Commissioning
an Agent

Carolyne (Realty) Corp.
bramptonhomes@carolyne.com
burlingtonhomes@carolyne.com
1-(888) SOLD-ONE

Copyright © CAROLYNE REALTY CORP. 2005. This information may not be reprinted or reproduced in any form without the written consent of the copyright holder. This material is part of a chapter in a forthcoming book – now in draft format only; this article is long. It is meant to be. The information will not fit on a single page; read it at your leisure.

Commissions
     (or Where does all the money go?)

REPRESENTATION - Do You Know What it Means?

Disclaimer: Laws vary from state to state, province to province and sometimes even within tiny jurisdictions. Study your local laws and base your decisions accordingly.


Commissioning an Agent (from the Buyer’s point of view)

First you must understand what representation means – there is Buyer representation and there is Seller representation, and you must decide whether you want representation and just how your representation will be implemented; how agency is employed in your local area. There are many rules and regulations that must be adhered to. Your agent most likely will come prepared with reading materials on this topic. In some areas you will be asked to sign off or initial that you have been provided with this information, that you have read it, and that you understand it. This is for your protection as well as that of your “agent”.

So, which agent are you going to hire to help you buy a house? Did anyone else you interviewed cover these topics with you?

My goal, when I am acting as a Buyer Agent, is to get for you the house you want to buy, for the very best price, in as little time as possible, with the least amount of aggravation to you and your family. My goal will be to get you the very best home that your money will buy, in a location - as reasonably can be expected - that will produce further equity for you in the future, and not prove difficult on resale, should you decide to move from it in the future. Location, in any price range, is always a most important factor when either buying or selling. It is also important to use the services of an agent who will be alert to the requirements of a real estate transaction contract, so that your position is protected to the best advantage at all times.

I look forward to being your agent if you choose to buy in our city, and if you are moving out of town, supplying you with the appropriate contact name in your new location.

But even more important: I know how to get you the BEST CONTRACT. It serves no purpose whatsoever for a REALTOR to help you get a house for the best price, and then the contract falls apart.

There is so much more to buying a property than getting it for the best price. What other details are critical to a successful closing?

WHO: Who all is party to the contract? could be not just who “owns” the property; there may be other signatures required in various circumstances; one example is the required “Spousal Signature” (under the Act, as it is delineated on the standard Agreement of Purchase and Sale form). In order to consummate a successful real estate transaction contract you must have “willing participants”. Their names must be spelled properly, and they in fact must be who they say they are. If the seller is a non-resident, and has not applied the proper taxation rules to his sale, money will be withheld on the sale, to cover the withholding tax. This money comes from the money that you will have arranged to give over to the seller at closing time, as per your Agreement of Purchase and Sale contract. It is vital that whoever is acting for the owners of the property you are buying, are aware of their status. If you are buying privately, and the seller is a non-resident, you could be held liable personally, for the withholding tax. Whoever closes the transaction for you will be seeking the appropriate information during the search process. The government has made it perfectly clear on an Agreement of Purchase and Sale form that it is the responsibility of you, the buyer and/or your closing attorney, to make sure that in fact the seller has done his own due diligence.

It could be too late for your lawyer to give you the keys on closing day, if it is discovered that there are variances, such as the sellers are non-residents, thereby calling into play, special requirements outside the norm.

It is too late on closing day to discover that the financing stated on the contract or amendments/waivers that you thought were in place, are not. It is too late on closing day to discover that the house you are selling in order to make your current purchase has a builder’s lien on it, and the funds from your sale cannot be released to enable you to complete your own purchase. Ask your lawyer about these details in finite form, but your REALTOR should have a working knowledge of these topics, and where appropriate intercede on your behalf to alert other professionals on your team as to any unusual possibilities that may affect your contract, and therefore your closing as well as any other contracts that are dependent upon your closing.

