Why Would I Use a
Purchaser’s Agent to Buy a Resale Property?
The concept of Purchaser’s Agent or “Buyer’s Agent” as it is often
referred to as, is rather new to Canada although it is well established throughout
America.
In Toronto consumers are protected by a number of
Government Agencies and industry associations (Real Estate Council of Ontario,
“RECO”, Canadian Real Estate Association,“ CREA”, Ontario Real Estate
Association, “OREA”, Toronto Real Estate Board, “TREB”). This
protection addresses issues such as conduct and code of ethics.
“Agency” is a legal relationship
whereby one individual or “brokerage” represents another party in the
negotiation of a transaction. In real estate their is fundamentally three (3) types of
Agency: Seller’s Agent, Buyer’s Agent and Dual Agent.
In Ontario the law requires that every Realtor not only disclose and make abundantly clear
his relationship with the parties before any negotiations and/or contracts are entered
into, that he/she must also get written acknowledgement from their client that they have
read and understood an Official Brochure “Understanding Agency”, produced by
TREB.
To arrange a viewing of a resale property your
Buyer’s Agent must disclose to the Seller’s Agent that he/she is working under a “Buyer’s Agency
Agreement” thus prior to viewing properties the law in Ontario requires that buyers
have entered into this formal working relationship under law. Most consumers are unaware
of this and quite frankly don’t like signing a contract with someone before they
actual initiate things. This agreement can be verbal until such time as an Offer is
presented at which time the required acknowledgement must be formalized and remain in the
Broker’s file.
The RECO Rule on agency stipulates:
RECO Rule 2 - Primary Duty to Client
A Member shall endeavor to protect and promote the best interests of the
Member’s Client. This primary obligation does not relieve the Member of the
responsibility of dealing fairly, honestly and with integrity with others involved in each
transaction.
Fiduciary Duty to Client
2.1 A member has a fiduciary duty, professionally and
at law, to endeavor to protect and promote the interests of the Member’s Client to
the extent that he or she may ethically or legally do so. This relationship of trust means
that the Member never puts the Member’s interests above those of the Client.
Competence, diligence, full disclosure, obedience, loyalty, confidentiality and complete
accounting are included in this duty.
2.2 Except in cases of Consensual Dual Agency, a Member does not act as a
mediator between the Member’s Client and the other parties involved in the
transaction. Rather, the Member advocates the Member’s Client’s position
according to the Client’s instructions.
 It is important when
setting out on a real estate quest that the ONLY person who is working for you is your OWN
Buyer’s Agent. If you see an ad in a newspaper, real estate newspaper, on television
or in a magazine or an “open house” sign, the sales representative on the other
end of the ad or sitting at the open house holds a Fiduciary Duty (set out above)
including diligence (do that which is necessary to get it sold), and confidentiality (not
give any information not specifically requested - non comparables, etc.). You see the
implications here. The same works at new condo sites where most sales representatives are
Realtor’s working on contract for the developer (client).
Now, let’s carry this legal burden into an arena where psychology courses on “the art of
persuasion”, “high power sales”, “closing that sale”, are
commonplace and put those strategies and tactics into operation in a straight commission,
big ticket industry and you will quickly start to see the benefits of having my 30 years
of condo knowledge and experience on your team.
As obligated to the fiduciary obligations between a Seller’s Agent and
his/her client so stand the fiduciary obligations of the Buyer’s Agent to his/her
client. Both hold a legal obligation to get the best price, terms and conditions possible
for their client as well as to fully disclose all pertinent information to their client
and a heavy demand for confidentiality.
 As with the Toronto
Real Estate Board and the Ontario Real Estate Association, I do not hold out that any Dual
Agency relationship is a sound one. I’ve heard all of the arguments but really, if I
have an oath of confidentiality with my client (“Buyer”) and I also have an oath
of confidentiality with another client (“Seller”) an obvious hurdle appears that
makes the goal (if it is in fact to get your client the best price, terms and conditions)
unachievable.
