Category: Buying
Everything You Need to Know About The Buyer Representation Agreement (BRA)

The BRA is a contract that defines the relationship between a buyer and a real estate brokerage. The term itself, “buyer representation agreement”, sounds intense and may be enough to scare away Buyers! Before running away, it’s important to understand what a BRA is and what it means to sign one.

The Toronto Real Estate Board has done a great job outlining the benefits of signing a BRA (http://www.brafirst.ca):

  • It ensures that your Realtor will be committed to finding your home
  • It outlines the fiduciary duties of your Realtor (and their brokerage) such as full disclosure of property information, loyalty, and confidentiality, to name a few
  • Protection of your interests
  • Expert professional advice
  • Puts your home criteria must haves in a Buyer Registry Service so Sellers’ agents can contact your Realtor if there is a potential match

Here are some things to be mindful of when signing a BRA:

  • It is an exclusive contract, which means you will be obligated to work with that specific brokerage for the duration of the time period outlined. If you decide that you no longer want to work with that specific brokerage, you must terminate the contract before working with another brokerage.
  • It outlines the commission payable regardless of what is being offered by the Seller. For example, if the BRA states that the brokerage will be paid 2.5% of the purchase price and you decide to purchase a home that is “For Sale by Owner” where the Seller is offering no commission, you will be responsible for paying the amount outlined in the BRA.
  • Pay attention to the duration of the holdover section. If the BRA has expired and you decide to purchase a home that you visited while under contract with the brokerage, you will be responsible for paying the commission outlined in the BRA if it is purchased during the holdover period.

Signing a BRA provides contractual protection and serves as a guarantee in writing, that your Realtor (and their brokerage) will make your home buying needs a top priority. When hiring an agent, find someone that you actually like and can trust, someone who will work hard to help you find your dream home, and will look out for your best interests, not their next commission cheque!


How to Dodge the Bullets and Improve Your Chances of Winning a Bidding War

Let’s face it, bidding wars suck for buyers! There’s a ton of pressure and the bidding process can get emotional.   In the end there is only one lucky home buyer who walks away with the prize, while the others are left scratching their heads wondering “WTF?”

The market has been active – interest rates are still low and there are buyers on the hunt for houses. If a house is located in a really great neighbourhood, you can bet the demand will exceed the supply.

Remember that house in the Yonge and Lawrence area that was listed for $699,000, received 72 offers and sold for $1,366,000? Yes, you read correctly…$1,366,000, that’s 195% over asking! No wonder why my buyer clients cringe when I have to break the news to them that a house has an offer date.

After encountering multiple offer situations in the past week for several of my clients, I thought it was time to document a few tips and tricks to improve your chances of winning. While this blog entry is by no means the answer to winning all bidding wars, its intent is to educate you and give you the best chance at winning your dream home.

Go in With a Clean Offer

There are 2 important conditions that typically go in all offers:

  1. Financing
  2. Home Inspection

Always have your financing approved ahead of time. An offer with a financing condition during a multiple offer situation is a weak approach to winning. Sellers want to firm up offers as soon as possible and if they have to wait for you to get your finances in order with your bank/mortgage broker, then of course they’ll want to go with the buyer that knows, with 100% certainty, they can afford the house.

It’s risky waiving the home inspection condition without having the home inspected. You never know the condition of the home – there may be issues with the insulation, cracks in the foundation wall, etc., that you may end up paying for down the road. If the homeowner has not done so already, your best bet is to get a home inspection done prior to the offer. If the seller did a home inspection, make sure you review the report in detail and consult with the home inspector if you have any questions. If you’re not confident about the report, get another home inspection done before submitting the offer.

In the end, you need to work within your comfort zone and if you’re uncomfortable going in with a “clean offer” then you should include conditions/clauses to protect yourself.

Be Flexible With the Possession Date and Give the Sellers What They Want

Many sellers don’t know exactly when they want to close. Giving the seller the option to set their own closing date within a timeframe determined by the buyer may appear more attractive. Try to accommodate the seller’s requested possession date and work with your realtor to determine the date the seller wants.

Come Prepared with a Certified Deposit

Most deposits are typically delivered to the listing brokerage upon acceptance of the offer. In a multiple offer situation, you’ll want to prove to the sellers that you have the money and capacity to complete the transaction – this will show you mean business and are serious about this offer!

My clients often ask me “how much deposit should I give?” While there is no written rule, a larger deposit can speak volumes. If you know that you’re going to be participating in a bidding war, make sure you give yourself ample time to shift your money around (if required).

Tell Your Story

When presenting offers to the sellers and their realtor, I like to give a little background information about my clients and explain to them why the buyers love their house. Cash isn’t always king and sometimes the emotional connection is the extra umph needed to win the bid. Don’t forget to explain to your realtor why you love the home, or better yet, write a personal note to the sellers – a little goes a long way!

Be a Bully

You heard me…BE A BULLY…and forget everything you were taught growing up about why it’s bad to be a bully! This can be a risky strategy but may pay off in the end. A bully offer is when you submit an offer before the offer date. This will only work if the offer is considerably higher than asking and worth it for the seller to risk the multiple offer process (e.g. will the seller be better off accepting your bully offer or will they get a better offer if they go through with the multiple offer process?).

Legally, they have to notify everyone who has visited the property and give them an opportunity to submit an offer. Your offer should have a short irrevocable time on it to prevent others from acting on this and putting in a competing bid.

In closing…

While bidding wars can be crazy, preparing yourself and getting the right information ahead of time will help you make the best decision possible.   Work with your realtor and make every decision without any regret.


Are Bidding Wars Here to Stay?

Written by guest blogger Frederick Chan (Mortgage Agent – Lic# 12070, Mortgage Alliance Performance Group)

…I hope not! Unless I’m on the selling side of course! Check out this article in the Star about the Toronto Real Estate Council debating ways in which they can curb these crazy bidding wars on houses. I think the key is that when buying a house you need to do so with your head, not your heart. Buyers are getting way too emotional when purchasing and it can come back to bite you!

If you buy a house for $400K and the bank values it at $380K, YOU HAVE TO PAY THE DIFFERENCE! How does that work? Let’s say you were planning on putting 5% down on $400K and the bank or insurer values the property at $380K. You could finance the house at 95% of $380K, requiring a down payment of $19K + the $20K difference between the purchase price and the appraised value. For most people with only 5% down, this is a big issue!

Here are some things to look out for if you’re buying a house in this crazy market:

– Regardless of whether you are pre-approved, the house is not. If the lender or insurer value the house lower than your purchase price, you’ll have to live with that value. So if you are putting down the minimum 5%, make sure you have a financing condition, so you can get out of the deal if this happens.

– Lenders don’t like properties that say “renovators dream” or “sold in as-is condition” very much. It implies there is something wrong with the property. Make sure you have an exit strategy for these types of places in case the bank has an issue.

– Banks understand the strategy of sellers pricing low to initiate a bidding war, but you can bet they will scrutinize the application a little bit more if the selling price is $200K over the asking price!

– Make sure to send me (or your lender) a copy of the MLS listing prior to putting in an offer so we can have a look. Especially if you are planning on putting in a “firm” offer.

Happy Hunting!


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