We debunk five real estate myths to help you become a more informed home buyer (and offer one that’s a fact, but should be taken with a grain of salt).
1. The agent representing both the seller and the buyer is working just for you.
No matter where you live in Canada, real estate agents and their brokerages can represent both sides of a transaction—the buyer and the seller. While this practice has come under attack as of late (based, primarily on unethical behaviour) it’s a situation that’s actually quite common in smaller towns and in rural jurisdictions, where a large area of land can be serviced by only a handful of agents.
It’s known as dual-representation and it arises whenever the same agent or brokerage is in a position to represent both the buyer and the seller in the same transaction. Thing is most provincial councils that govern realtors were already aware of the possible problems that can arise from dual-representation so most have a strict set of regulations that govern how agents and brokerages handle this situation. In Ontario, for instance, an agent or brokerage must explain that they have a fiduciary responsibility to both parties and that both parties will be receiving guidance and advice from the same agent/brokerage. To ensure that this situation is actually explained to both the buyer and the seller, the agent/brokerage must then get both parties to the transaction to sign Form 320, which states that everyone is aware of the dual representation situation.
Of course there are problems with how well the impact of dual representation is explained. Just keep in mind, keep asking questions until you get an answer you understand. If you don’t understand the answer, seek out explanation elsewhere. Either from the agent’s brokerage manager or even from your real estate lawyer.
There is also the option not to sign these forms. By refusing to sign you are notifying your agent and their brokerage that you are not comfortable with the dual-representation situation. The brokerage must then make a choice: Work with the buyer or the seller. If they decide not to work with you, you will then need to hire another agent and brokerage to work with to complete the transaction.
2. All contracts are standardized, so don’t bother reading that fine print.
Buyer and seller representation agreements are not standardized. Brokerages and agents may use similar paperwork—and even similar wording—but many terms and conditions in real estate forms can change from broker to broker, agent to agent and jurisdiction to jurisdiction.
All terms and conditions, then, should be discussed with your agent before signing any forms. It’s at this time you should ask for clarification and explanation. For instance, most forms include a clause that stipulates that there is a “holdover” period. Do you know what this means? (It’s the period of time, in which you are legally responsible for paying the agent the agreed upon commission, if they did not fully help to finalize the purchase or sale of a home.) Always ask for clarification and explanation, so that you know exactly what you are agreeing to and what’s required of you, and your agent.
To that end, it’s also a good idea to ask your agent for a detailed breakdown of what you can expect from him or her, as well as a copy of the signed agreement.
3. You signed a Buyer’s Representation Agreement. You’re not worried, as you can cancel at anytime.
Many homebuyers will sign a Buyers’ Representation Agreement and falsely assume that if they aren’t happy, they can stop working with the agent/brokerage at any time. These are the same buyers that sit at home, fuming, anxiously waiting out the end of the contract.
Once a contract is signed, both you and your agent have an obligation. Your agent’s obligation is to help you either find a home or sell your home. Your obligation is to pay your agent the commission you agreed upon, should you buy or sell a home within the three months to six months of signing the contract (the actual length of time depends on what you agreed to).
If, however, you find you are unhappy with how your agent is handling your business you have four solutions:
No. 1: Talk to your agent. Tell them why you’re unhappy and let them know what you need or expect. A respectful, clearing of the air may help both of you to establish a productive working arrangement.
No. 2: If that fails, talk to your agent’s manager. Every brokerage employs a manager that oversees all the agents. This person is typically a highly-experienced agent and is well-versed in the regulations and ethical codes that realtors must adhere to. A discussion with this manager should be respectful, but also point out what is making you unhappy and why. If the manager doesn’t see a way to improve the relationship between you and the agent, they could suggest working with another agent within the brokerage. This is totally legit as the contract you signed is with the brokerage, not the individual. This means you can switch agents and not break your contractual obligations.
No. 3: If you still have no resolution, consider taking your concerns by filing a complaint with the provincial council that regulates sales agents and brokerages. For instance, the Real Estate Council of Ontario is responsible for monitoring and addressing claims of unethical and fraudulent behaviour. In B.C. you can talk to the Real Estate Council of British Columbia and in Alberta, discuss your concerns with the Real Estate Council of Alberta.
No. 4: Of course, you can always return to the non-action answer: Stay at home, waiting out the time until your contract expires.
4. The only way to win a bidding war is to offer more money.
While price is an incredibly important factor, particularly when there are multiple bids, there are other facets to a deal that are just as important. For instance, some sellers worry about the closing date, others want to keep certain items in the home, while others aren’t so keen on having major changes done to the property.
Before adding numbers to your offer, make sure talk to your agent. You may be able to offer a better deal without being the highest bidder.
5. You put down a large deposit only to have the deal fall through. You’re not worried, though, as you know you’ll get the money back.
If you legally back out of the deal—say you put in an offer that’s conditional upon getting a mortgage and then you’re denied the money by your lender—you should get your deposit money back. Just not immediately. That deposit is held in the listing agent’s brokerage trust account. The money can only be released, and returned to you, once the buyer and the seller agree. (There’s a form to sign and that form is then filed with both the listing brokerage and your buyer’s agent brokerage.) But if the seller is upset with how the process transpired, they may demand to keep the deposit. Then, you’re only recourse is to go to court.
6. December is a great time to buy!
True. But this fact should be taken with a grain of salt.
Despite the fact that real estate prices have been surging in the last few years, the average home price is typically lowest during the month of December. Take, for example, Toronto’s average sale prices. In 2014, the average sale price for a Toronto home in September was $573,676. In December of that same year it was $556,602. In 2013, the average sale price for a Toronto home in September was $533,797. In December of that same year it was $520,398. The trend was the same in 2012, with the average sale price for a Toronto home in September at $503,662 and four months later in December it was $478,436.
But we need to keep in mind that the number of homes listed for sale and available on the market also drops in and around December. While buying in December could certainly see a reduction in your purchase price, you must also realize that it also limits your selection.