When looking for a Buyer’s Agent make sure that the agent “DOES
NOT TAKE LISTINGS”. It’s really that simple to select your Buyer’s Agent.
The majority of Seller’s Agents will tell you that they “Do Buyer Agency” however, in the purest sense of
the word their own words clash into one another. Remember the RECO Rule 2 about
“confidentiality, obedience and full disclosure”, relate that to trying to
represent both parties and you will quickly see why the Board and the educational arm of
the industry (OREA) front on the practice.
It is impossible to “serve two masters” as the Bible says and to
do a professional job you cannot have any influence to motivate a Buyer’s Agent to
influence his client in their 
decision. As admirable as it may sound when selling Dual Agency, the bottom line is that
you are just trying to make both ends of the commission on any sale. It’s only human
nature that a Realtor will push his listings (the properties he has a legal obligation to
push for his listing clients) and the last thing you (a buyer) wants is pressure (however
subtle) from your Buyer’s Agent.
Why Would I Use a Purchaser’s Agent To Buy In A New Development?
I have a lot of clients that have asked me this question and quite frankly,
I see my role with my clients at new sales sites as more critical than addressing the
resale issues (above) regarding the agency obligations imposed under the Real Estate Business Brokers Act.
First off, you will avoid the onslaught of the sales force and the basic
tactics that are still, amazingly, used today. A couple weeks ago I was in a new sales
site on Bay near College and had to wait about a half hour for a client who was running
late. It brought memories of 1001 Bay presale days when I worked the floor and designed
the sales strategy. We refined the strategy of throwing the buyers off their game by
making them wait in the cramped reception area of the make shift sales trailer.
The psychological warfare started long before they showed up at the
trailer. During the week I would phone all of the Registration cards that were given to me
(prospects) arranging a time on the weekend (we were only open weekends and you were only
given one time slot to attend). The more complicated and awkward we made the buying maze,
the more motivated the sellers became allowing us to sell the  entire building out in 10 days (5 weekends)! You
have your own professional and knowledgeable Buyer’s Agent to totally remove this
from your information gathering.
Most people have little experience in reading floor
plans and then juxtaposing this information into a physical environment that does not
exist at the time. That is what you are challenged to do each time you visit a sales site
and quite frankly the sales site lingo for clients just walking in without their own
buyers agent is: “who do you think buys the dog suites”. Don’t get caught
up in the commercial marketing craze of condo sales . . . be sure to have professional and
knowledgeable representation. It’s FREE!
Why Use a Lawyer?
It really isn’t my job to sell lawyers however, the use of them in a real estate
transaction is very important. When buying a presale you will receive a literal book of
documents. Know that the seller’s lawyer has prepared those documents taking every
initiative to protect the interests of his/her client (the developer).
You will find foolish things in there like you paying for the seller’s lawyer, open
ended levies and surcharges designed to minimize the developer’s financial exposure
on closing. Unless you have a knowledgeable lawyer review and “work”
those documents you are in for a surprise at the end when closing, a surprise that can add
up to the tens of thousands.
 Buying resale also leaves open
crisis doors for leans and/or encumbrances on a property or cloudy title as its referred
to and after closing is not time to find out about these kinds of things.
Always be sure to confirm costs prior to retaining the lawyer of your choice and always
talk to at least 3 lawyers before deciding on who should handle your transaction. Be sure
that the lawyer you choose is experienced with condominiums especially post September
2001.
What’s The Difference Between a Condo and a Co-op?
I preface this by saying that this is not intended as a legal definition. I would advise
anyone to talk to their lawyer about specific legal matters unique to each.
For our purpose, we’ll say that these two entities are almost the same thing there
are some legal differences resulting from physical differences relating to ownership.
In a Condo (a more modern day form of multi-unit residential buildings ownership) you are
purchasing proportionate ownership in the common elements of the building and the
exclusive ownership of the space included within the inside of the outside walls, ceiling
and floor and windows.
A Co-op (the predecessor of condos) you are buying into a corporation that owns the entire
building. There is only one deed on the entire property and shareholders enjoy exclusive
use and certain  rights to the
proportioned space in the building but individual owners do not own the unit.
