Buying a Home in Canada

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Homebuyers should be read their rights

Halifax, Nova Scotia, June 17, 2011 - Earlier this week, I read that June 13, 2011 marked the 45th anniversary of the “Miranda Decision” in the landmark United States Supreme Court case of Miranda v. Arizona. You may not be familiar this famous court case but I am sure you are familiar with this: “You have the right to remain silent. Anything you say can and will be used against you in a court of law. You have the right to an attorney. If you cannot afford an attorney, one will be appointed for you.” This warning read to criminal suspects in police custody in the United States is what the “Miranda Decision” was all about.

Which is basically that suspects should be made aware of the seriousness of the trouble they are in before they say or do something that could get them in even deeper trouble. It makes sense when you think about it. Most people don’t know their rights and should be warned about talking too much or doing anything crazy.

What does that have to do with buying a home you ask me? Well, I like the Miranda warning, and I think that there should be something similar in real estate. I think that buyers should be read their rights before the purchase of any MLS® property just to make sure that they fully understand what is happening and what options are available to them.

Of course, there would be a need for a few different warnings depending on the situation. But the most revealing one would be when a buyer is considering purchasing a home directly from the real estate company on the sign. For the fun of it, I tried to imagine what that listing agent would have to say to fully inform a buyer of his or her rights in that particular scenario. It would probably resemble something like this:

“It is my duty to inform you that I work for the seller. This means that I will pass on to my client anything that you say in front of me and that this information could potentially be used against you during negotiations. I must also tell you that you don’t have to purchase this house directly from me or any other member of my firm since the MLS® System gives you access to the real estate agent of your choice, from the firm of your choice, and that, at no extra cost to you – because the commission would simply get split between the two firms. You understand that with your own independent agent, you would be buying accompanied by a licensed professional able to suggest prices, negotiate on your behalf and give you confidential advice – all things that members of my firm can’t do for you because we work for the seller. Please sign here to confirm that I read you these rights and that you understand what buying this house directly from me means to you.”

How many buyers would proceed with the purchase directly through the seller’s real estate company after learning that the MLS® System gives them the opportunity to hire the professional of their choice to negotiate the purchase of the same house on their behalf and at no extra cost to them? Very few people you would think.

But fortunately for sellers and their representatives, a lot of Canadian homebuyers are not aware of this. Statistics from the Nova Scotia Association REALTORS® reveal that 40% of buyers in my province purchased their MLS® property directly through the firm on the sign in 2010. And whenever that happens, the commission doesn’t have to get split and the listing company keeps it all to itself…

If I use the same 40% on the national level – because I don’t believe buyers in other provinces know more about real estate than those in mine – this means that last year out of 447,000 MLS® transactions in Canada, some 180,000 Canadian families purchased their home through the firm on the sign.

And I think this is a sin. The only logical reason so many buyers are doing it has to be because they don’t know there is a better option. Canadians are not gamblers by nature, so there is no reason why so many of them would not take advantage of this great opportunity offered to them by the MLS® system. Buyers had to pay to get an agent to protect them in this way prior to 1995, but that all changed some 16 years ago and the message has yet to reach the public. Forcing real estate agents to read buyers their rights would quickly change all of this, but that will never happen. Clearly, someone must do something about this and I guess that someone will have to be me.

                                                                                  Alain Savard

Mortgage Rates

Discounted rates found on the internet on December 7, 2018.

Fixed-Rate Mortgages

1-year closed: 3.20% (3.20%)
2-year closed: 3.30% (3.24%)
3-year closed: 3.39% (3.39%)
4-year closed: 3.55% (3.55%)
5-year closed: 3.39% (3.39%)
7-year closed: 3.74% (3.74%)
10-yr closed:   4.04% (3.99%)
Qualify. Rate:  5.34% (5.34%)

Variable-Rate Mortgages

BofC’s Target:   1.75% (1.75%)
Banks' Prime:    3.95% (3.95%)

5-year: Prime - 1.20% or 2.75%

Some rates may only be available to people with top credit living in specific areas. BofC stands for Bank of Canada. The "Qualifying Rate" is used to qualify borrowers choosing terms of 4 years or less. The rates in bracket are from November 30, 2018.

 

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