Here is one example: A REALTOR is a listing agent for a residential property. The owner has signed the appropriate documents saying that the property is free and clear and there are no mortgages attached to the subject property; mortgage was paid off years earlier. There is no problem until there is a problem. It turns out that the attorney acting on behalf of the client who owned the subject property, although he acted for his client in the payout of the mortgage, failed to register same on title, years earlier. On closing day, the buyer discovered his attorney had not uncovered this situation, and on a Friday afternoon of a long weekend, the buyer found himself with a tractor trailer from his moving company sitting on the street of his soon to be new home, waiting to unload the buyer’s furniture. But, the buyer had no keys. The attorneys had not communicated back to the clients all day. No money changed hands, no keys changed hands. The buyer incurred extra moving day costs because the moving company had to return to their base of operations, unload all the buyers’ furniture and temporarily arrange storage until Tuesday, when the problem could be rectified, because they needed the moving van for other clients over the weekend. The buyers, their children and pets needed to find additional accommodation until Tuesday. They stayed at a local hotel, and put their pets in the vet’s office. Large costs. Who bears the burden of those costs? Much less the frustration involved. How could this have all been avoided?

WHERE: The subject property being sold must be identified properly, in finite detail, not only by its municipal address where it is physically located, but by definition as to how it is “registered”. Any easements and/or rights of way must be addressed. Anything negative about the subject property must have been disclosed by the seller, to the buyer; if not it, too, will “haunt the contract”. There is never a problem, until there is a problem. When a problem is discovered, everyone involved: the attorneys, the mortgage company, the bank, the government where applicable, the agents if there are any, the judge, and the owners of the property, all “look to the contract”. What was the intent of the contract? Firstly it must be discovered what is in the contract, if anything that addresses the topic problem. Who, if anyone, actually did something wrong. Who or who did not dot every ‘i’ and cross every ‘t’. Everything regarding real estate transactions flows through the root of the contract. Whatever caused the problem? Was the cause intentional? Was the problem caused by sloppiness? Ignornance? Arrogance? Negligence? Misinformation? Did the parties to the contract rely on someone else for assistance or information, when formulating their decision to act, or not to act? Was there any misrepresentation that occurred?

Disclosure of any potential issue, in the beginning, can be often overcome in discussion. There is a legitimate way to fix most things, and it is a matter of determining the potential for a problem and its related or subsequent costs, and who is going to cover those costs, now or later in a lawsuit.

It is important to note that on your contract, anything written in the “white space” and agreed to by all the parties supersedes the material in the fine print on the pre-preprinted document.

Does the agent you are considering hiring to help you buy a house, know how to address these issues? Does the agent know the most up to date method of deciding exactly what goes into that white space? What is vital or critical to your contract, and what is a matter of personal choice? Does the agent you are considering hiring know how to protect “your” position and instruct you on these sorts of details, if and when you are ready to bring an offer to the table? Does your agent know what, if any, special clauses may be required in order to protect you and your contract? You may want to seek the advice of your lawyer before signing the documents. That is very much an acceptable request. The agent you hire needs to have the necessary skills in place to be able to act appropriately on your behalf, and needs to know when to defer to the proper authorities on a given topic.

WHAT (stays:goes): what, exactly, are you buying? Every part, parcel, piece and appendage must be specifically identified, along with any and all chattels and fixtures (ideally with identification such as make, model and/or serial number) that form part of the agreement (contract). For such things as drapes and light fixtures, pictures can be useful. Due to the Privacy Act, you “must” seek permission before taking “any” photos.

WHEN: Another magic word in working with contracts. “When” is a real important term during the process of buying real estate. When any contingencies or conditions are, or are not, fulfilled by the required date on the contract, this impacts the contract in a huge way. Some buyers write a contract that has conditions/contingencies in place and then decide to walk away, thinking that if they do not fulfill these conditions, that they can just vanish from the contract with no further responsibility or potential for liability. Whether or not a buyer can do this, is fully dependent upon how the clauses are written and appear in your specific contract.

