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by Monica Beffa
BLOG, News, Real EstateOctober 22, 20220 comments

PRIVATE HOME SALE – CAN I SELL MY HOME WITHOUT A REAL ESTATE AGENT- IN ONTARIO?

The drastic increase in home prices in the past two years caused a great surge in private home sales in Ontario. As the home prices rose, so did the real estate commission of the agents who help sell the homes.

For many homeowners, this increased fee became too high of an expense to be deemed necessary.

  1. WHAT IS A PRIVATE HOME SALE?
  2. HOW WILL I BENEFIT BY SELLING MY HOME PRIVATELY?
  3. WHAT PROBLEMS CAN ARISE IF I SELL MY HOME THROUGH A PRIVATE SALE?
  4. THE IMPORTANCE OF HIRING PROFESSIONALS

WHAT IS A PRIVATE HOME SALE?

As a result of increased home prices, many homeowners decided to avoid the middleman and enter into Agreements of Purchase and Sale with buyers directly, via a private sale. Instead of using a real estate broker, sellers may opt to put up their own ads on various listing services, decide on the price, and organize all the documents that are required for the sale independently.

This new form of independence can definitely have its perks, however, there are also several risks associated with the private sale arrangement. Before examining the advantages and disadvantages of a private sale, it is best to understand the process behind it.

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HOW WILL I BENEFIT BY SELLING MY HOME PRIVATELY?

A private home sale is not an unattainable feat. It is possible to successfully sell your home privately as long as you have the proper knowledge and are prepared to put in the extra effort.

As a result of this extra effort, you can save a large amount of money on the real estate commission, especially if the sale price of your home is high. Since real estate professionals take a percentage of the selling price as part of their commission, the higher the price of the home, the greater the fee the real estate agent will charge.

In practice, the standard commission rate for real estate agents typically ranges from 3.5% to 5% and is divided evenly between the buyer’s agent and the seller’s agent. However, it is common for a real estate agent’s commission to be lower to attract clients and be divided into different terms.

Generally, a 5% commission on a home that sold for $1,000,000 would equal a total of $50,000, or $25,000 for each parties’ agent. A private sale will allow you to save this large amount of money.

You may also consider selling your home without a real estate agent when you are selling to family members, friends, neighbors, or other acquaintances. In this situation, you do not require the services of a realtor as you have already found the buyer and the buyer typically knows the state of your home.

For more information on transferring properties between family members, please see our blog titled: CAN I GIFT MONEY TO MY ADULT CHILDREN FOR DOWN PAYMENT TO PURCHASE A PROPERTY IN ONTARIO?.

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WHAT PROBLEMS CAN ARISE IF I SELL MY HOME THROUGH A PRIVATE SALE?

While you may choose to avoid the services of a real estate agent to save some money, selling your home independently will require you to put in more effort. The process is time-consuming and may be challenging for individuals who are not familiar with the real estate technicalities.
Before you rush into a private sale, please see some of the problems that you may face along the way.

THE ENFORCEABILITY OF THE AGREEMENT OF PURCHASE AND SALE

The Agreement of Purchase and Sale is the document that binds the buyer and seller to the real estate transaction and outlines the important details. The matters on the agreement should include the following:

  • Purchase Price
  • Deposit amount
  • Deposit date
  • Down payment amount
  • Conditions that you and the buyer would need to have fulfilled prior to closing
  • Closing date
  • Costs

Since this Agreement is a valid contract, it is binding. This means that you may not be able to change or revoke it once it is created, and if there is a breach of contract, the breaching party may be sued for the contract’s enforcement. As a result, the Agreement of Purchase and Sale must be carefully drafted and reviewed to be sure that it matches the expectations of both parties to the transaction.

If the parties draft the agreement themselves, they might create a poor agreement due to the lack of legal and real estate knowledge. As a result, they will miss the important clauses that will allow the deal to run smoothly.

To avoid such potential issues, real estate lawyer should be hired. Although the services of a real estate agent are not necessary, in Ontario it is mandatory to have a real estate lawyer finalize your real estate transaction. A lawyer will conduct a title search on your property, will help discharge any mortgages you may have, will help uncover and clear up any encumbrances that may be on the property, and will transfer the title from the seller to the buyer to finalize the change in ownership. Only a lawyer is authorized to do these steps.

The real estate lawyer will also help prepare the Agreement of Purchase and Sale to reflect the desires of the parties as the lawyer has knowledge of all the technicalities of a real estate transactions and will ensure that the contract is properly created.

