Acting on behalf of a Buyer of a resale residential property necessitates protection of your client’s interest with considerations that are different when acting as a listing agent. Agents may make the mistake of preparing the same offer and providing the same advice regardless of whom they represent.
The following reminders should help you to protect your commission, increase goodwill with your client and increase the likelihood of a problem free closing.
- A Buyer’s agent should always provide the maximum time for the requisition date. We recommend a minimum of thirty (30) days to protect the Buyer. This is a good practice as the first few days following execution of the Agreement may require conditions to be satisfied which means that the lawyer may not receive the file for many days following the execution of the Agreement of Purchase and Sale.
- Always provide full disclosure to the Buyer about the listing, the property, any existing tenancies and anything that you or your clients know that could be material to the condition and use of the property. Avoid making any representations about the value of the property, increase in value, state of repair of the property, financing or other matters of which you would not personally back-up with your own cheque book.
- Innocent or negligent misrepresentations by you about the adequacy of an existing survey may expose you to loss of goodwill and potential negligence claims. Surveys, if available, often will not illustrate additions to the property such as pools, garages, decks, encroachment, fences, sheds, etc. or possible by-law and building permit contraventions. A Buyer’s agent should always advise the Buyer of the importance of a survey. While title insurance eliminates the lender’s need for a survey, it is not a replacement for a survey, particularly where the Buyer intends to make renovations to the property following closing.
- Unlike a listing agent, the Buyer’s agent must be careful when drafting conditions such as home inspection, financing, status certificate, etc. Buyers do not want to become unexpectedly bound to buy a property with narrowly drafted offers. While it may be in your best interests to have a firm deal, the Buyer could take action against you for poorly drafted conditions which compel a Buyer to close when it cannot do so. It is important to ensure that the Agreement reflects the needs and wishes of your client.
- Be careful when listing chattels and fixtures in the Agreement. If it is not in the Agreement, the Seller does not need to provide it. Verbal assurances mean nothing and do not count. As well, you will want to include in the offer a warranty that chattels and fixtures will be in good working order on closing as home inspectors may overlook these items.
- In the absence of a home inspection condition in the Agreement, it is prudent to add a warranty by the Seller that the heating, air-conditioning, plumbing, electrical systems and equipment are in good working order and repair on the date of closing and the roof will be free from leakage on closing.
- Closing costs are often overlooked by Buyer’s agents causing frustration for the Buyer. Mortgage insurance, land transfer taxes, appraisal fees, legal fees and disbursements can result in a shortfall of funds on closing. You should prepare your clients, particularly first-time homebuyers, for these closing costs.
- Inquire with the listing agent to confirm that the Seller will have sufficient funds to pay commission, all existing mortgages, tax arrears, etc. If there are shortfalls, these should be addressed well in advance of closing.
- Problems dealing with uncooperative tenants need to be addressed at the time the offer is presented, especially if the Buyer is expecting to move into the property. Absent anything in the Agreement, the Selller must provide vacant possession of the property. If there are tenants to be assumed, the appropriate clauses need to be included in the Agreement. Also, if there is a basement apartment, is it legal and does it comply with the relevant fire and zoning regulations? Anticipating potential problems will result in a smooth closing and a happy Buyer who will refer you more clients.
- A good agent will follow up with the progress of the transaction once it becomes firm. We recommend that you follow up with the Buyer’s lawyer to check on any problems thus showing your continued involvement in your Buyer’s transaction. A good agent can often help to resolve potential problems without the necessity of involving lawyers.
- Refer your clients to dependable, reputable and experienced professionals such as mortgage brokers, home inspectors and lawyers. When it comes to lawyers, refer your clients to lawyers who are available and responsive to your clients. Do not refer your clients to the cheapest lawyer as they will often get what they paid for. Some firms operate in such a way that the client will never speak to or meet the lawyer and only deal with clerks or paralegals. Avoid firms that practice this way as your client will blame you when things go sideways. Your client deserves the best representation and will need it, especially if there are complications on the transaction.
The preceding reminders are general in nature and should be considered in light of the particular circumstances of your client’s transaction.