As we approach the busy spring real estate market I thought it would be a good opportunity to share my thoughts on the most common mistakes I see home buyers making year after year.
1. Hiring the first agent they meet
I see many mistakes that are not the home buyers fault but are the result of bad advice from inexperienced agents.
Think the agent you found has an in depth knowledge of real estate and can help you make a smart decision? Think again. It takes just 4.5 weeks of online coursework to become a real estate agent in Ontario. Most agents know very little about real estate, neighbourhoods and home construction.
Make sure to interview several agents before selecting one and ask them tough questions to test their knowledge.
2. Not Having an Easy Exit Guarantee in their Buyer Representation Agreement
Most buyers today will at some point in their home search sign a document called a Buyer Representation Agreement. A Buyer Representation Agreement gives your agent both the authority and responsibility to represent your interests during your home search and is a commitment that you will work with them exclusively for a certain period of time.
Unfortunately, Buyer Representation Agreements cannot be cancelled which means that if you’ve committed to working with your agent for six months and find that you’re unhappy with their service a few weeks into your home search, you can’t fire them. You’re stuck working with them or risk paying them their commission personally if you buy a house with another agent.
To avoid this, buyers should always include a clause in their Buyer Representation Agreement that allows them to terminate the agreement at any time, no strings attached.
3. Not Reading their Buyer Representation Agreement
While you should review the entire agreement before signing it, you want to pay particular attention to Clause #2 labeled Commission.
In Ontario, sellers generally pay both their agent as well as the buyer’s agent in a transaction. The commission paid to buying agents is typically 2.5% of a home’s sale price but it’s not uncommon to see buyer agent commissions in the 2%-2.25% range and in some cases as low as $1.
Going back to your Buyer Representation Agreement, in Clause #2 your agent is going to enter the commission they feel they’re entitled to and more often than not it’s going to be 2.5% of the sale price of the home you buy. Unfortunately this clause also states that if your agent gets paid any amount less than 2.5% of a home’s sale price then you have to pay your agent the difference.