There should also be two lawyers in a real estate transaction; one acting for the buyer and one for the seller.

CONSEQUENCES OF INCOMPLETE PURCHASE AGREEMENTS

One common issue that may arise in the Agreement of Purchase and Sale is the misconception about the difference between chattels and fixtures.

 A fixture is an object that is attached to the property permanently. Examples of fixtures are faucets, showers, and toilets.

In contrast, a chattel is a moveable object that may be removed without damaging the property. Such objects are furniture, refrigerators, and curtains.

The law in Ontario states that fixtures are included with the sale of the property unless specifically excluded, however, chattels are excluded unless specifically included in the Agreement. A problem may arise if the buyer assumes that a chattel was a fixture and will be included with the purchase, but the opposite turns out to the true. This may often happen with kitchen appliances as they are not automatically included in the sale unless expressly outlined in the Agreement. This simple misunderstanding and disagreement may lead to disputes and even litigation.

As the average person with little knowledge about real estate law, you are more likely to get caught up in such conflicts if a real estate lawyer is not hired early in the transaction

A real estate lawyer reduces the risk of a mistake or a dispute arising from the contract as the lawyer ensures that the conditions are written into the Agreement of Purchase and Sale correctly.

A LACK OF CONDITIONS

Another issue that commonly occurs in private sales is the lack of conditions listed in the Agreement.

Some conditions that should be included in an Agreement of Purchase and Sale are the conditions that the buyer may conduct a home inspection, finance, and insure the property prior to the closing date. These conditions may allow the parties to back out of the real estate transaction if the condition is not met.

For example, if the sale of the home is conditional upon the buyer successfully obtaining a mortgage to finance the purchase and the buyer is unable to fulfill the condition, the sale will be void. However, if such a condition is not included in the Agreement and the buyer fails to obtain financing, the buyer will not be able to back out of the deal which will likely result in the enforcement of the contract and in litigation between the parties. To see what other problems will occur in the event of a failed real estate transaction, please see our blog

Some other conditions that should be included in an Agreement of Purchase and Sale are the conditions that the buyer may inspect and insure the property prior to the closing date.

Additionally, depending on the type of home and property that is being sold or purchased, there are some other essential conditions such as a septic tank inspection, water potability test, and even a thorough environmental inspection.

While a real estate lawyer will consider including these conditions in the Agreement, a buyer and seller drafting the Agreement without legal advice may not be aware of their value and the devastating consequences of not having them included.

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THE IMPORTANCE OF HIRING PROFESSIONALS

When you enter the world of real estate, you are opening yourself up to numerous issues that you may not be capable of dealing with if you are an untrained seller or buyer. However, an experienced real lawyer will be able to guide you on your journey to purchase or sell a home in an effective and efficient manner that would reduce your stress and ensure your transaction will not end up being disputed in court. Since a well-drafted and thought-out Agreement of Purchase and Sale is essential to a successful real estate deal, it is best to seek advice from a Real Estate Lawyer.

If you require any assistance with a private real estate transaction, get in touch with us at Beffa Law and we will be able to help you navigate through the rough waters of the real estate world and achieve the results your desire. Beffa Law is a real estate law firm serving Oakville, Burlington, Milton, Mississauga, and other areas west of the GTA. We offer assistance in buying, selling, refinancing along with other practice areas. Call us at 647-812-8462 or email us at info@beffalaw.ca to set up an appointment to discuss your estate questions or concerns.

   

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Participation constitutes the entrant’s full and unconditional agreement to and acceptance of these Official Rules. Beffa Law’s 12 Days of Christmas giveaway submission period commences at 7:00 a.m. EST on December 12, 2022, and ends at 11:59 p.m. EST on December 22, 2022, with the final winner announced on December 24, 2022. The contest is sponsored by Beffa Law.

  1. Eligibility: Beffa Law’s 12 Days of Christmas giveaway is open only to legal residents of Ontario who are 18 years of age or older. Entrants must also be Canadian citizens or Permanent Residents who reside in Ontario at the time of entry. Employees, contractors, directors, and officers of Beffa Law and its respective affiliated companies, distributors, licensees, and the advertising, fulfillment, judging, and promotion agencies involved in the development and administration of this promotion and their immediate family members and those living in the same households of each are not eligible to enter the contest.
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REFINANCE
  • Review mortgage instructions for refinancing.
  • Conduct and review title searches for any defects in the title.
  • Conduct and review writ searches and execution searches.
  • Secure title insurance and all correspondence with the title insurance company.
  • Review mortgage instructions.
  • Draft all mortgage documents
  • Register mortgage documents.
  • Extensive correspondence with the lenders and banks.
  • Receive mortgage funds.
  • Review certificate of insurance.
  • Meet with client to explain and sign all legal documents
  • Close the refinance transaction and securely transfer the funds
  • Register mortgage on title
  • Open the refinance file and access to client portal
  • Report to client, lender & realtor about closing
  • One in person appointment or remote signing on zoom
  • After office hours appointment.

