molby

I went to see a realtor on Friday and he said that if we bought a house using his services it wouldn't cost us anything as the sellers pay the fees.
My questions are:
1) Won't that make him less accountable to us as the sellers are effectively his paying customers?
2) If we are up against another buyer in a bidding war (unlikely at the moment I know but still...) and they don't have a realtor - won't the seller go for their offer because they won't have to pay the realtor fees?

I checked the wiki but couldn't see anything answering my questions - apologies if something is on there.

Thanks

destinationnovascotia

Realtors act for the seller if they are the sellers realtor and the buyer if they are the buyers realtor.

The fee attached to the sale are divided between the sellers realtor and the buyers realtor.

Your realtor should represent your interests and should be able to provide you with information regarding their accountibility. Generally the system works very well.

JonboyE

The realtor has a duty to act in your best interests. Avoid dual agency (when the realtor is also acting for the seller) because they will also have a duty to the seller. Otherwise you should be fine.

The realtor gets his commission whatever house you decide to buy so they do not have any bias in trying to sell you a home that does not suit you.

The vast majority of buyers will have their own realtor. Yes, it is possible that a seller could re-negotiate the listing realtor's commission if there are multiple bids but, IMO, the benefits of using a realtor with good local knowledge far outweigh this small risk.

For example, in Canada it is the realtors, not the lawyers, who write the purchase and sale contracts. You can get yourself in a lot of trouble entering into a contract if you don't understand all the rules.

debbiem

It's just how the system works - and next time, you will be the one selling. We've bought twice in Canada now and I much prefer it to the English system - once you agree the price (after a bit of official haggling on the forms) then it's pretty much a done deal. Much more efficient and less 'will they, won't they' until the week before than the system in blighty.

Don't forget that the realtor you use won't necessarily be the one listing the property - so although they do stand to make additional money from selling one of their own listings, we have not found any pressure towards that sort of sale.

Our realtor was great (we used the same one both times), and I love the fact that the same guy/ girl can show you everything you want to see, instead of you dealing with a million agents from a million different agencies. Our realtor just wanted to match us up with a property that suited our needs - using the same person to look at everything means they get to know what you are looking for and what might suit you.

Contrary to belief, I'm not a realtor lol.

Alan2005

I have been told that there is no point in not having a realtor act on your behalf given that the 4% they would get isn't coming your way if you don't use one - it would all go into the sellers realtors pocket.

The fact that if you are buying your realtor has an incentive to get more money out of you seems wrong to me. But then it's the Canadian way - so you don't have much choice really.

molby

Really interesting responses - thank you. I'm still getting my head round the subtle but crucial differences in the two systems!!

penny farthing

a word of advice -
think twice about using the home inspector recommended by your realtor - get your own and make sure he is completely independent of your realtor.
That way you avoid any conflict as its in both their financial interests for you to buy and buy quickly so they get the commission/fee.
We got a glowing report from our 'Realtor-recommended' home inspector and ended up with a lot of problems he missed or minimized and ended up with a repairs and extra expenses which had we known about would have made us think twice about the purchase.
live and learn and get some personal recommendations first.

JonboyE

This is true.

I think this is to misunderstand a realtor's motivation. In BC the standard commission rate is 7% on the first $100,000 and 2.5% on the balance (I say standard because it is very negotiable). The listing realtor gets 51% and the selling realtor 49% (I think, but stand to be corrected). Therefore, for each additional $10,000 the listing agent's client spends they will get $122.50 in commission, less whatever the brokerage takes.

A good realtor will probably want to take their clients to a slightly more expensive house than their budget just so their clients are aware of what the extra dollars can buy (just as they should show them a slightly cheaper house). However, the financial motivation to sell their clients a house they cannot afford is far outweighed by the references they get from happy customers.

The realtors who make serious money spend years and years building up a reputation as the "go to" people in their neighborhood. One disgruntled client can ruin years of hard work.

iaink

My thoughts on the subject...

Home inspector...GET REFERENCES and FOLLOW UP WITH THEM, dont take anyone elses word that they are competent and reliable.



Use your own agent, not the sellers. The system is not perfect as pointed out, the buyers agent has no incentive to try and negotiate a lower price and lose commision for example, but on the other hand, the legal protection is not costing you anything, and they are at least legally obliged to act in YOUR interests, not the sellers.


Go with your gut. As a buyer in a new market you are chum for the sharks out to maximise their commision. Watch out for scams like late breaking offers that push your price up or hurry you into making an offer that you might have deliberated on.

Arm yourself with as much knowledge as possible before hand, this isnt buying a car, and if you get the wrong house at the wrong price it will cost you tens of thousands in expenses and commisions to cut your losses and move on again.

There are PLENTY of houses in canada, Dont be pushed into a hasty deal you later regret. If a "dream house" deal falls through through waiting a day or two for a second sober look around or over a home inspection waiver, then another dream house will be along shortly anyway. Just remember, if you had started to look a week later it would not have been on the market to you anyway...

Your agent wants to make a sale, any sale, and move on to the next commission. Ideally he would like to get it right and have a client for life, plus personal recomendations, but dont kid yourself that they are not in it for the money.

BUYER BEWARE.

JonboyE

Although I agree with you that you should not necessarily just accept the home inspector recommended by the realtor, the home inspectors I have dealt with charge a flat fee, payable in advance, irrespective of the outcome of their inspection.

iaink

So therefore more inspections = more income.

Which of the following will create more inspection opportunities:

A: Do a thorough examination, point out numerous defects, get glowing word of mouth recommendation from satisfied client who will then have to shell out $500 or so on a new inspection on a different property as they don't want to but that one now come hell or high water, but at least next time they move (5+ years average?) they are sure to give you a call


B: Team up with a realtor, don't rock the boat and jeopardize their sales and get numerous inspections a month from the association....


Seems to me it works both ways to some extent. There are definitely good inspectors and bad ones, and the industry is poorly regulated, so don't expect any coverage if you get a bad one who couldn't find his arse with both hands in the dark....

JonboyE

I certainly wouldn't suggest that B never happens. I just don't see why anyone looking to build a career would do it. The buyer still needs a house and so the selling realtor will still earn a commission. The buyer is going to be much happier if the realtor/inspector steers them clear of money pit.

iaink

I would suggest that it can and does happen to some extent, and have friends who, along with their insurance company, were on the receiving end.

If the OPP can ever catch up with the Realtor and "inspector", then charges will follow.

jimf

Is there anything stopping a buyer from using more than one agent for the purchase? A rule that limits a buyer to using one agent only might be considered to be a limit on competition against the interest of the buyer.

If a buyer uses one agent for a purchase and after a while is not satisfied with the service and changes to another agent is there any liability for any cost to the first agent?

JonboyE

There is nothing to stop you firing a realtor if you don't think they are working out. If they ask you to sign an agreement make sure there is a clause in the agreement that allows either party to terminate with a reasonable notice period.

It is best to talk through the permutations of what might happen as a result. If it is a genuine case of personal incompatibility I can't see there will be a problem. If they have done a lot of work finding you a place, and you buy it a week after you have fired them, I am sure they will expect their commission. As always, it is best to avoid unnecessary conflict by making sure you agree each person's rights and responsibilities on the termination of the agreement.

I don't think you will find many realtors who will work on a multiple buyers agent basis.