Real Estate Talk:
The buyer’s contract
There can be advantages for the buyer when one is used
By Joseph Marovitch
A buyer’s contract is a contract between a buyer and a broker, binding the buyer to purchase through the broker a property. In the buyer’s contract, the buyer and broker must put in writing precisely what type of property the broker is searching for the buyer to purchase. It must also be stated in the contract what the buyer is paying the broker for the brokers services, or if the buyer is paying the broker at all.
If the contract states that the broker will only search for properties that are represented by another broker, then the buyer may not have to pay the broker since the seller will provide the commission.
A buyer’s contract is a contract between a buyer and a broker, binding the buyer to purchase through the broker a property.
If the contract states that the broker can search for properties that are represented by an owner only, then the contract will state what the broker’s commission shall be from the buyer and not the seller.
In Quebec, a buyer’s contract between a buyer and a broker is rarely used, however, there can be advantages for the buyer when one is used. It is not a legal requirement to sign a buyer’s agreement. Brokers will always work with a qualified buyer however without a contract there are steps to take on both sides to insure time and money are not wasted.
Without a written agreement, and if the buyer is not someone the broker knows and trusts already, it is wise to have a face to face meeting to assess chemistry and trust. The broker wants to know that they will not spend time on research and visits only to find out that the buyer decided to go and buy a property without them. The buyer wants to know that the broker is representing their interest first and foremost. Trust is good, but a contract is legally binding.
‘Brokers will always work with a qualified buyer however without a contract there are steps to take on both sides to insure time and money are not wasted.’
The buyer’s contract does not require that the buyer must buy a property, but it does require that if the buyer does purchase a property as per the buyers stated criteria, the buyer will purchase through the broker.
As in a brokerage contract to sell, the buyers contract has clauses that protect the broker. If the buyer visits a property with the broker and does not purchase the property, and the contract expires, the broker may still collect commission should the buyer go back to the property and purchase it after the contract expires.
In Quebec it is not difficult to negate the buyers contract as well. If the contract states that the broker is to search for a two-bedroom condo in Ville Marie for $500,000 or less and the buyer decides to purchase a house with three bedrooms for $700,000, the buyer is within their legal right to not use the contracted broker to purchase the three-bedroom $700,000 house.
‘… the best situation is for the buyer and broker to decide to work together based on gut feeling, trust and integrity.’
As the buyer’s agreement is not a strong agreement, with several loopholes to circumvent its primary purpose, the best situation is for the buyer and broker to decide to work together based on gut feeling, trust and integrity. In the end, if you do not have trust and integrity, you have very little to work with and only aggravation, disappointment and lost time and money to look forward to.
Next article: Review starting with the purchase process
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Have a great week!
State of the market
Prices for property are still rising and inventory is still diminishing. We never know what the future holds but if we look at the current real estate market, the consumer price index and the cost of goods, there is reason to believe that interest rates may rise again.
For a potential buyer this would be a good time to visit your financial institution and seek a pre-approval document. A pre-approval is a promise from your bank stating they are willing to loan you a specific amount of money at a current interest rate for the next 30 to 120 days. This means you may lock into a lower interest rate for the time you are searching for a property. If you find your property within the 30 to 120 days provided, you will lock this rate into your mortgage even if interest rates have already risen.
It cost nothing to acquire a pre-approval, but you must meet certain criteria such as be employed, not be bankrupt and have a good credit score.
When you provide your promise to purchase along with your pre-approval document to the seller, you may find the negotiation easier and save money. Many sellers will consider a lower offer from a buyer who is pre-approved than from a buyer with a higher offer who is not pre-approved. One in the hand is better than two in the bush.
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Joseph Marovitch has worked in the service industry for over 30 years. His first career was working with families from Westmount and surrounding areas, hosting children between the ages of 6 to 16 as the owner and director of Camp Maromac, a sports and arts sleep away summer camp established in 1968. Using the same strengths caring for the families, such as reliability, integrity, honesty and a deep sense of protecting the interests of those he is responsible to, Joseph applies this to his present real estate broker career. Should you have questions please feel free to contact Joseph Marovitch at 514 825-8771, or firstname.lastname@example.org