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September 21, 2017 | Remorse

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

Enough Millennial-bashing, already. Let’s do something nobler. Like trashing realtors.

Over the past few years this pathetic blog has warned you (repeatedly) against signing anyone’s BRA. The Buyers Representation Agreement may make perfect sense from an agent’s or broker’s point of view, but it can come to bite buyers in the rear.

In case you just became sentient, the BRA is a document real estate boards have been pushing for years in order to obligate buyers who are shopping the market. The clauses are draconian and rarely explained. No wonder. If most people understood what was being pushed in front of them, they’d freeze.

This thing ties you into one agent, which means if you decide to buy a house with another realtor, you may owe commission to the first guy who did nothing to assist you. It’s common practice for an agent insisting on a BRA to make it for a long period of time (I’ve often seen six months, sometimes a year) and for a broad geographic area (like an entire city). Other agents just refuse to show a home to you unless the document is executed.

So the first thing is to refuse. If that doesn’t work, agree to aBRA only for a specific house. Write that address in, and make the document effective for two days. The agent will hate you, but c’est la vie.

Now, here’s an instructive tale.

Obviously Marcello and Anita are among the handful of Canadians not addicted to this site. They listed their north-GTA house months ago and made an offer with agent Vince to buy another one for $1.3 million, after he asked for a BRA. Then the market tanked. M&A panicked since they’d bought firm without selling their existing place. After weeks of debate, they walked. The risk, they felt, was just too great.

So they lost their deposit – as anticipated. They now face a potential lawsuit from the jilted sellers who can go after the difference between $1.3 million and the ultimate selling price, plus costs and damages. And, to their profound shock, they owe Vince almost $40,000 in commission on a purchase that never materialized.

Huh, you say? Don’t vendors pay commissions? Why would they be responsible?

Yes, because of the BRA. One of the nasties in there clearly states that in the event a buyer inks a deal using the agent, then fails to complete that transaction, “due to the buyer’s default or neglect,” they must pay. Here’s what realtor Vince told a reporter: “…they refused to close, stringing sellers, agents, mortgage brokers and lawyers along the way… This is a case of a client taking advantage of the current situation of the housing market due to buyer’s remorse.”

If this goes to court (a bad idea), Marcello and Anita can add twenty grand in fees to a litigation lawyer to the pile they’ll be ordered to pay Vince. It’ll be good practice for being screwed-over by the lawyers for the sellers they walked out on. They may feel wronged and victimized, but those are the downfalls of ignorance and house lust.

So here is the realtor-bashing part: if Vince failed to explain the document clearly, to spell out the gravity of its provisions when he presented it to his clients, he was negligent. Moreover, when the buyers were considering abandoning their purchase, the commission grab should have been spelled out as a key consideration. Given all the cash M&A will be piddling away, it might have made sense to close, rent out one of both properties, and weather the equity storm until markets heal. At least then they’d have assets, not merely regret.

How does this compare with the financial business – where clients rarely make million-dollar decisions in less time than they spend buying underwear? Simple. An advisor failing to disclose risk, making an unsuitable recommendation, or guiding clients into a $40,000 loss without providing any tangible benefit, would be covered in peanut butter, naked, and thrown into a pen of hungry weasels. With fleas.

Never sign a BRA. If you do, make it for a single address. Make it short. Strike out offending clauses. And if an agent refuses to represent you as a result, find another. There are 120,000 of them in the nation and 45,000 in the GTA alone, where Marcella and Anita now contemplate their miserable future.

Imagine. If only they’d come here, they would have found salvation. For blessed even are the greater fools.

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September 21st, 2017

Posted In: The Greater Fool

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