I want to buy a new home but I’m worried about contracting COVID-19 while I view properties. What can I do to minimize my risk?
The impact of the COVID-19 pandemic has affected the lives of many Albertans. It’s reasonable to be worried about contracting COVID-19 during property viewings or other in-person real estate interactions. Fortunately, there are precautions you can take to reduce your risk.
First, you’ll want to determine your personal risk tolerance with COVID-19 prior to attending any viewings. Review the current public health recommendations. Do you or members of your family have any medical conditions that increase vulnerability to the virus? Would you be comfortable working with real estate or mortgage professionals who are unvaccinated?
Once you’ve weighed your tolerance, work with your real estate professional to plan viewings in a way that can mitigate the risk of contracting COVID-19.
- optimize the use of virtual communications tools. For initial viewings, prospective buyers can view photos or video tours of properties they may want to view in person. Virtual communication platforms reduce in-person viewing and ensure prospective buyers have a genuine interest in purchasing the property.
- meet your real estate professional at the properties. Taking separate vehicles will help you maintain a safe distance of at least six feet (two meters). You can also ask in advance for in-person meeting options that allow you to keep a safe distance when working with your real estate professional.
- ask your real estate professional to request health and travel information from sellers and their professionals before attending viewings. While the seller can decline to answer, if they do answer, the must answer honestly. The seller may also ask for your health and travel information and can refuse entry to their home based on your answer.
- limit the number of people attending the viewing. Limit the number of people you bring with you to viewings to one other person. While it’s nice for your kids or parents to see your potential new home before you buy, more people through the space means more chances for exposure to the virus. Consider involving extended family other ways—for example, you can let your kids pick a new paint color for their rooms or ask your parents what things they’d look for if they were buying a home and report back for their input.
- seek specific viewing conditions in writing. Work with your real estate professional to request conditions such as the use of masks, hand sanitizers or gloves, or additional safety precautions which limit contact with surfaces or the amount of people at a given time. Remember, the seller might also have their own conditions for viewings. You and the seller must agree and sign off on these conditions before the viewing, and you and your real estate professional must adhere to all conditions when you are on the property.
The COVID-19 pandemic has affected the needs of both buyers and sellers for property viewing. Discuss your needs and concerns with your real estate professional and put your decisions in writing. Documenting and signing off on conditions can help alleviate confusion or uncertainty during this important part of your home buyer process.
I’m selling my home, and the potential buyers also want to use my real estate professional to represent them. Is that allowed?
Yes, that’s allowed. The situation you’re referring to is called transaction brokerage. Transaction brokerage is a service option when your real estate professional represents a buyer client interested in purchasing the property in which you are the seller client. The reverse is also true—transaction brokerage is a service option when you’re interested in buying a property and the property’s seller is also represented by your real estate professional.
When a real estate professional works on behalf of only one client in a transaction—the buyer or the seller—they have legal responsibilities, which include:
- undivided loyalty to their client
- acting in their client’s best interest at all times
- the duty to avoid conflicts of interest
- the duty to disclose conflicts of interest when they arrive.
Transaction brokerage changes the services your real estate professional is able to provide to you and to the other party in the transaction. A real estate professional who is working with both the buyer and the seller in a transaction cannot fulfill all of their legal responsibilities because there is a conflict between the best interests of the buyer and those of the seller. The buyer wants to pay as little as possible for the property, while the seller wants to sell their property for the highest possible price. It is impossible for a real estate professional to advocate for and represent the best interests of a buyer client AND seller client in the same transaction.
This is when and why transaction brokerage becomes an option. In transaction brokerage, the real estate professional will provide facilitation services to you and the other party. These services include:
- helping the buyer and seller negotiate an agreement
- giving the buyer and seller property statistics and information, including comparative information from listing services and local databases
- providing and preparing agreements of purchase and sale, and other relevant documents according to the buyer and seller’s instructions
A transaction facilitator has to treat both parties in an even-handed, objective, and impartial manner. They must remain neutral, not advocate for either you or the buyer, and they cannot provide confidential advice.
Before a real estate professional proceeds with transaction brokerage, both the buyer and the seller need to provide their informed consent by signing an Agreement to Represent both Buyer and Seller. Informed consent means each client understands the facts, implications, and future consequences of providing their consent. You do not have to consent to transaction brokerage. If you don’t consent to it, or the other party doesn’t, there are other options available to you such as seeking representation from a different real estate professional.
I saw a house for sale, and I want to check it out—will I have to sign a contract to get a real estate professional to show me the house?
