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Archive for September, 2015

Do real estate contracts have a “cooling off” period?

Some do, some don’t.

In Ontario, consumer protection legislation provides a “cooling off” period for certain types of contracts, during which consumers can change their mind and cancel the contract without penalty. An important example of this is the contract to purchase a newly-built condo from the builder.

In that case, they cancel the purchase within 10 calendar days of receiving the fully signed purchase agreement and disclosure statement from the condo corporation. Because of the short timeline and steps required in the process, a buyer who wants to take advantage of the cooling off period should work with their lawyer to get the wheels in motion well in advance of the 10-day deadline. Ideally the buyers should have their lawyers review the contract before signing it.

To learn more about buying a newly-built condo, visit www.tarion.com. Tarion’s mandate is to protect Ontarians who purchase newly-built homes.

For other types of real estate contracts, however, there is no cooling off period.

One key contract you’ll encounter is a representation agreement with your brokerage (a buyer representation agreement if you are buying, a listing agreement if you are selling). Representation agreements are legally binding contracts that commit you to working with only one brokerage for a stated amount of time. In addition representation agreements typically include a “holdover clause”, which in very specific circumstances, may require you to pay a commission to the brokerage if you buy or sell a home within a certain amount of time after you have ended or terminated your agreement.

Signing a representation agreement is a big step, so before you sign on the dotted line, you should make sure that you have chosen the brokerage and representative that are right for you. Before you agree to work with a broker or salesperson, make sure you are comfortable with them and their approach to the buying or selling process. It’s also a good idea to talk to a few candidates before making a final decision. Contacting references can shed some light on experiences that others may have had.

Once you’ve decided who to work with, you’ll be asked to sign the agreement. But before you do that, make sure that you and your representative have a mutual understanding about the services they will provide and the fees you will pay them in return. These things need to be included in the agreement.

Also, take the time to read the agreement fully to ensure that it meets your needs. Taking the time to understand what you are signing can avoid potential problems later on. If you don’t understand something, ask your representative to clarify. Don’t sign until you are comfortable with the whole agreement. If you’re not sure, consider seeking legal advice.

When you’ve found a buyer for the home you are selling, or have found the home you want to purchase, you’ll be dealing with an Agreement of Purchase and Sale to complete the transaction.

This is a legally binding contract between you and the buyer or seller and has no cooling off period. That’s why it is important to read everything thoroughly. Your real estate professional can help ensure that the agreement contains appropriate clauses and conditions to protect you, but don’t rush through the process and be sure to seek legal advice if you are uncertain.

By Joe Richer: Registrar of the Real Estate Council of Ontario (RECO). He oversees and enforces all rules governing real estate professional in Ontario. You may email questions to askjoe@reco.on.ca  or find more tips at www.reco.on.ca

 

 


Five things to know when buying from a bank

I have started receiving inquiries from buyers who notice residential properties for sale and the seller is shown to be a bank. This usually indicates that the owner could not make their mortgage payments and the lender is selling the property to recover the mortgage amount owing. If you are considering making an offer on one of these homes, here are five things you need to know:

1.  The process that most lenders will follow in Ontario is Power of Sale, and not Foreclosure. The main reason is that a Power of Sale can be completed much faster than a Foreclosure. Powers of Sale can be completed generally in 3-4 months, while the Foreclosure process will typically take up to a year to complete. Banks also prefer this method as it permits them to get bad loans off their books quickly and if there is any shortfall, they can immediately sue the original borrower for the deficiency.

2.  Lenders are supposed to try and get fair market value for the property that is sold, so it is not automatic that you will be able to buy the property at a substantial discount. Use a professional buyer agent to make sure you know what this property is worth before making any offer.

3.  The lender will usually contain special clauses in this contract that will be important to any buyer. For example, all appliances will be sold on an “as is” basis, with no warranty, meaning you are out of luck if the appliances are not working when you close. No warranty will be given regarding the room sizes or even the lot size for the property. If there is a tenant on the property, no guarantees are given about the length of any lease or how much the tenant may be paying in rent. If HST is payable, for example if the property had a business running in it before the lender took over, or if it had been substantially renovated, then this extra HST has to be paid by the buyer on closing. Finally, if the original owner comes up with the money before closing to pay off the mortgage, then the deal is over.

4.  In order to deal with the above clauses, buyers should make sure that any purchase is conditional upon a detailed home inspection condition so that everything can be verified, including the condition of the home, the room and lot sizes, and whether there was any business, such as a day care, operating in the home before closing. This could involve discussions with the neighbours as well as any tenant that the buyer will be assuming after closing. Regarding the lot size, ask the bank’s real estate agent if the bank has any survey relating to the property and if not, check at www.landsurveyrecords.com or www.protectyourboundaries.ca as there are over 1.5 million surveys available for purchase through these websites to assist you when the boundaries are not certain.

5.  Buyers should attempt to close the deal quickly, once they have satisfied themselves as to all conditions, to avoid having the original owners come back and pay off the mortgage before closing, thus ending the deal.

When you understand what is involved in buying a home from the bank, you should not have any unwelcome surprises either before or after closing.

By Mark Weisleder . Mark is a lawyer, author, instructor, Toronto Star columnist and keynote speaker for the real estate industry.