FOUND THE HOME

OF YOUR DREAMS?

NOW HERE’S YOUR TO-DO LIST

Do I have to sign a buyer representation

agreement?

REAL ESTATE COMMISSIONS VARY

TOP 10 Buying and

SellingMistakes

BRIDAL EDITION

Do you have any comments or inquiries about the reconnect newsletter?Please send them to: communications@reco.on.ca

Real Estate Council Of Ontario3300 Bloor Street WestSuite 1200, West TowerToronto, Ontario M8X 2X2

Tel: 416-207-4800Toll-Free: 1-800-245-6910Fax: 416-207-4820

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Disclaimer: While RECO makes every effort to ensure that the information in this publication is current and accurate, RECO does not warrant or guarantee that it will be free of errors. The information contained in this publication is not intended to cover all situations. It is general information only and users/readers are encouraged to seek their own independent advice for particular fact situations.

Providing objective adviceRECO works to protect consumers and enforce the rules that real estate professionals in Ontario must follow. That means we can offer buyers and sellers impartial advice on how to protect themselves, and ask the right questions during the real estate transaction.This newsletter is a great place to start. Inside, you’ll find key information about buying and selling pitfalls, commissions and more.

Three pillars of protectionAll brokers and salespersons in Ontario are registered with and regulated by RECO. That’s why working with a real estate professional provides buyers and sellers with three pillars of protection.

KnowledgeReal estate professionals must complete courses before they can enter the real estate sector. And once they are in the profession, they complete additional courses every two years to keep their knowledge up–to-date and their skills sharp.

Professional standardsBrokers and salespersons are required to uphold professional standards that emphasize treating anyone involved in a transaction with fairness, honesty and integrity, and following rules and regulations that are there to protect consumers. In the rare instance that something goes wrong and you want to complain about your representative or the brokerage, RECO will investigate the complaint and take steps to hold the real estate professional accountable for their actions.

InsuranceDeposit insurance provides you with peace of mind knowing that your hard-earned payment will be held in trust and insured against loss, insolvency or misappropriation by a brokerage.

Information is powerWhen it comes to real estate, informed consumers have more positive experiences. Understanding the process and asking the right questions can make a big difference throughout the buying process. I encourage you to keep reading to learn more.You can also find more buying and selling tips on RECO’s website (www. reco. on. ca) and on our Facebook page (www.facebook.com/RECOHelps). RECO’s “Ask Joe” column in the Toronto Star is also a great resource. You can find it in the Saturday “Homes” section.

Buying your first home? RECO is here to help.Congratulations on your engagement! Marriage is a milestone event in your lives, as is buying your first home together.

There's no shortage of home buying information on the Internet, but much of it focuses on market trends and how to get the best price. You also need information about your rights and responsibilities as a buyer. How do you ensure you are protected?

Fortunately, the Real Estate Council of Ontario (RECO) is here to help.

Message from the CEOBy Kate Murray

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Finding a home that has the qualities you want and is within your budget is no easy feat. But there’s lots more to do before you move in.

Before you make an offer These to-dos can be completed before or after you make an offer, but getting ahead of the game is a good idea.

■ Obtain a mortgage pre-approval to give you a good idea of how much you will be able to finance for your home.

■ Hire a real estate lawyer in case you have legal questions and so you’ll be ready when it’s time to close the deal.

After your offer is accepted These items should be added to your list once your offer has been accepted.

■ Satisfy any conditions included with your offer, like conditional financing or a satisfactory home inspection.

■ Confirm financing by providing your lender with the signed Agreement of Purchase and Sale. Your lender may conduct an appraisal on the home.

■ Ask your real estate professional, family or friends to recommend a home inspector. There are also associations for home inspectors that can refer you. When selecting a home inspector, ask about their training, experience, certifications and approach to the home inspection process.

Here’s your to-do list.If there is an issue with any of your conditions, you will need to speak with your real estate representative and your lawyer about your options.

