Buying a house with a broker
It seems that more and more people enter the adventure that is buying a home without the services of a real-estate broker – but real-estate brokers remain very present on the homebuying landscape.
When comes the time to sell their homes, most people still deal with a broker; when buying, however, doubt still seems to persist. In the end, what does dealing with a broker change in the home-buying process on either sides of the transaction? Let’s take a look at a rapidly-evolving reality.
According to François Des Rosiers, professor in the finance and real-estate insurance department of the Faculty of Administrative Science of Université Laval, it’s certain that the role of real-estate brokers is not likely to disappear. “Even judging solely by the presence of signs in the street, we can see it’s still the norm. I’d say they’re present in about 70% of all transactions.”
In a market on the upswing, one could be tempted to skip the use of a broker. Thus, when the market is very active (which is currently the case), homes don’t stay on the market for very long. It’s not rare to witness bidding wars. In such a context, it can be tempting to avoid paying a broker’s commission. In a slower market, however, a broker can make all the difference. “There are all kinds of brokers. Some are very good, very active. Others will be content just signing up properties. It also depends if said broker specializes in the area or not,” explains François Des Rosiers.
An evolving culture
What about getting a broker for purchasing a home, specifically? If some doubt of the relevance of such a partnership, it’s mainly because this is less common in Québec. “Here, brokers are much more popular when it comes to selling a home. The tradition of using a broker to purchase is, however, becoming more popular,” says François Des Rosiers. “In the commercial real-estate world, it’s much more common and a integral part of the current culture.”
Me Amel Barkati is a notary who works with individuals who are buying or selling homes. She notices that, in her experience, many buyers in her practice use a broker. When that broker does their job well, even the notary’s job is simplified! “In my experience, people do not want to manage a relationship with the seller’s broker. There is no confidence established there, which scares people,” she says. “Considering it is illegal for a selling broker to favour an offer from someone without a broker (in order to avoid having to split the commission), hiring a broker becomes even more interesting,” says the notary.
According to Anouk Vidal, broker and vice-president of the board of directors of the Quebec Professional Association of Real Estate Brokers, there are only advantages when a buyer calls upon a broker’s services. “Most people appreciate being accompanied by a professional, especially when they don’t need to pay anything as the buyer’s broker is paid by the seller,” she explains. Concretely, the broker hired by the buyer will highlight the property’s strengths and weaknesses to make sure the buyer is getting their money’s worth. They’ll also be in charge of leading negotiations, a step that intimidates many. ‘Personally, I see myself as a conductor,” says Anouk Vidal. “I’ll create a bridge between the different parties and guide the buyer towards competent professionals, while making sure it all happens within the time limits.”
Buying new with a broker
First of all, it’s important to specify that, whether for the purchase of a new home or an older one, the broker’s duties and obligations are the same. It’s the Organisme d'autoréglementation du courtage immobilier du Québec (OACIQ), as the authority on real estate brokering, that makes sure brokers follow all of the appropriate laws, says Marie-Ève Bellemare-Tessier, communications agent with the organisation.
When a consumer wants to purchase a new or unbuilt residential property from a promoter or builder, the Quebec Civil Code requires the use of a prelminary contract rather than the promise to buy that the broker will use when the transaction concerns a used dwelling. The preliminary sales contract must contain all mentions required by the Quebec Civil Code, including a breakdown of the sales price and a cancellation right for a grace period of ten days in the buyer’s favour.
Note: contrary to what we may we led to believe, brokers do not negociate with the promoters to get their quote. “The broker receives their quote from the customer, the buyer of the property. This sum, negotiated in advance by the broker and their client, is consigned in the Brokerage contract – purchase, which both parties must sign,” explains Marie-Ève Bellemare-Tessier.
Broker or no broker?
It’s also worth mentioning that the real estate broker cannot work for a builder or real estate promoter, either as a freelancer ou through a real-estate agency, as stated in the brokering contract between the broker and said builder/promoter. They must identify themselves as a broker on any advertising material and collaborate in order to attain reasonable conditions with any other broker or agency that makes a demand.
Sometimes, in the world of new constructions, the buyer does not differentiate between a broker and a sales agent. Promoters and builders, in fact, do not always use brokers to sell their new properties. However, it is pertinant to verify that the person you’re dealing with is indeed a broker, since the OACIQ’s brokerage compensation fund won’t be applicable as a means of help should a problem surface; it will only be applicable if one of the two involved parties is a registered broker. Any transaction performed by a simple sales representative will also not be covered by Quebec laws on real estate brokerage.
And what if the buyer is interested in a home that isn’t represented by a broker?
This is a recurring situation in your hunt for a home? There are two possible outcomes:
1) The buyer has signed a brokerage contract. The buyer will therefore have to mention all properties they are interested in to their broker, even if they do not appear on Centris (ex: from a promoter, from the seller themselves). The broker will be responsible for setting up any visit and for accompanying their clients through the buying process. They will be paid according to the terms outlined in the brokerage contract. “It’s important to know that it is possible to deduct remuneration directly from the sale by using the Annexe Financement form,” explains notary Amel Barkati. “It’s all part of the negotiations with the seller; the latter will have to consider those fees in the sales price.”