Toronto does have co-ops but they do not represent a sizeable market share of multi-unit
ownership alternatives. Conventional banks do not mortgage into co-ops as the mortgage is
on the entire building as opposed to the actual units. You conventionally need a large
deposit (35% or more) and are limited to 2 loan institutions. You also must get approval
of a committee of owners before actually becoming an owner.
What do I Own Personally When I Buy a Condo?
When you purchase a condominium you are purchasing your own private “space”
referred to as a “unit” within the condominium development as well as a
proportionate ownership (proportionate to the overall percentage of ownership) of the
“common areas” within and forming a part of the corporation.
 Conventional ownership dimensions
start at the outside of the drywall on your walls and run to the outside of the drywall on
the opposite wall or many times specified as the upper surface of the cement forming the
floors to the lower surface of the cement forming the ceiling, and the same with walls. In
other words what is inside your unit is yours plus you own the common areas in association
with all other owners in the development.
Parking is not conventionally a part of the condominium purchase with initial purchasers
being offered the opportunity to purchase it or not. When purchasing resale whether the
unit comes with a space or not is based on decisions of the initial purchaser.
Infrequently parking spaces come on the market and can be purchased in the same manner on
MLS or sometimes owners post them for sale privately usually on an owners bulletin board
in the mail area.
Parking in condominiums is either “Owned” or “Exclusive Use”. When
owned, you receive an actual deed on the parking space just like the unit. This means that
this parking space may be sold or rented out to the benefit of the owner. Condo documents
restrict the sale of parking to non- owners of units in the building to insure security.
There is usually a strong market for parking spaces either for sale or for rent in
downtown Toronto. Prices in 2002 for parking spaces range from around $18,000 to $30,000
down on the Harbourfront.
What are Conditional Clauses?
Conditional Clauses relate to resale condominiums. When dealing with new condos the 10 day
rescission period comes into effect which negates the conditional clause used in  resale’s to protect clients.
Conditional clauses are clauses your Buyer’s Agent will prepare for you when
purchasing resale. You will make your offer conditional on securing a first mortgage to
give your banker’s time to get everything in place. We also make our Offer’s
Conditional on receiving and having our lawyers go through the “Status
Certificate” showing us the financial and physical condition of the condo
corporation.
These are conditions that as the Buyer we must “waive” (a waiver is a document
that you will sign stating that our condition has been met and we are therefore waiving
it). Should we not deliver a signed “waiver” regarding each/any condition in our
Agreement of Purchase and Sale, the deal becomes null and void.
What Is A Capped Rate?
Capped rates are rates that your bank offers to you that show a maximum interest rate that
they will charge you when you take your mortgage with them.
 Most new home sales sites have
their own in-house banker. Realizing that the condos won’t be delivered for a couple
of years when you are buying at the presale stage, the bank that is doing the construction
financing for the developer extends preferred mortgage rates and/or terms to buyers.
Regardless of where the interests go up to by the time the development is delivered, the
bank will “cap” the rate you pay at the published rate. If the rates drop and
are below this rate the bank will offer that rate to you. You are not locked into this
offer and can usually take it when purchasing and then negotiate with any bank you choose.
What is a Reserve Fund?
Every owner of a condominium pays a monthly fee referred to as “Maintenance
Fees” (see “Maintenance Fees”), and a certain portion of these fees are
contributed to a special fund called the “reserve fund”. This fund is required
to be maintained
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and can only
be used solely for the purpose of major repair and/or replacement of the common elements
and assets of the corporation (see “Condo Corporation”).
The Condominium Act requires that condominium corporations carry out a reserve fund study
within one year for corporations created post May 5, 2001 and within three years from May
5/01 for existing condominium corporations.
There are restrictions on the use of the money in the reserve fund and also on where these
funds can be invested. Once the
reserve fund study is carried out, the Board of Directors completes a proposed plan for
the future funding of the reserve fund and at this point is able to start investing the
reserve fund into appropriate investments.