If all the conditions are satisfied, you will have to sign documents stating that each of the conditions are either waived or fulfilled. The offer will then become firm.

■ Once the deal is firm, your lawyer will help you close the transaction.

■ You might need to prove you have home insurance before your lender will release the mortgage funds.

Planning your move

■ If you’re renting, you’ll need to provide notice to your landlord.

■ If you already own a home, it’s a little more complicated. Ideally the move-in date for your new home will align with the date you move out of your existing home. If not, you may need to get a storage locker and stay with friends or family, or rent temporarily while you’re between homes. You might also need to talk to your lender about bridge financing if you will own both homes for a period of time.

Throughout this process, your registered real estate professional is a great resource. Make the most of their expertise as you work through these to-dos. Just remember, at each step of the way, you’re getting a little bit closer to your dream home.

Found the home of your dreams?

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With that in mind, here are the most common buying and selling pitfalls, and tips on how to avoid them:

HIRING THE FIRST SALESPERSON YOU MEETWhile you may decide to work with the first real estate professional you meet, it's a good idea to meet with a few different representatives before settling on one. Make sure you feel comfortable with them and their approach to the process. Also, be sure to get references and contact them to learn about their experience with the salesperson. Before signing a representation agreement, it’s a good idea to use the ‘Real Estate Professional Search' tool on RECO's website (www.reco.on.ca) to check the status of their registration and see whether they have been subject to disciplinary action.

NOT MAKING YOUR EXPECTATIONS CLEAR WITH YOUR REAL ESTATE PROFESSIONALWorking with a real estate professional is a partnership, so communication is the key to success. It’s important to have a mutual understanding about what you’re looking for in a home, what elements you would consider to be ‘deal-breakers’, and what services the brokerage will be responsible for. Make sure you discuss what services you expect them to provide, and get it in writing.

FAILING TO READ AND UNDERSTAND FORMS AND CONTRACTSIt can be tempting to speed the process along by signing forms that you haven’t read. After all, nobody really likes reading the fine print. But taking the time to understand what you’re signing can avoid a lot of problems later on. For example, you don’t want to find out that you’re on the hook for a six month listing agreement to sell your home if you only want your house on the market for three months. Make sure all the blanks on the form are filled in before you sign it, and make sure you get a copy of whatever you sign.

ALLOWING EMOTIONS TO OVERTAKE COMMON SENSEWhen you fall in love with a property, it can be hard to walk away. Stick to your budget and be aware of the risks of foregoing a home inspection for a chance to win a bidding war. Making your offer conditional on a home inspection is a smart decision because a qualified home inspector, engineer or contractor can identify underlying problems with a home’s major systems, like heating and electrical. Skipping an inspection is a gamble because you’ll leave yourself vulnerable to a much more costly problem later on.

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It’s worth the effort to learn about the home buying and selling process; doing so could save you time, stress and money. One way to protect yourself is to learn from the mistakes of others.

“RECO is responsible for protecting home buyers and sellers, and we’ve seen too many Ontarians fall victim to easily avoidable buy-ing and selling hazards,” says RECO’s Regis-trar Joseph Richer. “Being mindful of these issues can help the process go a lot smoother.”

MOST COMMONBUYING AND SELLINGMISTAKES

WATCH OUT

FOR THE

TOP 10

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ASSUMING EVERYTHING IS INCLUDEDDon’t assume that the stove, washing machine and dryer or other items are included with the sale. The seller may want to take the dishwasher with them, and the hot water tank might be under a rental contract that you’ll be required to take over. The best way to protect against any surprises is to detail all the items (known as chattels) you expect to be included in your written offer. In the offer, you can also include a clause requiring the seller to pay out any outstanding leases on the home’s major systems.

FORGETTING ABOUT WHAT’S WITHIN THE WALLSThe hardwood floors, stained glass windows and walk-in closet are appealing features, but the insulation, wiring and plumbing are just as important when you’re evaluating a property. Ask your real estate professional to look into the age of the home’s systems and if there have been any upgrades. If extensive renovations have been done, your real estate professional can also help determine if the appropriate permits were issued.