The short answer is no. If you see a house for sale and you simply want a real estate professional to show you that house, you’re not required to sign a contract.
Simply viewing a home with a real estate professional doesn’t trigger a regulatory requirement to sign a contract with that real estate professional. However, if you start sharing confidential information such as your motivation for buying or your financial qualification, the real estate professional has a responsibility to clarify your working relationship, at which point they are going to provide you with some documents to review.
In the process of clarifying your working relationship, the first document a real estate professional should present to you is the Consumer Relationships Guide. The Consumer Relationships Guide is a mandatory document for real estate professionals when they begin working with a buyer or seller of residential real estate. It explains the different types of working relationships between real estate professionals and consumers.
The Consumer Relationships Guide is not a contract. It does not commit you to a specific ongoing working relationship with your real estate professional, but it is an essential information piece for consumers to understand what working with a licensed real estate professional entails. Among other things, it discusses responsibilities and obligations.
The Consumer Relationships Guide contains an acknowledgement that consumers have to sign indicating they’ve read the Guide, understand it, and have been provided with an opportunity to ask the real estate professional questions about it. Consumers need to review and sign the Guide before entering into any contract with a real estate professional.
Some real estate professionals may actually present the Consumer Relationships Guide and request that you sign the acknowledgement even before showing you a single property, but that specific practice is not a requirement.
I want to buy a resale condominium, but I’m worried about rising fees and possible assessments. How can I ensure the condominium is a good one?
Condominiums can be a great housing option, and with some due diligence, you can find one that is well suited to your needs, and a financially sound purchase.
Condominium refers to a type of ownership that includes the individual ownership of a unit and shared ownership of common property with other unit owners. Condominiums can be apartment-style, townhouses, attached, or detached.
Condominium owners typically pay monthly condominium fees to cover their share of expenses for the common property, and some of this payment goes into the condominium corporation’s reserve fund.
The reserve fund is used to pay for major capital repairs and replacements. All condominium corporations must have a reserve fund. As a buyer, you want a condominium corporation that has a healthy reserve fund because it reduces the likelihood of a special assessment. Special assessments occur when a condominium corporation has major work to do and there isn’t enough money in the reserve fund. The corporation assesses an amount owing to the owner of each unit.
So how can you find out if the corporation you’re thinking of buying into is a healthy one? A good place to start is a condominium document review.
Condominium documents relate to the operation of the condominium corporation, which you want to ensure is financially stable and well managed. Condominium documents include but are not limited to:
- current reserve fund study (5 years old or less) and 25-year reserve fund plan
- current operating budget and fee schedule
- current balance sheet
- registered bylaws
When buying a condominium, you can hire a professional to review your condominium documents. They can provide you with a summary of the documents, and identify areas about which you might have concerns. Reviewing condominium documents can uncover financial difficulties, bylaws you find unacceptable (for example, restrictions as to size, number, or type of pet), upcoming necessary maintenance, or even discussion in Board meeting minutes about water issues.
Even a healthy reserve fund and a review of condominium documents can’t guarantee you won’t have a special assessment or that your fees won’t go up. In fact, you should expect your fees to go up a small amount each year, from factors such as inflation or rising utility costs. However, reviewing the condominium documents will give you a good idea of the health of your condominium, and if it’s the right one for you.
I’ve recently started hearing reports about radon in Alberta homes. If I’m buying a home in Alberta, is it something I should be concerned about?
You’re right to be asking this question. A lot of people aren’t familiar with radon, but they should be.
Radon is an odourless, tasteless, colourless radioactive gas that is the by-product of uranium decay. Uranium occurs naturally in soil and rock formations, and places with higher than normal uranium deposits, such as Alberta and Saskatchewan, have higher radon levels.
Radon seeps through the earth and into basements, where it can become trapped because of the efficient way our homes are sealed from the outside elements.
Prolonged exposure to radon can lead to health problems, including lung cancer. In fact, after smoking, radon gas is the leading cause of lung cancer.
Download the radon fact sheet for more information.
Unfortunately, there’s not much that can be done during the offer and negotiation phase of a real estate transaction because reliable radon tests take 90 days to complete. That’s much longer than a typical offer to purchase timeline and time for condition removal.
However, some Alberta homeowners are having their homes tested for radon knowing what a serious health issue it is. If you find a home you’re interested in, ask the seller if they’ve had their home tested and ask for the test results. If the radon test showed high levels of radon (higher than 200 Becquerel), that’s considered a material latent defect that MUST be disclosed to prospective buyers unless a radon mitigation device is installed prior to listing.