Time lines must be addressed, identified and complied with. Dates are “critical”. There must be a beginning date (when the contract is signed), there must be a specific closing date (commonly referred to as, but not necessarily, the moving date); vacant possession can be arranged for another date entirely, and both, when applicable, are noted in the contract, and other extremely important dates such as the length of time the parties have to consider the contents of the contract (commonly called the irrevocable date), the date by which parties “must” give their response to one another or the contract evaporates (voids), or self-destructs; ceases to exist but, if a contract has reached a certain state beyond its initial presentation, and the deposit cheque/check in fact has been deposited into a trust management account, most likely full releases will be required to be signed by all parties even though the contract has ceased in reality, before the monies can be returned because this situation prevents the seller from contracting the property further until such releases have be actualized; the date by which the attorney or someone in charge (commonly referred to as the Title Search Date) must have in hand all the necessary information for paperwork and transfer documents ordered to enable the transfer of title to proceed smoothly: whether any liens are in place, stop work orders, assessments or even if proof of insurance is required, and last but not least, the expiry dates of the conditions and/or contingencies noted in the contract and whether or not they have or have not been waived or amended. If an amendment is making a critical issue change to the contract, the amendment often should require an irrevocable date, itself, by which the other parties must agree to the specific amendment. Just as important, it is critical to the contract, within the contract itself, to note exactly what happens and what the expectations of all the parties to the contract are, when in fact the contingencies are not dealt with or are dealt with inappropriately.

For instance, are deposit monies to be returned upon the signing of the authority releases? When releases are required, all parties to the contract must sign off, not just some of the parties, or one side only. If releases cannot be provided in proper form, then a court must decide what procedure will be followed, and real estate companies cannot and must not release trust funds, failing having all the necessary documents in place. In many trading arenas, companies are regularly audited regarding such procedures.

For example, what does happen to the deposit monies? Deposit monies are different than down payment funds. One good example is that some buyers think that the sellers automatically get to keep the deposit if the conditions/contingencies are not fulfilled or if it is discovered that the buyer actually was not displaying total honesty; or when closing day arrives and the buyer doesn’t (was it anticipatory breach? or non performance?). This determination requires your attorney’s input, and likely the decision as to what happens next, and who will get to keep the deposit, will be reached by a judge. Who pays those costs? Could all these potential situations have been avoided? Who is at fault? Who determines who is at fault? How is fault assessed? What happens if a chain of closings cannot happen, due to a problem you as a buyer have created? Are you now liable for the problems created for everyone else in the chain of events? Could be.

HOW: So how is this “salesperson/agent” you have hired to help you buy a house, going to get you the best price? you ask. The Buyer Agent REALTOR involved has a patent (identifiable) job description. Only part of that job description requires him/her to get the best price for you when you buy. You can see here, that deciding which REALTOR to hire to “represent” you involves far more than your being able to buy for the best price. And, if you are thinking of buying privately, it is one thing to have an attorney draw up a contract for your purchase, but does the attorney then “represent” you. Is your attorney going to “negotiate” for you? When you choose a lawyer to look after your real estate affairs, it is important to hire one who does, in fact, practise real estate law, rather than dabble in many kinds of law. Real estate requires the expertise of an expert legal counsel.

Artists are “commissioned” (selected and contracted for) to prepare a particular piece of art for a particular client. Many fields “commission” endeavors with an end result in mind. What will your end result be? Will you be happy “with the picture?” What instructions are you giving your buyer agent? Commission is so much more than what you agree to pay your agent in dollars or in percentages. As a would-be buyer, how are you “commissioning” your buyer agent? What contract did you sign last time you “bought” a house? Will you pay your buyer agent, direct? at time of closing, as an adjustment, through the closing costs your attorney prepares? Or will your agent be paid “through the transaction, as stipulated and offered as a co-broke fee on the listing? Is the agent you have hired to represent you, really your agent or is “your agent” acting as a sub-agent of the listing agent, and is therefore “really working for the seller”, and is “your agent” then really not “your” agent at all? Did anyone explain this to you? Will you be paying your agent a retainer fee? Some agents now charge a retainer fee, the same way an attorney does. In some cases the retainer is non-refundable; in others, the retainer is reclaimed through the transaction at closing time, as a refundable adjustment.

