Some buyers wonder if they should hire a buyer’s agent, or they should represent themselves. Below we will discuss different options, what to be aware of, pay attention to and what to avoid.
First off it is important to mention that the buyers aren’t required to use an agent, they can represent themselves, in Ontario you as a buyer are required to use a lawyer to complete the transaction, but you are not required to use a realtor when buying the property.
There are over 100,000 real estate agents in Ontario, and around 70,000 in the GTA alone, while it’s very difficult to be a successful real estate agent, the barrier to enter is very low, and that low barrier is a reason why we have extremely high turnover rates (most don’t last past the first two years), many part-time agents hold a real estate license to buy and sell for family and friends, others operate selfishly without properly representing the clients.
For these reasons the buyers looking for their agents have a difficult time finding professional realtors who know the business very well and do their best to represent the clients, we are out there, and our business models are based on referrals, unfortunately, many agents give all of us a bad name.
Buying a house is not rocket science, nor a brain surgery, yet it can be a very daunting task for anyone who doesn’t have the experience or expertise. If you are confident you can gather all the info needed to make the informed decision and go through the process on your own, by all means, don’t hire an agent and represent yourself, otherwise please read below and see how a good real estate agent can help you.
We have highlighted good agents in the paragraph above because the bad ones don’t help, quite the opposite, it’s the good realtors who can improve the experience, help with difficult transactions, and provide proper advice.
We will try to answer some of the concerns and stereotypes by answering some of the common statements found by browsing online.
I have access to housesigma or other website with sold prices, I can see the comparable sales myself.
Correct, around GTA the properties listed and sold though MLS appear on various websites, the properties that don’t show up are the private sales which are in minority when it comes to real estate transactions.
Checking comparable sold prices is part of doing a due diligence, but quite frankly a small one. A good realtor will assist with that as well but will also ensure the comparisons are accounted for properly, which will take into consideration all aspects of the property including less obvious nuances.
Market trends will also be considered, real estate may not turn as quickly as the stock market, nevertheless, it can change drastically in a very short period, as we have experienced multiple times in the past few years. We monitor the market daily, see the activity, number of showings, and number of offers, and have constant communications with other professionals in the business such as mortgage brokers, real estate lawyers, other realtors, residential construction, stagers, and so on. We can see the numbers and statistics, but can also see the trends based on the very latest activity that the statistics haven’t yet addressed.
Home inspectors will spot all the problems with the house.
Even if being able to include the inspection conditions in the offer and having it accepted, a good agent may be able to advise on the estimated scope of work needed for the house, and the magnitude of potential issues, at which point the buyer can decide whether to go forward with the offer or not. Inspections aren’t free, and if the inspection reveals issues that could have been easily identified by an agent with some knowledge and experience in the matter, not only the buyer would save the inspection fees, but also won’t have to wait or a mutual release and until the deposit funds have been refunded, which may take few weeks and tie up the buyer, and prevent them from putting an offer on another property during that time if one were to become available.
We are not inspectors, but have some experience in construction, have seen many inspections, have taken the time to educate ourselves on the potential major pitfalls related to it, and so have other good agents.
Below is a picture of what’s included in our tool bag during showings: flashlight, tape, moisture meter, infrared camera, various electrical testers, multi-tool, and so on. They do help.
Condos are easy to buy, lawyer reviews the status certificate.
We encourage everyone who is purchasing the condo to have the status certificate reviewed by the lawyer and at the same time we would like to clarify some common misconceptions about a typical lawyer review. Many buyers assume the lawyers review the documents in great detail, let us have a look at a common statement that you may find on the actual review letter (the following is a copy from the actual status certificate review for a condo in Toronto):
“The status certificate may include additional documents such as owner information forms, agreements, rules, and other documents. We have not reviewed these additional documents as part of this report.”
“We cannot provide advice as to whether the reserve fund balance is sufficient to run the corporation or whether the corporation is running efficiently as this is outside of the scope of legal retainer.”
“Rules and regulations – before waiving the status certificate condition you should review the rules and regulations, there may be items of interest or concern that do not present any particular concern from the legal perspective.”
“Financial – it is beyond the scope of the legal opinion to provide advice on the budget and financial statements.”
The typical review by the lawyer will address legal issues, comment on monthly fees, and look at the status certificate summary, but unlike what many people believe, it will not go beyond the legal aspect of the document, and most importantly won’t address the financial aspects of the corporation. Can a real estate agent assist with more details? Most unfortunately can’t since they don’t understand the documents, but some can, we find that the real estate agents who fully understand the documents typically come from related professional backgrounds; condo managers, accounting (that is our background), and engineers.