The good news when it comes to radon is it’s a solvable problem. Even if you fall in love with a home that hasn’t had a radon test or the results are high, a radon mitigation device can be installed to vent radon gas outside the home from the basement. Mitigation costs vary, but are often not more than $2,000-$3,000. Hire a Certified Radon Technician to install the device to ensure it’s done properly.
If you buy a home that hasn’t had a radon test done, we encourage you to proceed with a radon test within 90 days of possession. This is health issue, and radon testing and mitigation is money well-spent. For more information about radon, go to Health Canada’s website and search “radon.”
Whether the seller is required to disclose will depend on how the property is listed.
Some local real estate boards in Alberta may have rules around listing a property using their online listing database. Although sellers do not have to disclose to buyers if their property is conditionally sold to another buyer, some listing services require that upon acceptance of a conditional offer, any property listed on their platforms must be reported as “pending.”
It is important to read your listing agreement carefully before signing it so you understand the specific rules of the listing service(s). Sellers should also ask their agent about the rules around advertising conditional sales on listing databases they plan to market their property.
Remember that conditionally sold is not the same thing as sold. If the conditional offer falls through, the seller may begin the process of attracting potential buyers again if there are no other offers pending.
Even if the listing service doesn’t require that a pending sale be disclosed, a buyer’s agent can always ask if it is. In that case, the seller has two options: they can instruct their agent to answer the question—if they choose to have their agent answer, they must answer it honestly—or they can instruct their agent not to answer. If the seller’s agent refuses to answer the question, buyers can probably read between the lines. Choosing not to answer a question can be an answer in itself.
If you are a buyer and you love a property, think about going to see it even if it is conditionally sold. This way, if the first conditional sale falls through, you’ll be prepared to make an offer right away or submit an offer to be considered in the event the first sale falls through. Your agent can talk you through the pros and cons of these strategies.
If you are a seller, make sure you understand the requirements of disclosing any conditional sales for the online listing databases on which you plan to list your property. If the listing service requires pending sales be disclosed, you will have to abide by these rules, or you may not be permitted to use that service to market your property.
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I want to buy a new build home from the builder, but I don’t want to work with the builder’s representative. I want to work with my own agent, is that allowed? Will it cost me more money?
Yes, you’re allowed to work with your own agent. The builder’s representative is representing the builder’s interests, and your real estate professional will represent your interests in negotiations with the seller (builder).
RECA always recommends having your own representation when buying a property, whether it’s a new build, resale, a condo, or even a commercial or rural property. While builders can’t stop you from having your own representation, it is possible you’ll come across one that wants to deal with you, as the buyer, directly. If that’s the case, your real estate professional can offer you advice and guidance behind the scenes but they won’t be dealing directly with the builder or the builder’s representative.
When you hire a real estate professional to represent you, you’re required to enter into a written service agreement. The written service agreement sets out the roles and responsibilities of your real estate professional, and your obligations to that individual. It also sets out how your real estate professional will be paid.
Typically, buyer’s representatives are paid through a portion of the commission the seller pays. Some builders, however, do not offer commission to buyer’s agents. If this is the case, your real estate representative won’t be paid in the usual manner.
Your agreement may contain a clause that sets out if your real estate professional will not receive a portion of commission from the seller’s agent’s commission, you will owe compensation to your agent upon completion of your purchase. This compensation could end up being an out of pocket expense for you.
You may come across builders that have programs to pay commissions to real estate professionals who introduce a buyer to the builder, but this is not the same as having representation from a real estate professional throughout the process. In these cases, the builder is willing to pay commission to a real estate professional who introduces you – but then the builder expects to deal directly with you as the buyer, and you may not have the benefit of advice from your real estate professional.
RECA recommends carefully reviewing the fee portion of your written agreement before signing it.
If there is no mention of how your real estate representative will be paid in the event the seller or seller’s brokerage is not offering commission to a buyer’s representative, you need to talk about it with your real estate professional. If you have concerns about a possible out of pocket expense in terms of compensation for your real state representative, get that out in the open at the beginning.
I just bought a house, and on possession day, I noticed the movable island from the kitchen, which I loved when I viewed the property, was gone. Was the seller allowed to take it with them?
The short answer is yes, the seller was allowed to take the movable island with them. A movable or detached island is an example of an unattached good—these are movable items that are not included in the sale of a property unless agreed to, in writing, by the parties.
Unattached goods include items such as wall art, area rugs, non-built-in appliances such as microwaves, and even curtains. Unless otherwise agreed to, sellers can take movable items from the property before the buyer takes possession.