FORGETTING ABOUT WHAT’S OUTSIDE THE WALLSWhen you buy a home, you’re also buying a place in a community. Visit the neighbourhood at different times of the day to see if the surroundings fit your lifestyle. Is it too noisy, or not vibrant enough? The only way to find out is to spend some time exploring the area, talking to neighbours and researching the locations of amenities like grocery stores and banks.

NOT DOING YOUR RESEARCHIf you’re concerned about buying a home with a troubled past, a simple Internet search for the address can go a long way. This is also something you can ask the neighbours about.

MAKING VERBAL AGREEMENTSVerbal agreements aren’t a problem, until they’re a problem. Putting everything in writing forces both parties to be clear about their expectations and provides a record that can prevent disputes later on.

UNDERESTIMATING CLOSING COSTSThe price paid for a home is just one of many costs associated with the purchase. Related costs, such as land transfer taxes, title insurance and a home inspection, can really add up and take an unexpected chunk out of your budget. There are also the final touches – like a fresh coat of paint, some window coverings or a new appliance – that you may want to do to make the place feel like your home.

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10While these tips will certainly help, the most important advice is to work with a registered real estate professional.

“Registered brokers and salespersons provide a great deal of knowledge and expertise about the buying and selling process, along with specific knowledge about neighbourhoods and local issues,” says Richer. “They can also provide crucial help in avoiding these hazards.”

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Did you know that real estate commissions and fees vary depending on the brokerage and the services they provide? In most situations, the seller pays the real estate commissions to both the buyer’s and the seller’s brokerages. Commissions are written into the listing agreement, so the seller must agree to the commission prior to signing the listing agreement.

W E I G H I N G Y O U R O P T I O N S

Real estate commissions and fees may vary

You get what you pay for

As with most things, paying a lower commission rate may mean you are provided fewer services. Before you agree to work with a brokerage, ask for a detailed list of the services they will provide to you.

“It’s important to remember that different real estate professionals and brokerages offer different skills and levels of service,” says RECO Registrar Joseph Richer.

“Some may prefer to offer discounted commissions and take on a larger volume of sales, while others offer unique or tailored services that provide extra value to their clients.”

Have an open conversation with your real estate professional about your expectations and theirs. As a seller, make sure you are comfortable with the commission rate or fees, as well as the services being offered, before you sign the listing agreement.

How does it work?

Commission payments can be structured in three ways: as a percentage of the sales price, as a fixed dollar amount, or a combination of the two.

As the seller, you will typically pay the commission agreed upon in your brokerage listing agreement. The commission paid may then be split between your brokerage and the brokerage representing the buyer. Be aware that the real estate commission is subject to HST.

What about buyers?

As a buyer working with a real estate salesperson or broker, you may have signed a Buyer Representation Agreement (BRA), which specifies the amount of commission the brokerage that represents you is entitled to and how it will be paid.

If the commission listed in the BRA is greater than what the seller’s brokerage will pay to your brokerage, you may be on the hook for the difference. It’s also important to note that if you buy a home that is “for sale by owner”, you may be responsible for the commission payment owing to your brokerage under the terms of the BRA. Understand your rights and obligations before signing the BRA.

CombinationExample: As the seller, you agree to pay a fixed commission amount of $6,000 + HST as well as 3 per cent of the sales price. Your home sells for $300,000. You will pay $15,000 + HST. This may be paid in part to your brokerage and in part to the buyer’s brokerage.

Percentage of sales priceExample: As the seller,

you agree to a 5 per cent

commission payment. Your

home sells for $300,000. You

will pay $15,000 + HST. This

may be paid in part to your

brokerage and in part to the

buyer’s brokerage.

