Vol 3:2 Dear Unrepresented Buyer,
Dear Unrepresented Buyer,
There is no downside to hiring your own Realtor because it's free* and it ensures that you make informed choices that protect you as well as save you time, energy and money. My evidence falls into three main categories that I’m calling You Don’t Know What You Don’t Know, Buyer Beware and No One Can Serve Two Masters.
You Don’t Know What You Don’t Know
There is no substitute for experience.
“We thought we knew what we wanted, so we were surprised when what we wanted changed after viewing a few homes with you.”
I’m quoting a young couple whom I was helping to purchase a home late in the fall of 2018. We were looking at 2-bedroom homes in the $200,000 - $250,000 range. Homes in this price change tend to be smaller, and the thing that smaller homes do not typically do well is dining space.
With the right design – and there are a few out there - a 750 square foot home can deliver a dining area that will do well for the two of you but can also expand to comfortably accommodate dinner for 6. Many of these smaller homes, however, are really only comfortable as 2-seaters, which limits both their utility and their value.
That’s just one consideration out of dozens which might not readily occur to you if you aren’t in and out of homes regularly, as Realtors are, evaluating them through multiple filters for a variety of purposes.
A good Realtor brings to the table several different lenses through which to look at and think about each house you see, laying the foundation for you to recognize a good deal when you see one and for you to be able to make confident decisions on tight timelines.
As a savvy buyer who values her time and energy, you want to learn how to do this early in your house search. More times than I can count, I have been called in at the last minute to help a buyer purchase “the one” only to have them realize after inspecting the property with me that it isn’t the one at all.
Buyer Beware You don’t know what you don’t know – it’s hard to escape the logic of that - and, as a buyer in Manitoba, what you miss is on you. Here, real estate law rests on a foundation of CAVEAT EMPTOR, which is Latin for BUYER BEWARE. This has implications for what Sellers have to disclose and for what happens when things don’t quite unfold as everyone agreed they would.
Under the law, a homeowner and their Realtor have no duty to disclose defects that can be observed upon reasonable inspection. One of the hotspots of undisclosed defects are electrical systems. I have found many an undisclosed knob and tube wiring on behalf of buying clients. And sometimes I really have to dig for it. Although most vendors will complete a Property Disclosure Statement (PDS)**, the form asks about aluminum wiring, not knob and tube.
Which is oddly out of step with the home insurance industry, which currently insures aluminum wiring quite readily but not K & T wiring comprising more than 20% of the total wiring.
You can’t secure mortgage financing without providing proof of home insurance, and with the average K and T removal bill will running between $7,000 and $12,000, not picking up on undisclosed K and T is a matter of significant financial consequence.
“But that’s what the home inspection is for!” is the protest I hear most often.
In my world, the home inspection should be the big guns, a $500 service reserved for the house that has passed your and your Realtor’s initial inspection and is ready for the deeper probe that validates what you think you know and flushes out anything you might have missed.
You and your Realtor need to be separating the sheep from the goats yourselves on the front lines of your search as a safeguard to your time, energy and money. If there is something that’s going to add thousands to your purchase price or possibly complicate insurance, you want to pick up on that as soon as you can and move on.
And when a house does make it past your initial inspection, I urge you not to skip the big guns of an inspection. It’s not uncommon, for example, for all surface evidence of K and T to have been removed. This happened to clients of mine where the only evidence of K and T was a couple of live wires tucked away in the vermiculite-laced sawdust in the attic - a discovery that saved my clients from a nightmare scenario and they walked away. Not because of the knob and tube – that’s a pretty straight up fix but because of how the vermiculite is mandated to be handled when there is no exterior access to attic. It would have been big dollars to do it right.
The second circumstance that screams buyer beware is this: by the time you take possession of your new home, the entirety of your purchase funds will be in the hands of the vendors.
A good Realtor will prepare a purchase contract that maximizes protection and minimizes risk, but in practical terms, with no money held back to deal with bumps in the road, the contract is somewhat toothless . Should you discover upon moving in that the fridge is not the one you originally viewed, the garage door opener does not work or that there is furniture and junk left behind that needs to be dealt with, the onus will be on you to seek reparation.
Your Realtor and your real estate lawyer have protocols to follow which may result in the happy result you are looking for - I’ve seen it happen – but if the vendor declines to do the right thing - which I’ve seen happen even more - new homeowners just suck it up. Most of the time, anything else is just too costly in terms of time, energy and peace of mind.
Facilitation Not Negotiation – No One Can Serve Two Masters For my final point, I would like to delicately turn the spotlight on the situation of the listing Realtor.
With rare exceptions, I recommend that you not use the listing agent to view or purchase a house you are interested in. The law provides a legal avenue for Realtors to represent both the Buyer and the Seller – called Limited Joint Representation - but it is rife with conflicts of interest.
The listing Realtor has a relationship with the homeowner – perhaps even a longstanding one – that pre-dates yours. They may even have taken on some of their client’s emotional connection to the property and the blind spots that go with that. He or she doesn’t have to be a bad person to be tempted to lean in the direction of the interests of their first client, they just have to be human.
And then there’s the money piece. Listing agents who represent both parties to the transaction typically collect double the fee – their own plus the fee that would have gone to the Buyer’s agent. Humans have a lengthy track record of losing their objectivity when it involves money.
Even the listing agent who truly strives to represent the best interests of both the Buyer and Seller is, at best, only going to be able to facilitate an agreement. But rigorously negotiate on behalf of both? How would that work, exactly?
Speaking of Money
If you want to dive a little deeper into this issue, understanding how Realtors get paid and how consumers fit into the big picture will give you even greater insight into the process of buying and selling real estate. Click here to read more.
*(until you become the Seller, that is. More about that in my companion article Follow the Money: The Invisible Social Contract in Real Estate, link provided above).
**A Property Disclosure Statement is only as accurate as the knowledge of the person filling it out. There are all kinds of circumstances wherein Sellers either don’t know or have inaccurate information about their homes. In the summer of 2017, the Wolseley home my client wanted to buy had a 60 amp electrical service – which rendered the home uninsurable for a new homeowner. When I reached out to the listing agent to discuss the issue, he told me I was mistaken and suggested that I shouldn’t be drinking before going out on showings. The owner had inadvertently provided erroneous information when he insured the home and his Realtor hadn’t caught it either.
If you have any feedback, questions or need help with a real estate matter, please get in touch - that's what I'm here for! Likewise, if you or someone you know is house hunting without a Realtor and interested in learning my home inspection protocol, please contact me at (204) 979-0640 or firstname.lastname@example.org