The opposite of unattached goods are attached goods. Attached goods are items that you cannot remove from a property without causing damage to the property. For example, chandeliers, built-in appliances such as dishwashers, and curtain rods and brackets are attached goods. Unless otherwise agreed to, sellers are expected to leave attached goods behind.
However, the good news for buyers is, if there is something you like in a property you are considering buying, but it’s an unattached good, all is not lost. If you want a particular unattached good included in your purchase of the property, list it as an inclusion in your offer to purchase. Now, it’s subject to negotiation between you and the seller.
The seller may agree, or they may remove it from the list of inclusions in a counter offer. It is up to the buyer and seller, with the help of their real estate representatives, to negotiate the transaction, and that includes what items are included or not.
When it doubt, write it out. This is the best way to ensure you know what is included when you’re purchasing a property. For larger more expensive items, you may wish to include the make, model, and serial number. This may eliminate a seller’s urge to switch nice appliances, for example, with less expensive, used items.
Now, what do you do in the event the seller was supposed to leave something behind, but didn’t? If you don’t find out until after possession, you need to call your lawyer as it is now a legal issue between you and the seller. Your real estate professional can attempt to discuss the matter with the seller’s representative, but if things aren’t fixed to your satisfaction, your only recourse is to speak to your lawyer.
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There was a major hail storm after a seller accepted my offer to purchase their home, and the house needs a new roof. Who is responsible for it?
Until the deal closes and you take possession of the property, the seller is responsible for the property. Any damage to the property or to the items included in the sale, are the sole responsibility of the seller until your purchase funds are transferred and you take possession of the home.
When you take possession, the property – and its inclusions (appliances, etc.) – should be in the same condition as when you viewed it and submitted your offer to purchase.
Even if the property is vacant, and has been for weeks, it is still the seller’s responsibility to maintain home insurance on the property.
As the buyer, you should make sure you arrange for your home insurance to begin on your possession day, even if you aren’t moving in right away. As soon as you take possession, insuring the property is your responsibility.
If something such as a hail storm damages the property in the time between the seller accepting your offer and possession day, have your agent talk to the seller’s agent to confirm the seller is handling the damage. If the seller confirms they’re handling the repairs, you may wish to add an addendum to your accepted offer to purchase that outlines the seller’s responsibility to replace the roof prior to possession day, or you may ask the seller to agree to you holding back a small portion of the purchase funds until the roof is repaired. Make sure any agreements between you and the seller are in writing.
If there is any resistance on the part of the seller, either to fixing the damage or to putting details and agreements in writing, you need to talk to a lawyer for legal advice.
Likewise, if either party wishes to end the transaction in light of the damage done to the property, or if the seller refuses to repair the roof prior to possession, contact a lawyer for legal advice.
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I’ve taken possession of my new home, but pictures, sold price, and its address are still on the listing agent’s website, advertised as sold. I want them to take down the pictures and address. Can I make them?
It depends if the information they post on their website is personal information or not. Personal information is defined in the Personal Information Protection Act as information about an identifiable individual. This means that if the information could identify you, it’s personal information, and someone needs your consent to use it.
In real estate, a picture of the exterior of your house, information about its neighbourhood, and even the address are likely not personal information. All of that information is readily available on sites such as Google Maps, but the law is less clear when this information is combined with a statement that the property was just sold, and at a certain price.
Though it has not been tested in court yet, this combination of information could be considered personal information. It’s because of legal grey areas like this that RECA recommends real estate professionals get written consent from buyers of their listings if they want to continue advertising a sold listing after possession takes place. Once possession takes place, the seller is no longer the person who provides that consent; it’s the new owner – the buyer.
If there is any doubt about whether or not there is personal information in an advertisement, real estate professionals should try to get written consent from the property owner before advertising, or don’t include the information in the ad.
If you are concerned that a real estate professional’s website contains your personal information through posting a sold listing, talk to the real estate professional in question. There are strict confidentiality rules for real estate professionals, and privacy legislation may apply too. You can also bring the issue to the real estate agent’s broker.
You may not be able to make a real estate professional take an ad down if it doesn’t contain your personal information, but if you’re still uncomfortable with it because you believe it shares too much about your property, a true professional should be open to hearing your concerns and working with you to address them.
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I did all of my homework before buying a condominium, and I think I bought a good one. Now I’m here and I want to make sure it remains a positive experience. What can I do?
You’re right to want to keep the condominium you’re in a positive experience; not only is that better for you as an owner, but it will also help your resale value.