Fixed amountExample: As the seller, you agree to pay a fixed commission amount of $15,000 + HST for the sale of your home. That is the total commission you will pay for the transaction, regardless of the final selling price. This may be paid in part to your brokerage and in part to the buyer’s brokerage.

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Did you know?

The short answer is no. You don’t have to sign a buyer representation agreement (BRA) with a brokerage, but you should consider the benefits it offers you as a home buyer.

A BRA defines the relationship between the buyer (you) and the real estate brokerage that is working on your behalf. It sets out the property type and geographic location for your potential new home, lists the services to be provided, addresses the issue of commission that may be payable to the brokerage, and it also specifies the duration of the agreement.

Signing a BRA confirms in writing that you are a client of the brokerage and documents the terms and obligations of the brokerage-client relationship. As a client, the brokerage has a special responsibility to follow your instructions, protect your confidential information and promote and protect your best interests.

On RECO’s website (www.reco.on.ca), you can confirm the registration status of a broker or salesperson. Before you choose your representative, use the “real estate professional search” feature to check their registration status and see if they have been the subject of any disciplinary decisions. All real estate brokers and salespersons in Ontario must be registered with RECO.

Do I have to sign a buyer representation agreement?

Consumer Q&A

To make the most of this relationship, it’s important to identify your needs and expectations. Discuss what services you are looking for and determine whether the brokerage and the salesperson or broker are the right match for you. To avoid misunderstandings later on, don’t make any assumptions and be sure to list all details in writing. You should also ask what the broker or salesperson expects from you and what your obligations are.

If you’re not comfortable with the terms of the BRA, you can enter into a Customer Service Agreement (CSA) with the brokerage instead. In this scenario, the obligations of the brokerage will be different. While they will still help you buy or sell a home, they won’t have the same level of responsibility to you as they would if you were a client. For example, the representative would still show you properties and help you fill out paperwork, but they wouldn’t necessarily provide advice.

While the brokerage will have less of a commitment to you, you will also have less of a commitment to the brokerage. Typically, CSAs are not legally-binding contracts.

Think of it as though a BRA is a wedding band, while a CSA is a promise ring. The level of commitment from both parties will be less with a CSA. Regardless of whether you sign a BRA or CSA, the brokerage will still have to act fairly, honestly and with integrity and provide conscientious and competent service. Keep in mind, a brokerage can choose to decline your business if you choose not to enter into a BRA.

As with any contract, take the time to read and understand each clause of the BRA or CSA. If you’re unsure about something, ask questions or consider seeking legal advice before signing. And remember that while there are rights that come with any agreement, there are also obligations.

W E I G H I N G Y O U R O P T I O N S

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Follow these tips to help protect your home and investment:Plan ahead

• Make a list of exactly what you want done. Remember that changing plans in the middle of a project will cost extra money.

• Set a clear budget and commit to it.

Shop around

• Consider a local home renovation company or contractor. This may make it easier to check references, enforce a warranty or have follow-up work done. Ask your friends and neighbours for recommendations.

• Get written estimates from at least three contractors. Never accept an estimate over the phone or without a contractor inspecting the area.

• Once you have a contractor in mind, get at least three references and check them. Ask for references from people who had work done that is similar to the project you have in mind.

Protect yourself

• Never go in for a deal that sounds too good to be true. Cheap home repairs can cost you later.

• Get a written contract and make sure your written estimate is included in the contract. This way, the contractor cannot charge you more than 10 per cent above the estimated cost unless you have agreed to new work or a new price and have signed a change to your contract.

• Keep down payments to a minimum. We recommend about 10 per cent.

Learn more about your rights at Ontario.ca/HomeRenos.

For a first time homebuyer willing to put in the effort, a fixer-upper can be a great option.

But, before hiring a professional to help you create your ideal home, it’s important to do your research and ask the right questions.

How to plan for a fixer-upper

The tips below have been provided by Consumer Protection Ontario, a consumer awareness program from the government of Ontario and partners like RECO.

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