The Condominium Act restricts the investment of reserve funds and provides for only
investing in “eligible securities” that are registered in the name of the
Corporation or held in a segregated account.
A Condominium Corporation that maintains a healthy reserve fund and ensures that the funds
are properly invested will have adequate funds and access to capital to carry out a major
repair or replacement of the common elements when necessary. Those without face the
possibility of a “Special Assessment” (see what is a “Special
Assessment”).
How Are Maintenance Fees Determined (Can They Rise Unexpectedly) ?
 As a shareholder in the
condominium corporation you have the right to attend Board Meetings and every year there
is a vote for Board membership. There are usually seven Board Members but sometimes five
or whatever number the shareholders feel appropriate. This is normally determined and set
out in the condominium documents at the presale stages.
Immediately when the condo board is initially formed an independent auditor is retained by
the Board. A reserve fund study should be immediately undertaken to confirm the accuracy
and representations found in the condo docs. The study will also forecast operating cost
growth to inform the owners as to expected annual growth in maintenance fees.
Each unit owner's proportionate maintenance fee (proportionate to the physical size of
your ownership unit to the overall ownership space within the condominium) having been
accurately set out in the developer’s original condo docs and an effect reserve fund
study enables the Board to inform owners as to future maintenance fee growth annually.
The auditor audits the books of the corporation and reports to the shareholders at an annual meeting. The more
manpower and amenities a development has, the more “operating budget” the
corporation requires. This budget is divided proportionately amongst the shareholders
(owners) resulting in an annualized monthly maintenance fee per unit. An additional amount
each month (equal to approximately 10 per cent per unit) is deposited into a Reserve Fund
(money which the condo corporation invests on the condos behalf to earn money to offset
future repair and restoration to the building itself.
As the more amenities and manpower affects your monthly maintenance fee, the higher number
of units in a building also affect the maintenance fees (more people share expenses).
What is a Special Assessment ?
A Special Assessment is a charge passed onto each owner in a condominium in the event of a
major repair (possibly the roof needing replacement or an elevator needing to be replaced)
and the reserve fund (see “What is a Reserve Fund?”) not having adequate funds
to pay for the repair. The Board of  Directors
must impose a “Special Assessment” which is proportioned amongst the owners
based on their proportionate ownership within the condo corporation. This charge, usually
broken down over a number of months unless the situation requires immediate payment. The
owners are always personally liable for all costs in maintaining the condominium and condo
corporation.
Can Builders Take Advantage of Purchasers ?
In Ontario consumers have a multitude of layers of protection against unscrupulous or
unethical developers but laws are only as good as enforcement. Over the past, almost three
decades I have seen a lot of changes in Toronto condo laws.
Initially developers were required (by banks and government agencies) to have prohibitive
clauses included in their Agreements of Purchase and Sale to guard against speculators.
Recently in Humber Bay Shores (see later) I am aware of sales involving the total deposit
of $7,500 on a $200,000 condo purchase with no more money until final closing and the
right, for $1500 to the developer to flip the unit! “Times“, as the song goes,
“are a changin”!
The bottom line on being taken advantage of is that the developer cannot get away with
anything that is in the Agreement of Purchase and Sale. This is why you take your
documents to a good condo lawyer. Don’t just give this work to any lawyer. We have a
new condo Act in Ontario which means that not all lawyers are up to date on all the
changes (they are considerable).
A good condo lawyer will save you more money out of the clauses in the Agreement than their fee.
Understand that the documents are written by the other side’s lawyer solely and
expressly to protect their client (just like their sales agent is legally obligated to
do). You need a lawyer who will challenge the many trivial “nickel and dime”
surcharges and fees that most developers try to pass onto the buyers. They look trivial
until added up and the bill gets handed over to you!
What is Title Insurance ?
Quite simply stated Title Insurance is insurance that one takes out to insure that the
property they are buying has a clean “title” (“title insurance”).
Ontario has long had two registry offices for registering title to land and the province
is in the process of centralizing all of this.
Title Insurance is a way that all matters are resolved insuring everyone transferring
title to a property that the property’s title is clear of liens and encumbrances.