When you bought the condominium, you likely received a number of documents to review—this should have included the corporation’s bylaws, a budget, a reserve fund study, and a reserve fund plan.
You may have originally hired someone to review the documents for you, but as an owner now, you want to make sure you understand what these documents are and what they mean. These are four of the most important condominium documents:
- bylaws – every condominium corporation has bylaws. The bylaws outline the rules by which the Board of Directors, and individual owners, have to abide. If you don’t abide by the bylaws, the Board of Directors may have the authority to fine you. Make sure you know and understand the bylaws for your condominium.
- budget – each condominium corporation has an annual budget that outlines revenue (from condominium fees) and expenses (capital and operational) for the coming year. The corporation budget shows you how the Board of Directors is spending the corporation’s money.
- reserve fund study – this important document analyses the state of the common property of a condominium corporation. It assists a condominium corporation in planning future capital expenses, and ensuring the corporation will have enough money in its reserve fund. It should contain:
- an inventory of all common property that may need repair/replacement within 25 years
- information about the current condition of common property and an estimate of when each component may need repair/replacement
- estimated costs of repairing/replacing each component of the common property
- the life expectancy of each repaired/replaced component of the common property
- current amount in the reserve fund
- the recommended amount of money that should be added to the reserve fund to ensure necessary repairs/replacements occur
- reserve fund plan – this is a document the Board of Directors can develop based on the results of the reserve fund study. It sets out how the Board of Directors will address the revenue and expenses required to meet the long-term capital needs of the condominium. The Reserve Fund Plan should:
- identify the capital expenses to be incurred by the condominium corporation
- outline the timetable over which these expenses will be incurred
- indicate the method of funding and the amount needed for maintaining the reserve fund
The other thing I want to emphasize is the importance of getting involved in your condominium corporation. Remember that a condominium isn’t just a place to live. When you buy a condominium, you’re buying into a corporation, which means joint ownership of the corporation’s assets. Getting involved as a member of the Board of Directors provides you with the opportunity to affect how the corporation is run because you will be part of the decision-making process. You’ll also have better access to information about the financial health of the corporation.
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I made an offer to buy a property, which was conditional on financing. My mortgage broker told me the lender is behind and I won’t be able to get approval until the day after the date in the contract by which I need to waive my conditions. Can the deal still go forward?
Yes, your deal can still go forward; however, you will have to amend your offer to purchase to reflect a later condition-removal date and have all parties agree, in writing, BEFORE the original date passes.
If you ask for a short extension, most sellers will agree. They likely want the deal done as much as you do. You, your real estate professional, and the sellers can negotiate a date that works for both parties, but the amendment to your purchase contract must happen before the deadline.
Your purchase contract is a legally binding contract between you and the seller. Through it, you agreed to try to obtain financing and waive that condition by a certain date. If that date passes and you have not waived the condition, the contract is null and void. Neither party has any responsibility to the other. In fact, at this point, the seller could even accept an offer from another buyer.
Conditions on your purchase contract are important, and you should treat them as such. When you write your offer to purchase, think about how much time you might need to satisfy the conditions you’re including. Your real estate professional or mortgage brokerage professional can also help you figure out how much time you might need depending on the condition.
It’s entirely up to you what condition removal date you put in your offer, but there is no guarantee the seller will agree to your date. There may be some negotiation between you and the seller. Ultimately, the seller doesn’t want to agree to a long condition period because during that period, they’re probably not going to extensively market their home. In the event you don’t waive your conditions and their home remains on the market, they may have lost valuable time and possible buyers.
If your condition date passes, and then you find yourself in a position to waive your conditions – but you never amended the original purchase contract, you’re going to have to write a new offer to purchase, and get the seller to accept it. Your prior offer became null and void the moment you missed the condition removal date.
Every deal is unique, but your real estate and mortgage professional will have the experience to help you include an appropriate condition date AND meet it.
I’m in a time crunch and need to purchase a property fast. I’ve made an offer that expires in the extreme short-term, but the seller’s agent refuses to take it to the seller, saying the seller wants to consider all offers at a later date. Is this allowed?
Yes. The seller controls how they want to consider offers. If they instructed their agent to hold off on presenting offers until a certain date or time, then the agent is obligated to follow that instruction.
There is nothing stopping your agent from asking the seller’s agent to talk with the seller and see if they’ll make an exception, but if they decide to not review your offer until the date they set, there is nothing you can do about it.
Everything is up to the seller.
We’d like to think that in such a situation the seller’s agent discussed the pros and cons of such a strategy with their client. But, if knowing those pros and cons, the seller still wants to proceed with holding off, it’s their choice.