Real estate agents are not tour guides or taxi drivers. Do you have any working knowledge of the liability undertaken by a REALTOR? Are you aware that the agent typically bears all the up-front costs – without danger pay? The REALTOR will research the appropriate properties for you to view, make appointments, spend countless hours making sure you understand what you are contracting for, and then closing day arrives, the transaction cannot close, and what happens next? Not all, but certainly some Buyer Agents charge a retainer fee (just like some lawyers do) up front before ever showing houses to you, having had you, as a buyer, sign a Buyer Agency contract. Many research and or background hours can be spent by the REALTOR, working “for” you, even though he/she may never be paid. Why do you suppose the agent charges a retainer? It’s no small wonder that some retainers are non-refundable.

What other industry is in the position of a REALTOR? where he/she is expected to bear all the liability, sometimes for months, spend his/her own money (not the money of the franchise or broker/owner), and when contracts come unstuck, even bear further expense to defend himself/herself if wrongfully named in a lawsuit along with his/her corporation broker, brought by the parties to the contract, even if the agent did nothing wrong, personally.


Can you see how getting a house for the best price becomes an exercise in futility, if the contract itself is worthless in the end? Were you ever guided previously by an expert Buyer Agent REALTOR throughout the transaction when you decided to buy a residential property? What is the good achieved by having you decide to write a contract because it has been determined you can get a specific house for a great price for example, when any or all of the other critical features cannot be addressed or fulfilled by the other parties to the contract? Did your Buyer Agent point out all the possible negative side effects of the properties you entertained buying? If the negatives have been pointed out to you, and you still want to buy the property, it needs to be understood that the REALTOR has done his or her job, and may require you to sign a liability disclaimer that addresses the fact that any negatives were discussed with you, and you, of your own volition, decided to proceed with the purchase. Now the Agent needs to be protected against the decision you made, so it does not come back to rest on his shoulders. He/she has done the contracted for job, even so you decided to operate outside advice offered for your protection.


The other REALTOR, if one is involved, is not a party to your contract, unless they are selling their own home to you (which must be disclosed prior to viewing the contract). Neither is your own Buyer Agent REALTOR a party to the contract. In reality, REALTORS are merely facilitators in fact, regardless of their title, whom they represent, whether they call themselves an agent, a broker, a sales representative, or have any of countless accreditations, enabling them to help you, as the buyer, to fulfill your part of the contract. They don’t own the property, they are not buying the property, therefore they do not have a right to a personal opinion. They must stick to the facts relative to the property and the contract. Your agent should refrain from offering personal advise such as how much he/she would pay for the subject property, were they the one buying it. A house is worth whatever a willing buyer is prepared to pay a willing selling, when neither the buyer nor the seller is under duress (must buy or must sell).

As a negotiator your Buyer Agent REALTOR is working for you, not just to achieve the best purchase price for you, but to make certain, as certain as can be, that you have the BEST CONTRACT, one with loose ends tied down securely (as much as can be). Failing which, a judge in the court system must untangle the details, which could tie up you and your deposit monies perhaps not enabling you to buy some other property in the meantime along with the purchase that you thought would take place, for an indeterminable period of time, perhaps disenabling you from buying at all, and/or preventing you from proceeding with your own sale of an existing property, which may or may not be tied to the paper trail.

WHY and WHY NOT: The other REALTOR, if there is one at an offer presentation, is working for the other side most likely; but this cannot be presumed. It is important to predetermine, in fact, exactly for whom the other REALTOR is actually working, too. It could be, although rare, that possibly he too is working for you, in the position of sub-agency, having signed the seller up as a customer instead of a client, and the seller only “thought he had an agent”? Example: the Buyer Agent found you a house that is not currently listed. It can be confusing, and often is confusing, even for the professional REALTOR. That’s just one reason for “all the paperwork”. This is why everything must be documented, and the creation of a paper trail and time line is critical. It is so important to take good notes. It is never enough to simply say - he said: she said. It is vital that the consumer be protected and must understand what is being undertaken on his behalf, by the chosen Buyer Agent REALTOR.