What is a Reserve Fund ?A Reserve Fund is a separate
fund established by the condo corporation and managed under the supervision of the Board
of Directors. A portion of every unit’s monthly maintenance fee is set aside for this
fund. The fund is invested into certified (approved) investments by the Board with all
proceeds of the fund targeted to offset normal upkeep and renovations to the building and
common areas.
What is a Reserve Fund Study ?
All Board of Directors of condo corporations are required under the Condo Act to conduct a
thorough analysis of their Reserve Fund on a regularly scheduled basis. The study shows
how  well the Board is doing
investing the money and amounts in the fund as well as anticipated major repairs, updates,
or renovations required, built into this same schedule to insure that the asset (building)
retains its value and that interior and exterior common areas are maintained and upgraded
as required.
What About a Pre-Delivery Inspection ?
When you purchase a presale condo your are buying something that does not exist with an
understanding that the developer is going to build your dream space exactly as represented
in the glossy full colour pictures used in the marketing and sales of the development
years ahead of time.
When you actually take possession of the unit you are given a form (“Deficiencies
List”). You meet with a representative of the builder who walks through the property
with you identifying any short falls or “deficiencies”. In Ontario we have the
Ontario New Home Warranty Program which insures workmanship is completed to code so this
walk around is required under the Program. Every developer must participate so buyers are
pretty well protected regarding the physical delivery. No system is perfect but in Toronto
the system works pretty well.
Once completed, the deficiency list is submitted to ONHWP and the repairs, adjustments,
corrections, or whatever are  completed by the developer. This is not a one shot deal and you can
submit further deficiencies at any time throughout the first year (on workmanship and up
to five years on other areas). Always be sure to document everything with respect to this
signing off as that is exactly what you are doing. Study your new home closely and
don’t be afraid of being “picky”. Get what you contracted for and rest
assured that the developer will give you nothing more (with a few exceptions).
Where do You See The Condo Market Going in the Immediate and Long Term Future ?
In early June of 2002 I was driving downtown at about 6:30 a.m. listening to CHUM FM who
announced an American real estate analyst had just completed a study on the residential
real estate market in downtown Toronto. The analyst stated that in this year alone Toronto
housing prices have shot up Ten (10%) Percent and will top Fifteen (15%) before
year’s end!
Today, (at publishing) it is 2005 and the market has just continued
to boil breaking every sales record in the market's history consecutively month after
month in spite of the media misreporting of a "bubble about to burst".
Even the media had to give up those headlines and admit that there appears to
be no end to this upswing market. With Toronto proving the "Affordable
Manhattan", I see this trend continuing.
The greatest majority of my clients today are international buyers. With Hong Kong prices
running in excess of $1,000 U.S. per square foot and Manhattan topping $850 U.S. per
square foot, Toronto’s $300 - $400 CDN per square foot for conventional "middle
market product" (approximately $US 200 - $300) suggests to global buyers that Toronto
offers extreme VALUE.
Wendy Dennis, a writer for Toronto Life Magazine wrote an excellent article in March 2002
called “Renter’s Hell” that sets a pretty good
foundation for my confidence that condos have only started to proliferate in Toronto.
Toronto is Canada’s most cosmopolitan city, modern in many ways. As a Realtor I would
hardly be qualified to speculate on road and/or traffic infrastructure development but
what I can see from my layman’s perspective is that there simply is no possibility to
expand the downtown roadway system yet high rise condo development is taking off like
crazy in Toronto. Canadians can now be seen moving to the core of the city in droves. Take
a look at the massive condo explosion going on and realize that all these high-rises had
to be 60% sold out to get their financing.
Canadians will not tolerate the urban sprawl that represents American lifestyles. We
won’t see downtown become blighted as we convert all useable space to mix use
residential space. We are building our social infrastructure around urban living in the
heart of the city.