When sellers wait to consider all offers at the same time, it’s usually in a hot seller’s market where there is a higher likelihood of multiple offers. This has been common in Toronto and Vancouver, but it’s less common right now (especially in Alberta).
In a hot seller’s market, when a buyer swoops in with an offer they want seen before the seller’s offer date, this is called a “bully offer.” If you ask the seller’s agent to ask the seller to review and consider your offer early, this could still spark the multiple offer situation the buyer with the bully offer was trying to avoid.
The seller’s agent will likely suggest to the seller that they tell other buyers who showed interest in the property that a bully offer has come in. This may lead to other interested buyers immediately putting in their own offers to compete with it.
Unfortunately, the sellers may not review your offer on time or, they may review it, but not accept it. If you are in a rush to buy, it’s a good idea to make sure the first offer you put in is your best one, and have some back-up properties in mind just in case the offer isn’t accepted or looked at within your timeframe.
I heard there are new rules for condominium developers that might affect buyers. What do I need to know?
You heard right. There are new rules that came into force on January 1 and April 1, 2018, and more changes will come over the next few years.
Most importantly to buyers of yet-to-be-built condominiums, developers must now give you a final move-in date, and if they cannot meet that date, they must give you the option to renegotiate or cancel your contract, and give you your deposit back.
Developers are often reluctant to give firm move-in dates, as unforeseen construction or financial problems can delay a project unexpectedly. In the past, they’ve also been reluctant to provide options for contract renegotiation as the certainty of an existing contract can go a long way in ensuring financial stability for the developer, and helps appease any investors.
There has been tremendous growth in the popularity of condominiums for Alberta consumers, but some believe there hasn’t been enough protection for consumers, particularly when they buy condominiums that are not yet built.
These new rules further protect consumers by requiring developers to provide a realistic operating budget and an estimate of idea of what the condo fees will be, and requiring them to provide more information to you in the contract, including floor plans and finishes. These changes allow buyers to be sure they know what they’re going to get for their money even if the move-in date is months (or years!) away.
Another new rule you should know is that when you’re buying a new condominium from a developer, an Alberta lawyer must hold your purchase deposit in trust while the condominium is being built. The developer can no longer hold your deposit.
These are just some of more than 50 changes Service Alberta is moving ahead within the next few years.
For our part, the Real Estate Council of Alberta (RECA) continues to work on developing the regulatory framework for licensing condominium managers. In late 2014, as part of the other changes to the Condominium Property Act, the Government of Alberta announced RECA will be responsible for licensing and regulating condominium managers. Condominium managers are professionals who act on behalf of, and in the interests of, condominium corporations, including activities such as collecting fees and holding their funds in trust, hiring contractors and enforcing condominium bylaws on behalf of the board.
I encourage you to stay up to date on these and other changes to condominium laws and regulations in Alberta through Service Alberta’s website.
I want to buy a 6-unit apartment building as a rental property for extra income going into retirement. My regular real estate agent—who I trust—told me they can’t help me because they aren’t licensed for commercial real estate. Is this true?
Yes, it’s true. Not all real estate industry professionals in Alberta can trade in commercial real estate. When becoming licensed, real estate professionals in Alberta can choose from four separate practice areas: residential real estate, rural real estate, commercial real estate, and property management.
In order to be licensed in a practice area, an individual has to complete pre-licensing education course for that sector, and complete any ongoing mandatory education in that sector. Real estate professionals only need to be licensed in one practice area, but can add other practice areas as they see fit by completing additional education. Many real estate professionals are licensed in all four practice areas.
Commercial real estate means real estate used to generate income, and includes retail, office, industrial, investment, institutional, and residential real estate with more than four units.
If a real estate agent wants to represent a buyer or a seller in a transaction that involves a building with more than four residential units, they need to be licensed in commercial real estate.
This licensing model helps ensure that only those qualified to do so can trade in a particular sector. Typically, what we find with this licensing model, is that real estate professionals target their education and professional development to specific areas of practice rather than serving as generalists.
Residential real estate is real estate used for residential purposes that is comprised of not more than four residential units. Residential real estate includes individual condominium units.
Rural real estate is real estate located outside a city, town, village, hamlet or summer village that has, as its primary purpose, farming.
Property management professionals hold a licence to work with landlords and/or tenants in the leasing of real estate. This includes negotiating, approving and offering to lease, collecting and attempting to collect rental money, holding money in connection with a lease or rental of real estate, and advertising and negotiating to further property management activities.
