Wednesday, February 11, 2009

What is Buyer Agency? Why Buyer Agency and why do some reps ask for one up front? Who does it protect? Why a Holdover? Are there risks?

1) Buyer Agency is a contract between a Buyer and their Brokerage. This Form is a contract between a Buyer and a real estate company that gives the real estate company permission to act on the Buyer’s behalf in the purchase of a property. Assuming the Buyer is a Client of the real estate company, the Real Estate Council of Ontario (Ontario’s governing body) REBBA Code of Ethics requires that salespeople have a written Buyer Representation Agreement presented for signature prior to an offer being presented on behalf of the Buyer.
2) Representation agreements can be written, oral or implied. However, your broker or salesperson is required by law to reduce the agreement to writing and provide it to you for your signature prior to entering an agreement to purchase. The agreement should be in writing in order to protect the interest of all parties. It establishes agent responsibilities, commission arrangements and provides the foundation for negotiation and offer drafting. This form, which is commonly used in the real estate industry, provides that the broker is entitled to be paid commission if the buyer enters into an agreement to purchase any property, during the running of the agreement. If the seller does not pay the commission(in the case of a for sale by owner), or all of it, the buyer is required to pay it. Many agents ask for this form to be signed before any showings take place to protect their interests which include time invested, and their ethical and fiduciary duty to protect the client. If you have yet to sign this form, you are a customer, not a client. There is a great deal of difference with regards to that.
3) A perfect example: Customer calls agent to view property. The agent sets up the showings and meets the customer at the location to view the income property. The customer decides they want to see further property. The agent then sets up showings for various times, dates, locations. Many days, sometimes weeks, or months go by, showing after showing sometimes having to return because they want a contractor to see it, or a spouse wasn't available. The agent even introduces them to a series of different builders as he wants to further provide all suitable properties to their customer, hoping they will become a client. A hard working reputable agent will not only show property, but fact find, including visits to the municipality, registry office etc., to get all pertinent information on the subject properties. It’s called due diligence. This represents many days and days of work which costs time and money. Then one day, the agent that has done all of the work finds out that his customer has decided to work with with someone else because they didn’t realize how things work in this industry. The other agent didn’t ask if they were currently working with another agent.
4) This form protects both parties. The Brokerage(sales rep) and the client. When entering Agency, A buyer’s agent promotes your interests and represents you throughout the home-buying process, beginning with the search for the perfect home until you have the keys in your hand. A buyer’s agent can provide you with many important benefits such as knowledge of the local market, negotiating skills and expertise in working with contracts. It sets out what kind of property you are looking for and in what geographical location. A Buyer’s agent has a Fiduciary duty to protect the interests of the Buyer once this form is signed. Remember, we do follow a strict Code of Ethics, and without this form we still have a right to protect you with honesty and fairness.
For many agents in this industry, this is their sole means of income. They do not get paid unless they find you a property, and you put the offer through with them. Without implied or written Agency, the representative that did all of the work on your behalf has no claim to the commission that is to be paid.
5) A Holdover clause specifically addresses what happens when the contract comes to an end. Some agents don’t use a Holdover, while others do. The time of holdover is not specific and can range from days to months. What it means is that anytime after the contract expires, and while in the “holdover” period you purchase a home to which you were first introduced by that agent, commissions would be owed to that brokerage. You have to understand that some people do use the agents time to find property then wait to try and save money on the purchase of the home by not having representation at the time of offer. This isn’t fair to any of the parties involved as the process of purchasing and selling is complex.
6) There should not be any risks involved when signing a Buyers Agency Agreement. You can add anything to the pre-printed sections of the agreement, which takes precedence, so if there is something you want to add such as “exclusions on homes you have already seen”, or “commission payments” then have your agent add it, and agree by both parties signing the changes. Buyer Agencies can also be mutually cancelled at any time. Talk to your agent, they understand.

So, rather than getting to a point of risk such as implied agency commission payouts, discuss any issues with your agent, be open and honest and chances are if there is a problem it is just lack of communication. Realtors® are educated professionals and are supposed to follow strict ethical guidlines.

Monday, February 9, 2009

Attached is as current an interest rate update as I can provide today. Rates and policies both are very fluid!

The best 5 year rate is now around 4.34% meaning someone can pay just $434 for a $100,000 mortgage over 35 years. Let's look at it another way.

Assume you know someone who is paying $1200 a month for rent right now. If we assume $2000 a year for property taxes and $55 a month for heat estimate for qualifying purposes only, that $1200 a month could be carrying a mortgage in the amount of $226,000.

If your job is secure - if you live and work in a stable community - this is a very affordable time to be obtaining debt.

It could also be a very attractive time to consider refinancing or renewing early - we are developing a simple five minute mortgage check-up to answer the question - is it the right move for me now?

This information was provided by but is not meant as advertisement for:
Jim Cook
Mortgage Agent
Mortgage Intelligence
519-396-6800 - Kincardine
519-389-6900 - Port Elgin

Tuesday, February 3, 2009


It is so interesting watching people wait for prices to hit rock bottom here in Canada! The problem is that the media is indicating recession, and that prices are falling. Let me share a little historical trend for you. Last year our board reported the 2008 stats and comparing them to 2007, I can tell you that prices have not dropped the way that the media is reporting. Sure in some locals it may be relevant, but in areas such as Bruce County, where employment, and economic concerns are not as bold, prices remain stable. So what then makes this a perfect BUYER opportunity? Selection, interest rates and small price drops!
Consider a house price in 2007 at 195,000 and the same house now at 200,000. Although some may think it's costing them more to purchase really it is not.

On average, interest rates in 2007 were 5.7% and today in February 2009, 4.6%

Assuming a fixed Term of 5 Years and a 25 year amortization

Mortgage 1 $200,000 @ 4.6% would have a monthly pmt of 1118.09
Mortgage 2 $195,000 @ 5.7% would have a monthly pmt of 1213.06

Mortgage 1 would pay almost $43,000 interest and $24,117.64 in principal
Mortgage 2 would pay over $52,000 interest and $20,570 in principal

So as you can see, Mortgage 1 which is at todays home price and lower interest than last year, actually costs you less in monthly payments, interest and your are putting more of your hard earned money towards principal. So, what makes more sense, waiting for prices to fall and interest rates to rise?

Rate Drop!

The Bank of Canada prime rate is now it's lowest EVER, and fixed rates are very low right now also. People are split between taking a 5 year mortgage at 4.49% or a 1 year at 3.5%. So speaking of "split", why not split your mortgage and take advantage of both great rates. In the meantime, get shopping for that home as many buyers are out there already looking to scoop up a deal, and spring pricing could see a rise in price before long. Call Jason Steele for your real estate needs. I will "listen to you". 519-377-2147 cell