With a decided lack of road infrastructure Canadian’s won’t tolerate commuting
forming the smog festered interstates of L.A. and most major urbanized American cities. I
see Toronto more like Hong Kong where the core is Hong Kong Island with Kowloon reflective
of North York, Mississauga, Scarborough, Etobicoke, etc. Toronto’s high rise downtown
residences reflective of Robinson Road and the Peaks in Hong Kong.
 Hong Kong
housing prices on the island have softened a bit from when I was there but I hear it is
coming back. When I left in 1996 flats (condos are called flats in Hong Kong) were selling
“unfinished” (put in your own kitchen and bathroom) at around US$1,000 per
square foot. Even at CDN$400 per square foot being paid at some Toronto sites today it
equates to about US$250 a foot from a Global perspective and real estate today is a Global
commodity.
I Hate Paying Rent But What Can I Get For Under $200,000?
This is a question that I hear a lot! Over half of the thousands of responses that I
receive at my website are from first home purchasers. They have read that if they are
going to get into this market that this is the time to do it.
Unfortunately, the news is not good for those of you searching for a condo in this price
range. If there is any physical product (and there are some) still floating around out
there, then you should know that in the majority of cases the condo will be located in a
scary area.
With new condos coming on stream at $400+ per square foot (Tip Top Lofts, 18 Yonge., etc.)
forming today’s continually escalating price point for residential condos, (upscale
developments like The Hazelton, The Winston, The Regency, 1 St. Thomas, and others are
getting $800/sq.ft. - $1,000 per square foot with $1.00 maintenance and 2,250 sq.ft.
minimum sizes). The are some sites offering lesser pricing points with upgraded
suites (Spire, The Hudson, Waterclub, etc.) however, a simple academic exercise shows that
you are going to have to find something under 500 square feet in size to live in and
parking is $20,000 - $29,000 extra!
I recommend to most first time buyers to either look into the surrounding areas of Toronto
to find size but not to expect too  radical a difference from downtown. If it is directly connected to
Toronto’s public transit then the prices are pretty much the same as downtown.
This is not to say that all properties are demanding these prices per square foot and a
good agent will be able to steer you in the right direction providing they know the market
intimately.
Cityplace's high rise developments " Apex, Matrix, Optima, Harbourview Estates", have introduced a standard of condo/loft residences
that the city cried out for just a few short years back. Today, I recommend
looking at cityplace to many first time buyers as they are set up from presales for
investors to buy very inexpensively and "flip" to first timers
inexpensively delivering a decent (no hardwood floors, upgraded appliances, or other
upgrade other than granit countertops).
If you cannot afford buying into a quality development my recommendation is to stay with
rent and "invest the rest". If you have gone to a bank and identified
what amount of mortgage you can handle, and added all supplemental hard costs into the
equation then you will have a pretty well defined idea of what that sub $200,000 condo is
going to run you.
The most sound approach to getting into the market is to find a small rental apartment to
satisfy your immediate needs and start investing the balance between the rent and the
mortgage approval, and invest into a presale that will be ready for occupancy a couple of
years down the road.
This accomplishes a couple of goals. One, it gets you into the  game at the only point that
shows maximum potential return on investment (presale to delivery is showing $50,000
profit at time of writing this book on resale product in downtown). Two, it gives you a
realistic potential return on investment of $50,000 of tax free income! When you realize
that the purchase of a condo to serve as a principal residence bears no capital gains tax
whatsoever (100% tax free!) the strongest aspect of condo life present themselves.
I frequently negotiate preferred terms and conditions for my clients with developers
lightening up the up front financial demands for them. In two years or so when the
building is constructed you own a brand new parcel of real estate, with brand new
appliances, features and appointments and it is valued at the “then market
value” while paying only a small deposit in todays dollars.
Assume that we are buying a $150,000 presale condo and putting down a total of 15%
therefore depositing $20,000 spread over a year or eighteen months time period. When the
development is completed and occupiable (based on recent purchases in downtown Toronto)
you may see a growth in equity (money if you choose to sell) equal to $60,000 (average on
actual "Assignments" that I personally have done). That’s a 300%
R.O.I., plus you have a place to live in that you own! Compare this to the recent
fiasco known as the stock market!
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