Real estate industry professionals can only provide service in the practice areas listed on their licence. Practising in an area for which they are not licensed can result in significant discipline from RECA, and a negative outcome for any clients they’re working with.
You can check which practice areas a real estate professional has on their licence by searching for them on the Real Estate Council of Alberta’s (RECA) website, under the Search for an Industry Professional link. When you search their name, you’ll see a column called ‘Real Estate Sectors,’ which will list their authorizations as ‘Res., Comm., Rur., or PM.’
RECA expects competent service from real estate professionals. If your real estate professional isn’t authorized in the real estate sector (practice area) in which you’re buying or selling, they can refer you to someone at their brokerage who is or someone from another brokerage.
I have steady employment, a 5% down payment, and I make $60,000/year. My mortgage broker says for the condominium I want to buy, I need a larger down payment. Can a friend or family member secretly lend me the money?
Unfortunately, they can’t.
There are very strict rules about qualifying for a mortgage. Lenders want to make sure they’re lending money to people who can afford it. Part of the qualification process to obtain a mortgage in Canada is to provide proof that the money you’re putting as your down payment comes from your own funds.
Because of this, when you apply for a mortgage, a mortgage lender will likely ask to see three months (or more) of bank statements for the account from which you’ll be getting your down payment funds. They want to verify that your down payment money is truly yours, and they likely want to attempt to see how you got it (i.e. they see regular payments in your account from an employer).
Even if you found a lender that didn’t actually ask for proof (that would be extremely rare), what you’re doing is lying. The mortgage lender, even if not physically reviewing your account history, is going to ask you for some sort of statement about where the funds have come from.
If you lie about the true source of that money, it’s mortgage fraud.
Family members can sometimes “give” you some of the funds needed, but it must truly be a gift and not a loan.
If someone is going to lend you money for your down payment, or part of your down payment, that effectively means you owe more money than what it shows on your mortgage. Your lender is qualifying you for a certain amount of mortgage based on the amount of money you can afford to pay each month towards the mortgage debt. If someone loans you money, you would need to add the repayment of those loaned funds on to what you owe on the mortgage – and you could find yourself overextended.
Little white lies during the mortgage application process are not okay; they’re mortgage fraud. This includes lying about the source of funds; lying about how much you make, who your employer is, or how long you’ve been employed; and, your planned use for the property (that is, whether it’s your residence or income property). Fraud is a Criminal Code offence, and you can be charged and prosecuted.
I encourage you to talk about your options with a licensed mortgage brokerage professional. There are mortgage products available that may assist with your ability to purchase a home you love or it may be better to wait until you have a larger down payment. Whatever you do, don’t lie.
I recently found a house listed at a price that seems too good to be true. I discovered the house is a court-ordered sale as the result of foreclosure proceedings. Are there any risks when buying a foreclosure?
Yes, there can be risks associated with buying a foreclosure property. Foreclosure properties may be offered at a lower than expected price, but you need to know what you’re getting into.
A foreclosure sale, which may be labelled “as-is,” “where-is” or judicial sale, is the sale of a property under the supervision of the Court of Queen’s Bench. In a typical foreclosure sale, the owner of a property is behind on their mortgage payments and the lender requests that the Court order the home to be sold. The sale of the property is arranged through the courts in order for the lender to recoup the money owed to it.
In a foreclosure sale, there is no guarantee of the property’s condition, no warranties, and a potential buyer can’t submit an offer that is conditional on anything – such as a home inspection or financing. In some cases, when buying a foreclosure, you can’t even see the inside of the property. This can create significant risk for a buyer.
In a foreclosure sale, the seller typically won’t provide documents that are associated with the property, such as a Real Property Report and/or condominium documents. Without a Real Property Report, the buyer may not know the true location of the structures and the legal boundaries on the property. Likewise, without condominium documents, a buyer might not even know what the monthly condominium fees are.
That being said, there are things you, as a buyer, can do to learn more about a property. Searching the address online may uncover something. Likewise, in the case of a condominium, you can find out the name of the condominium management company and pay to obtain condominium documents from the company rather than from the seller. But remember that any offer you make for the property cannot be conditional on receiving and/or reviewing those documents.
A court-ordered sale can be a very long process because it has to go through the Court. It’s not as simple as a seller accepting or rejecting an offer from a buyer; the Court ultimately that makes those decisions. There’s also the possibility that the sale could fall through at the last-minute in the event the property is no longer in foreclosure, for example if the owner gets caught up on mortgage payments. It is important to remember that nothing is guaranteed with a court-ordered sale.
