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Archive for May, 2014

Five things to know when selling a home by yourself

Is it worth it to try and sell your home on your own?
Mark Weisleder writes about why you should use a real estate agent to sell your home.

“Here’s why I think that:

You don’t have to pay upfront: Do-it-Yourself marketing companies are not real estate agents. You usually pay $1,000-to- $2,000 up front, for pictures, videos and to have your home listed on the MLS system. However, you get no money back if your home doesn’t sell. With a real estate agent, if your home doesn’t sell, you pay nothing, even though the agent may have spent a lot of time marketing and using all of their own and their company contacts to sell your home.

A bidding war is unlikely: Bidding wars are the norm in some parts of Ontario. In virtually all cases, the home is sold by a real estate agent. The reason is that it takes experience to price the home properly. Second, the process is fair because no one knows what anyone else is bidding. With a private seller, there is no duty of confidentiality, so the seller can tell one buyer what another buyer is bidding. Buyers do not trust the process so there is no bidding war.

You negotiate on your own: When you do it yourself, it is difficult to know what a fair price is for your home. You might have to pay an appraiser to find out. When a buyer hears that you are saving commission, they will want to split the savings. So you don’t get all the commission savings and you also have to negotiate with a buyer who is likely represented by a real estate agent. This agent will use all their experience to figure out how low you will go, while giving nothing away about their own buyer.

Not knowing your obligations: Sellers cannot rely on the term “Buyer Beware.” You have to disclose problems with your home and you cannot hide or cover up anything. Otherwise, you can still be sued after closing. Who wants a court fight long after you move?

Lenders are more cautious when they see a private deal: I have seen deals collapse this way. In one case, the lender sent their own appraiser because they were concerned the buyer paid too much money. The appraiser agreed and the buyer’s loan commitment was cancelled. The deal died.
In another case, the seller was worried the buyers did not have proper financing. They wanted more proof about the buyer’s financial situation than the buyer was willing to give. Lawyers became involved when things could not be worked out amicably. When buyers are represented by agents, they are usually pre-qualified in advance so the seller can have comfort that they will have the money available to close the deal on time.

When you’re out for a walk this weekend have a look at the For Sale signs and see how many are represented by realtors. There’s a reason for that.
By all means, try and sell your house on your own, just beware that it’s not as easy as it looks.”

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Some common questions about real estate deposits

By Mark Weisleder

1. When must a deposit be paid under the standard Ontario real estate contract?

In Ontario, the standard real estate contract gives the buyer two choices; you can pay the deposit immediately when you present your offer to the seller, or you can agree to pay it within twenty four hours after the seller accepts it. Most buyers prefer the second option. If you are in a bidding war, you will be encouraged to come up with the deposit immediately, to show additional good faith to the seller.

2. Can the buyer just cancel the deal by refusing to pay the deposit after the deal is accepted?

The answer is no. Once the deal is accepted, you can’t change your mind. If you do, the seller can sell the property again and if they obtain less money than you were going to pay them, the seller can sue you for the difference, plus legal fees.

3. What happens if the deposit is paid late?

If you are late with the deposit, the seller has the right to cancel the deal. This is because all time limits matter in real estate contracts and if you are late, even by a few minutes, the seller can try and cancel. I have seen this happen many times, especially when the seller knows that there is another buyer out there who will pay more money. If you need more time to come up with your deposit, say so in your offer.

4. How much should a buyer pay as a deposit so the seller will feel secure that the deal will close?

This is a tough question, and will largely depend on where your home is located. In the City of Toronto, deposits are now usually up to 5 per cent of the sale price. In Brampton, it is closer to 2 per cent. In some areas of Ontario, deposits can be as little as a few hundred dollars.

5. Why can’t the deposit be paid to the seller instead of the seller’s agent?

If the seller goes bankrupt or disappears with the deposit, the buyer is not protected. When the deposit is held by the real estate brokerage, it is in trust and is also protected by insurance so even if the brokerage goes bankrupt, the buyer can get their money back.

6. If the buyer is not satisfied with their home inspection, how can a seller refuse to release the deposit back to the buyer?

This happens more than you think. A deposit cannot be released unless both the buyer and seller agree. If a seller believes that the buyer did not act in good faith in trying to satisfy their condition, whether it is a home inspection, financing or a condominium status certificate review, they can refuse to release the deposit. This means it stays in the broker’s trust account until a judge decides who gets it, which can take years. As a precaution, buyers might consider making two deposits in their offer, a small one of say one per cent when the offer is accepted, and a second larger deposit once the condition is satisfied.

Be serious and understand the rules about deposits before you sign any real estate contract. It is expensive to change your mind later.

Toronto lawyer, real estate expert and speaker Mark Weisleder is an excellent source of information. I am pleased to present his words of wisdom. Robert.