WHO each REALTOR “represents” is vital information and must be disclosed. THAT’s the law. Part of the necessity for this disclosure is so that you know when “not” to pass certain information over to the other side that could disarm, or harm, your position. That is not the same thing as hiding critical information to the contract, but rather addresses your personal information, not to be disclosed without your permission and your understanding as to how it can impact your purchase. Never tell anyone how much you will pay for a specific property, up front. Let your contract talk; in the beginning the contract is just an offer. Who gets paid, how much and by whom may not have anything at all to do with actual representation. The wording of a contract always prevails. This is most difficult to understand sometimes, but nonetheless, it is a fact. A client is entitled to advice; a customer, only information. If you are buying, you need to be working with someone who “represents you”, ideally. Although an agent can represent both sides, working for the seller and for the buyer, he/she must be totally diligent in not passing information inappropriately from one side to the other, and requires the permission from the person with the original contract, in order to proceed to act as a dual agent. In some areas it is not legal to act as a dual agent; it is forbidden.

NOW: Would you feel comfortable hiring me to help you purchase your next property? You can pay me direct at the time of closing, in which case I would not be paid through the listing contract of the other agent involved; you can hire me and I can still be paid through the listing contract of the other agent, and still represent you; you can hire me and I can be paid a portion of my fees by each side. How I am paid has no bearing on your “representation” choice. You can hire me to represent you, as the buyer, and possibly pay me no money at all, in which case I would be totally paid by the other side, and still represent you. Some agents rarely work that way, but decide on a fee for the services they render, and then an adjustment is paid at closing by the buyer, to make up the missing commission amounts, as specified in your Buyer Agent Contract.

Some agents are already contracting to be paid by the hour plus administration fees and all related costs for supporting documents, with the addition of all advertising and promotional materials to be paid for by the client, as itemized throughout the life of the contract. In the end they likely will earn much more than the commission would have been, in percentage points. If you hire an agent and agree to pay by the hour, you may want to contract for a capped amount, not knowing how many hundreds of hours your agent is working behind the scenes for you, in which case you might be in for a big surprise.

If you choose to hire me to represent you, I must not disclose any of your private or personal information to the other side, except to say that I represent you, not them. That is part of what representation is all about. I’d be proud to take on the job of representing you. Hopefully this information helps you to understand that by hiring the one who charges less could put you in a position of double jeopardy. Time is money. Agents (perhaps a friend or family member) who work for free or for minimal fees simply cannot spend the time required to evaluate all the finite details of your contract; they typically must do more transactions and hurry along to do the next one, just to stay in the same place financially themselves, hoping that in all their rushing around that they have not put you, or themselves, in any jeopardy that will come back to haunt both you and them, later on. Does this put you in danger? Not always. But it certainly can. You may find yourself largely on your own, after you have signed a contract to make your purchase. As you can see, this is a real job that requires astute skills. It is important that you understand: REALTORS are much more than “just licensed salesmen”. As Buyer Agent REALTORS, we are governed by laws and rules put in place to protect you, to protect us, and the rules we must follow are generated in the best interests of all concerned. The Code of Ethics must be adhered to at all costs. It shouldn’t ever be, Buyer Beware. Guidance is a key factor in representation. So, when you are ready to make your move, be sure to HIRE A BUYER BROKER AGENT TO REPRESENT YOU.

Copyright © CAROLYNE REALTY CORP. 2005. This information may not be reprinted or reproduced in any form without the written consent of the copyright holder. (Part of a forthcoming book)



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1998 by Carolyne Lederer PLEASE NOTE: this material is copyrighted by Carolyne Realty Corp. and may not be reprinted or duplicated in any form without the written consent of the copyright holder.
1/14/98