Until recently, there was a real estate boom, with prices of homes reaching astronomical heights.
Rentals were down, but sales were way up. Real estate agents and brokers were extremely busy and
may have omitted to take certain precautions on behalf of their clients who were looking to purchase a
home.
There are certain safeguards real estate brokers or agents should perform on behalf of their clients who
are looking to purchase a home. Clients should not have to ask for their realtor to take these steps and
should always insist that their agent will be protecting their interests before signing a Buyer
Representation Agreement with any real estate broker.
These precautions are the responsibility of real estate agents and brokers and the omission of any of
them may constitute a breach of their fiduciary duty to buyers.
The first is a comparative market analysis. This is a study of the real estate market and similar properties
in the area of interest and is used to help determine the range of market values. This would enable the
purchaser to find out the fair market value of the property they are interested in.
In addition, there are certain conditions that should be contained within an agreement of purchase and
sale. For example, closing should be conditional upon mortgage financing (if applicable), the satisfactory
results of a home inspection and the sale of the purchaser’s existing home (if applicable).
If you are counting on financing to enable the purchase of a home, ensure that your purchase is
conditional upon financing. You do not want to be stuck in a purchase and sale agreement only to find
out (too late) that the financing you were depending on has not been approved. If you omit this very
important condition, you could end up losing your deposit and you may be liable for the full amount of
the seller’s losses, thereby costing you thousands of dollars.
Buyers should also insist that the purchase be conditional upon the home passing an inspection to make
sure that they are not purchasing a house with any defects or deficiencies that could potentially result in
additional money to rectify.
Also, if buyers are trying to sell their existing home and cannot afford the expense of two homes, or if
they are counting on the proceeds of the sale of their existing home to finance the purchase of their
new home, they should ensure that the purchase of the new home is conditional upon the sale of their
existing home.
One other item to be very cautious about is entering into a Buyer Representation Agreement (also
known as a “BRA”). This is an arrangement with a realtor or broker whereby home buyers contract with
a particular broker or agent to have the realtor represent them for the purchase of a home. The
standard wording of the BRA also requires that the Buyer client will be responsible to pay a commission
to the realtor if the buyer client purchases a home within the time period specified in the BRA. Even if
the purchaser finds a home on their own and the broker or agent had absolutely no involvement with
that whatsoever, based on the standard wording, buyers could still end up owing the agent or broker a
commission due to the BRA.
It is not easy to get out of a BRA, both parties have to agree to it and both parties have to sign a
Cancellation of Buyer Representation Agreement. It must be signed by both the buyer and brokerage. To protect yourself, you should insist that the standard wording of a BRA be modified as appropriate for
your interests. An experienced real estate lawyer should be consulted.
Please note these materials have been prepared for general information purposes only and do not constitute legal advice. Readers are advised to seek legal advice by contacting Frank Feldman* regarding any specific legal issues.
Call the Real Estate Law Experts at Frank Feldman Law Today!