2) The buyer does not have a brokerage contract. The buyer could choose to deal directly with the seller without involving their broker, as they have no contract tying them together. However, if the buyer wants to employ the services of a broker in order to be well-represented and protected, they can ask the broker to represent them when dealing with the desired properties. The broker will then have to fill out the brokerage contract with their clients and agree on their fees for services rendered. This will vary depending on the broker. “Sellers are generally very open to the idea that a broker will bring in their clients and take care of the transaction. It makes their life easier and they will generally be ready to pay a certain amount (negotiated alongside the selling price) for this,” confirms Me Barkati.
Transparency and conflicts of interest
Many wonder if there is a conflict of interest (or the appearance of such) when a broker representing a buyer is added into the mix. After all, the broker is paid by the seller, which means that both parties have a vested interest in selling at the highest price possible. “In theory, both brokers work together to find a price that is satisfying to all. In theory,” says François Des Rosiers. If the broker is representing both parties (which is technically allowed), the risk seems even larger. “For the last thirty or fourty years, there have been ongoing debats about whether or not a broker can represent both the buyer and the seller. It’s controversial,” confirms the expert in urban and real-estate management.
Silva V. learned that the hard way. Her experience with a broker was disastrous. “It turned out that the broker was friends with the people selling, which I was not aware of. Amongst his many mistakes, he omitted to mention many hidden defects,” she says. “It was my first experience, which is already pretty stressful in itself. I finally learned about the conflict of interest through an acquaintance. When confronted, the broker didn’t deny it. We came to an amicable solution in front of a notary, as I didn’t feel like taking it to small claims court.”
Anouk Vidal believe that anyone who do business with a broker are very well protected and that this kind of story isn’t the norm. “In fact, people who deal with brokers, one way or another, are reasurred to know they’re protected by brokerage lawsand by strict ethical rules,” she assures. “When it comes to one agent representing both sides, it’s something that is done, but that must obviously be divulged early on. In any case, it’s very apparant; it’s a difficult thing to hide,” adds the vice-president of the board of the Association professionelle des courtiers immobiliers du Québec. All properties, no matter the nature of the broker, will be posted on the Centris website, for double verification purposes.
Stéphanie D. Insistent on doing business with a broker to purchase her property. “After our first purchase offer, with the seller’s broker, we decided to go with a broker that would work solely for us. We didn’t feel like we were getting as much transparency as we wanted,” she explains. No regrets there. “We,re very satisfied. Our broker was very professional, dynamic and hard-working. She kept us in the loop and answered all of our questions, compared our case to others in her practice, etc. We really did feel like she was working for us, which made things easier,” she concludes.
Protection and verifications
There are good brokers and less good brokers – as there are in every profession. “There are bad workers in every domain, including real-estate brokering,” says Me Barkati. “We shouldn’t forget that there is always the possibility of filing a complaint if need be,” says the notary. Indeed, the Law on real estate brokering gives the Organisme d’autoréglementation du courtage immobilier du Québec (OACIQ) the power to impose fines or apply sanctions that can go from simple reprimands to suspension of licenses. This independent organisation outfits and accompanies individuals in the filing of a complaint; in fact, their website is filled with practical information.
But before even choosing your broker, a few verifications are required. In order to help with this step, the OACIQ has put together the Register of licence holders, which allows you to obtain a broker’s contact information, verify the validity of their permit, see the list of all training they may have had and find out if they have ever been the target of disciplinary measures.
On top of these more technical verifications, it is pertinent to take some time to analyze the broker’s profile and ask ourselves a few questions. For example:
- Is the broker familiar with the area I’m interested in?
- How many years of experience do they have?
- Do I have good references?
- Does the broker have many availabilities?
The limitations of the Internet
It’s impossible to approach this subject without touching upon the impact of internet and new technologies on the real-estate market. “In the long term, it’s certain that new technologies are transforming a large part of the activity sector,” confirms François Des Rosiers. “But it isn’t always for the worse. There are some who are now able to get a particular client base, or sell a more difficult property, thanks to the Internet,” he adds. The broker still has a place, but they must adapt. A practical example of the change brought on by websites and other online ressources: buyers visit much fewer properties, as they’re able to eliminate many options virtually. When they go visit a property in person, their interest is already higher and a sale more likely.
For Anouk Vidal, the Internet has in fact helped brokers confirm their value and competence. “We have learned how to prove we’re much more than just a sign in front of a house. There’s a whole notion of accompaniment and knowledge that’s offered in our services,” she says.
It must be said that the completion of a real-estate transaction, whether it be a sale or purchase, will always be a very emotional process. It’s even been said that the purchase of a new home and the subsquent move is one of the most stressful events in one’s life. Technology can’t really change that. “It’s always comforting to be accompanied by a human, someone who has already lived through the process several times and can help us get a lay of the land,” says Arthur F. “We used a broker to purchase our first family home. He took care of logistics and everything administrative as well as all of the negotiation, which isn’t my strong suit. I consider that it saved me time and money,” he concludes.
- Read: A complete worry-free guide to buying your new home
Stock images: Shutterstock
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