Understanding What You're Signing
Tags: toronto, real estate, Chad McMahon, BHGRE, Top Agent, realtor, investment, Oakville, Burlington, equity
Understanding What You’re Signing
After almost a decade in real estate I have seen a fair bit of changes over this time. When purchasing a home there is a lot of important paperwork that is involved in either selling or buying a property.
While some real estate forms may vary, the Ontario Real Estate Association (OREA) does have standard forms in place that are regularly used for resale residential sales and leases. Some regulations are often challenged/changed to move with the always shifting times, but these following forms seem to be a part of every real estate transaction so you’ll want to familiarize yourself with them and I’ll explain why.
The biggest shift in real estate to me is that everything has so quickly gone digital. While I don’t miss the late night drives in November driving to a clients house to get some initials, there is something to be said about being there when my clients sign their paperwork.
I feel now that so many forms sometimes come back so quickly to me that I always find myself double checking with my clients that they understand what they’ve signed before we proceed to send the papers back to the other party. II just want to stress that to please be sure that you’ve read all that fine print in what you just signed and more importantly did you understand it? If not then please read it again.
Real estate not only provides shelter for your family, but it also builds equity for your future, it helps build your financial credit and it will likely also be what’s carrying the bulk of your personal wealth for the later years of your life.
So remember this before so quickly and carelessly signing something you didn’t bother to read or understand. This can be a very quick way trading your position in life to almost owning a home to paying off a costly mistake for the next decade or more.
In case you were unaware, a lot of real estate transactions can often be connected to other home transactions that are in the process of completion. So if you find yourself not able to close on your home purchase due to your negligence, you could be finding yourself in a lot of legal and financial trouble as you could be affecting other deals that are loosely connected to yours.
Remember there is nothing wrong with saying you’re unclear on something. I know you don’t buy a house every day so I can totally empathize if you’re not 100% on some wording, but please be darn sure to make the time before you sign and that you’re comfortable with proceeding.
So the very first thing I would suggest you do if you’re contemplating making a move is to go to a bank or mortgage broker and get financial pre-approval. Best to know what/if you can afford to do anything before you go to your next step.
The next step is an important one and that is selecting your agent. In case you didn’t know in Ontario, all REALTORS (agents, sales representatives, etc) work for and represent their brokerage and all agreements you sign are between you and their brokerage (not the agent)
So there is sort of an order in which I present these to clients so I will do it the same here as they sort of perfectly play into the next form and so on.
The first form I’d show you is the Working with a Realtor (WWR OREA form 810) This form is mainly here to show that you have acknowledged the two different ways that you can be represented by an agent and their brokerage. You can choose your distinction to either be represented as a client or you can decide to be a customer. The form lays out your agents services and obligations to you for both. Also please keep in mind that if you sign this form there is also no contractual obligation to the agent at this point.
Now that you have the understanding of what services are offered you can choose to sign one of two forms. One is the Buyer Representation Agreement (BRA - Form 300) or the other is the Customer Service Agreement (CSA - Form 310)
The BRA is the agreement between you and your agents brokerage. This lays out and confirms the terms of your relationship, the commission paid if you buy a property while under this contracts timeline, the role of the agent as well as what happens if they are representing the Seller (in multiple representation)
So what do you get if you sign a BRA? It means that your agent will keep your information confidential, they’ll take the proper steps to determine and disclose material facts about the property in question, negotiate the best and most favourable terms for you while promoting and protecting your best interests as their Buyer client.
In other words they should be working their tail off to provide you with all the information they can find on the property, recent sold prices to help compare the list price. They should be trying to negotiate terms that best protect you (financial and home inspection conditions in your offer as an example - again the market is looney tunes with firm offers all the time) This is usually the most common agent/buyer relationship that most people are talking about having.
Again this is the form that if you sign you are under a contract with the brokerage (agent) for the allotted time you have agreed to. This is the form you will likely have an agent ask you to sign before they take you out to view properties. I myself don’t ask you to sign this until we get together a second or third time. I want to be sure we work well together as well! I don’t want you in a business relationship that you don’t want to be in either…but so far I have had no complaints.
If you choose not to be a Client and you would rather be a Customer then you would be signing a Customer Service Agreement (CSA - Form 310) Most people choose this non-exclusive agreement when they need the agents assistance with drafting the paperwork. The CSA confirms that the Buyer acknowledges that the agent is not representing the interests of the Buyers and very much like the BRA is also has a timeframe and includes the paid commission if a deal is put together this way.
Again is there is a multiple representation present where the brokerage represents the Sellers this also confirms that the Buyers understands and acknowledges the brokerage is working in the best interests of the Seller and not the Buyer. An agents obligations here can be somewhat restricted but they must promote honesty, integrity and Fairness, they must exercise due care when provide information and answering questions while avoiding misrepresentation. It’s a tight rope to walk as an agent which is why I always recommend that each side of a transaction have representation.
Here are some examples of what can and cannot happen under a CSA relationship. The agent cannot disclose your terms to any other buyer, the agent cannot lie to you, no additional due diligence about the property is required from the agent - they only have to disclose material facts that are known or ought to be known.
The agent will also not provide any price recommendations or provide comparable sold properties. The agent is not obligated to show you all properties of interest to you and lastly if the brokerage is representing the Seller, they must disclose anything pertinent about you to the Seller, such as your budget or motivations about the property.
Lastly is the biggest and most important forms in a home transaction and that is the Agreement of Purchase and Sale (APS) - (Form 100 - freehold homes) & 101 (condos) and the Confirmation of Co-operation - (Form 320)
The APS is the agreement that you use to purchase your home and in Ontario that has to be in writing to be deemed legal. This agreement will define all terms and conditions in your offer to purchase the property.
Some of the more important topics to have covered for your APS are your ideal closing dates, conditions in your offer (Financing, Inspection and Status Certificate are the most common ones), full legal names, your deposit, your purchase price, legal descriptions of property, lockers, parking spots and taxes to name a few.
Again many of these terms are yet to be negotiated such as conditions, closing dates, purchase price until all parties are satisfied but these are usually the meat and potatoes of every deal.
A few things to also note about the APS that are very important is that time zone is relevant. Say if the property is in Ontario, then it’s by this time that we go by. If an offer expires at 11:59pm then it can’t be accepted at 12:03am. Also it isn’t enough that you sign in the required time frame but the other party also needs to have a signed copy as well. All negotiations need to be in writing and any changes have to be initialled by all parties to the agreement.
Lastly is the Confirmation of Co-operation and it simply details the type of relationship the buyer and seller have with their brokerage (Client or Customer) as well as the commission agreement between the sellers and buyers brokerages.
While all these forms can be rather daunting, real estate forms play a very important part in the breakdown of duties, expectations and costs to keep all parties privy to a transaction while looking out for the best interests of both parties involved. But I mean it when I say it’s amazing how quickly sometimes things can go sideways. Just when I think I’ve seen it all, the real estate gods give me another chapter in my eventual book! Lol!
Hope this helped, reach out anytime with any questions. Please be sure to read all the fine print in anything you sign and remember you also have the legal right to a copy of all these forms you’re about to sign so be sure you ask for your copy. Best of luck, here if you need a top agent.