be very costly if issues arise.
If you offer more than the market value for a home in order to get it, the mortgage company may not cover the difference and you would be obligated to pay the difference or be sued or lose your deposit for breach of contract if you are unable to purchase the home.
If you are dealing with an unethical agent, you may be told of competing offers from non-existent buyers in order to driving up prices (and commission). This practice is against the code of ethics and can be reported to Real Estate Council of Ontario (the licensing & governing body for real estate professionals), but proving this is difficult.
Make sure you get a Comparative Market Analysis (CMA) in writing that explains the specific market value or value range for the home you want to buy including similar comparables (location, size, type, age, upgrades, etc) and know the value differences.
A CMA is more an art than science which means upgrades may be evaluated slightly differently depending on the situation. Bidding wars, location/demand and neighbourhood standards call affect the fair market value of a home, so get as much information as possible before making an offer.