CLOSING COSTS &  NOT INCLUDED IN FEES;

  • Title Insurance (as per Invoice)
  • Registration Costs/ per Mortgage;
  • Software Charges;
  • Flat disbursements cost, title searches, writ searches, execution searches, bank charges, courier charges etc.

CALCULATE YOUR COSTS

OCCUPANCY
  • Acting for you in matters relating to your purchase of the property
  • Review the Agreement of Purchase and Sale
  • Conduct and review title searches for any defects in the title Submit requisitions on the title and review the responses
  • Search for arrears of taxes and obtaining a certificate
  • Confirm that utilities were in satisfactory standing and arranging for meters be read
  • Search for executions
  • Examine the draft deed
  • Review the statement of adjustments
  • Reviewing the documentation provided by the builder including warranties, declarations and vendor’s and purchaser’s undertakings, and verifying enrolment with Tarion Warranty Corporation
  • Draft documents and statements in accordance with Land Transfer Tax Act
  • Correspondence with the Condominium Corporation and obtain a Status Certificate and Certificate of Insurance and review the same
  • Meet with client to explain and sign all legal documents
  • One in person appointment or remote signing on zoom
  • Close the transaction and securely transfer funds
  • Register transfer

OTHER CLOSING COSTS

  • Software charges ;
  • Disbursements includes one title search

CALCULATE YOUR COSTS

TITLE TRANSFER
  • Complete the required documents and gather the supporting documents
  • Obtain appropriate legal advice for the tax and other implications of the title transfer
  • Review the forms for completeness and accuracy
  • Perform title searches
  • Obtain title insurance
  • Update the contents and fire insurance policy
  • Update ownership records in the utility bills
  • Advise current mortgage lender of the title changes
  • Get the title change documents registered and report them to the clients
  • Send information to the city’s tax department and condo property management of changes in ownership

CLOSING COSTS NOT INCLUDED IN FEES

  • Software charges
  • Flat disbursements cost – includes one title search
  • Registration Fee

CALCULATE YOUR COSTS

SALE
  • Review mortgage instructions for refinancing.
  • Conduct and review title searches for any defects in the title.
  • Conduct and review writ searches and execution searches.
  • Secure title insurance and all correspondence with the title insurance company.
  • Review mortgage instructions.
  • Draft all mortgage documents
  • Register mortgage documents.
  • Extensive correspondence with the lenders and banks.
  • Receive mortgage funds.
  • Review certificate of insurance.
  • Meet with client to explain and sign all legal documents
  • Close the refinance transaction and securely transfer the funds
  • Register mortgage on title
  • Open the refinance file and access to client portal
  • Report to client, lender & realtor about closing
  • One in person appointment or remote signing on zoom
  • After office hours appointment.

OTHER CLOSING COSTS 

  • Title Insurance (as per Invoice)
  • Registration Costs/ per Mortgage
  • One Mortgage payout with a Tier 1 bank
  • Software & office disbursements
  • Flat disbursements cost includes one title search

CALCULATE YOUR COSTS

PURCHASE
  • Review the Agreement of Purchase and Sale.
  • Conduct and review title searches for any defects in the title.
  • Submit requisitions on the title and review the responses.
  • Conduct and review writ and execution searches.
  • Secure title insurance and all correspondence with the title insurance company.
  • Examine draft transfer deeds and draft closing documents.
  • Review the statement of adjustments.
  • Draft documents and statements in accordance with Land Transfer Tax Act.
  • Draft documents to apply for first-time home buyer rebate for the client.
  • Correspondence with the lender and banks.
  • Review the certificate of insurance.
  • Meet with client to explain and sign all legal documents
  • Close the purchase transaction and securely transfer funds
  • Register transfer
  • Report to client, lender & realtor about closing
  • One in person appointment or remote signing on zoom
  • After office hours appointment

OTHER CLOSING COSTS

  • Land Transfer Tax
  • Title Insurance (as per invoice)
  • One Mortgage with a Canadian Tier 1 bank
  • Government Registration fees
  • Teranet and search fees;
  • Software fee and other office disbursements

CALCULATE YOUR COSTS

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