Apart from the status certificate review, the lawyers won’t walk with you through the building and the unit, won’t assess the general feel of the building and how it matches your requirements, won’t look at the position of the unit and potential pitfalls, won’t check for the potential developments, and probably won’t be familiar with the buildings and builders.
To learn more about condo buying please visit our blog section with many articles about the condos.
Lawyers can prepare offers on my behalf.
That is 100% correct, lawyers can prepare the offer. Will they charge for offer preparation? Very likely yes. Will they deal with the offers on the weekend or evening, or be available for hours during the offer day? Very unlikely.
I can be represented by the listing agent and save on commission.
Yes, the listing agent can represent both sellers and buyers if the sellers agree. Double representation is not allowed in some other provinces (BC for example), unfortunately in Ontario, this is permitted. In our opinion, one agent can’t represent the best interest of both parties and in many cases, the agent won’t be acting in the best interest of buyers or sellers. The potential commission reduction will depend on the contract signed between the seller and the listing agent, unless the agent agrees to reduce the commission when representing both parties, the total commission will be paid to the agent.
If I am self-represented, will the listing agent help with due diligence on the property.
The short answer is no, you haven’t hired anyone to assist you with the real estate purchase and the listing agent is representing the seller, and should do what’s best for the seller, any due diligence is your responsibility. In addition, similarly to double representation as above, being self-represented doesn’t mean there will be any savings on commission, which will depend on the contract between the seller and the listing brokerage.
If I know how to determine the price the buying agent will only open the door and fill out a few forms.
We already talked about current market trends and sentiments, finding problems with the house, or an in-depth review of the status certificate. Proper due diligence doesn’t end there, there are many aspects of the property to be confirmed and analyzed such as confirming if the work was done with permits. and according to municipal regulations (hard landscaping is a common issue for example), knowledge of the area, investigating potential for future nearby developments or any changes that affect the property, existing surroundings to be avoided, and all practical aspects of the property which may not be obvious, especially for the first time home buyers. “I didn’t think of that” is the most common phrase we hear all the time. Buyer education is another aspect of our job, there are many nuances to consider when buying various types of properties, especially the investment properties (tenancy rules for example).
Industry connections and knowledge.
If the buyers don’t have contacts in the industry we can recommend lawyers, mortgage brokers, movers, handymen, cleaners, and so on. In addition, since we have been through hundreds of transactions, we can spot if someone is not doing their job and can recommend an alternative.
Convenience.
That goes without saying, in addition to doing proper due diligence on the properties there are many aspects of the process we will be doing on the buyers’ behalf; scheduling, dealing with issues, dealing with the sellers or their agents, doing the paperwork, and so on.
Why should the buying agent make a 2.5% commission for just opening the door and some paperwork?
If the realtor only opens the door and fills out a few forms then indeed, they shouldn’t be making much, however, a good realtor can do much more than that as we already addressed above, and can provide a tangible value.
Let’s also keep in mind that 2.5% is not a law, and while it’s still the most common compensation, some sellers these days offer less.
Some agents share a portion of their commission with their buyers via cash back. We are cash back agents and offer a significant rebate to our buyers.
What is a cashback agent?
A cashback agent will rebate a portion of their commission to their buyers after the transaction closes. Some agents rebate a flat amount, others rebate various amounts of percentages, and some keep a flat amount and rebate the rest.
Generally, the agents with the highest cash back offer the least services.
Our cash back is very significant, we don’t offer the highest rebate but aim to offer the combination of full services, experience, and knowledge which in our opinion combined with the cash back provides a great value for buyers seeking assistance in the process of buying a home. Please contact us for more details.
What type of buyer agents to avoid?
In short, you would want to avoid realtors that don’t provide any value, this is often difficult to determine for inexperienced house shoppers, here are a few general comments.
- Agents who tell you to schedule a showing with a listing agent. These agents don’t want to do anything and can’t properly vet the property if they have not seen it in person.
- Tell you to visit open houses and don’t visit the property personally.
- Part-time agents, typically aren’t always available to answer questions, show properties, and usually don’t have the same experience since they have a main job elsewhere.
Should I use a buyer agent who is family or a friend?
That depends, you should hire one that is going to benefit you and can be trustworthy, if your family member or a friend is a realtor, and is experienced, and trustworthy, you would have hired an agent like that if he or she was a stranger than by all means use one, but don’t hire one just because they are your second cousin or a friend, they won’t be much benefit if they can’t properly assist you or aren’t trustworthy.
We hope the above article provides a bit of an insight into what a good real estate agent can do for you and can help you determine if you should hire one or not.
Please don’t hesitate to contact us if you have any questions.
Thank you.
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