Even though foreclosures come with some risk, they can be a good option for some buyers – just make sure before proceeding you know the risks.
A property I’m interested in is advertised as having an ‘illegal suite.’ Should I be worried?
Not necessarily, however, you and your real estate professional need to do some due diligence, and the first part of that is thinking about whether you want to have a tenant in that space.
Often, when listings mention an ‘illegal suite,’ it means the municipality hasn’t formally approved the suite. Some municipalities require separate utility metres, separate outdoor space, and other requirements – and without those, the municipality won’t approve the suite and the suite is therefore illegal. There are thousands of illegal suites in Alberta. When a suite is illegal, the seller’s real estate professional must advertise it as illegal, so there is no confusion or misrepresentation.
When considering a property with an illegal suite, there are additional things to think about.
The rules vary depending on the municipality, but when a suite is illegal, there is a chance the municipality could force the property owner to remove the suite, particularly if neighbours complain. While this isn’t a common occurrence, it can and sometimes does happen.
Also, the zoning laws may prohibit two dwellings on the same lot. Make sure the area is zoned for suites. If the property is in an area that is not zoned for secondary suites, it may increase the likelihood of the municipality taking action.
Illegal suites can be in perfect condition and up to current building code standards or they can be a complete dangerous mess. If an illegal suite does not meet building code requirements, it may be hazardous to the health of anyone using the suite. Additionally, your insurance provider may evaluate your home differently because of the illegal status of the suite.
If you decide to buy a home with a suite, include a home inspection condition in your offer. A home inspector can’t advise you on whether the suite is legal, but they can advise you of health and safety deficiencies you may need to fix before someone occupies the suite.
You need to think about all of these things before deciding to buy a property with a suite. How would you handle it if you had a tenant and then the municipality orders you to remove the suite? Could you afford to lose the rental income? If you need to upgrade the suite for health or safety reasons, could you afford to?
Talk to your real estate professional about your concerns. Illegal suites are common, and real estate professionals have the experience to guide you.
My mortgage broker had me prequalified for a mortgage, but still says I should include a financing condition when submitting an offer to purchase a home. Why?
Your mortgage broker is making a good suggestion. You have been prequalified, but that’s not the same as being approved for a mortgage. Mortgage prequalification is only tentative approval based on basic financial information.
Typically, a mortgage broker can prequalify you for a mortgage based on minimal information about your financial situation, such as your income and down payment amount. Prequalification helps when you start looking at properties because it tells you the mortgage amount for which a lender would likely approve you. It is not a guarantee a lender will enter into a mortgage contract with you, but it can help you narrow down your property search to a certain price range.
When you find a home you want to buy, your real estate professional will help you write an Offer to Purchase. You should listen to your mortgage broker’s advice, and include a financing condition on your Offer to Purchase. A financing condition means the deal isn’t firm until you secure a mortgage and waive the condition. If you aren’t successful in getting a mortgage, you won’t waive your financing condition, you won’t proceed with the purchase, and there won’t be legal consequences for not proceeding with the purchase.
If the seller accepts your conditional Offer to Purchase, you have to apply for a mortgage. To do so, you will have to submit supporting documents (paystubs, T4, letter of employment, etc.), and information about the property you want to purchase (for example, the listing feature sheet). The lender will review your financial situation and information about the property.
The lender wants to review the property to look at a number of things. For example, is the property is worth what you’re paying for it? Is it located in a flood plain? If you’re buying a condominium, is the corporation in financial difficulty? Does the condominium have an appropriate reserve fund? The lender wants to review the property to see if it has an elevated financial risk associated with it. Until you are formally approved, and the lender assesses the property you’re buying, there is no guarantee you will receive a mortgage from the lender. The financing condition gives you a chance to secure a mortgage before finalizing the purchase.
Some buyers who need a mortgage feel comfortable proceeding without a financing condition, possibly to make their offer more attractive to a seller, but it’s rarely a good idea. A financing condition provides a bit of added protection. If you proceed without a financing condition, and are not able to secure a mortgage, you may have to back out of the deal and the seller could take legal action.
I’d like to buy a home, I can afford monthly payments, but I’m working on my credit—I saw an ad for a rent-to-own. Is that something I should consider?
The short answer is maybe. Rent-to-own arrangements sometimes make it easier for someone to buy a home.
A typical rent-to-own is a type of rental arrangement that also contains an option to purchase the property in the future, at a specific point in time, at an agreed-upon price. Rent-to-own contracts give buyers time to save a larger down payment, and time to work on their credit, but there are some risks.
Rent-to-own contracts are very complex. There are many things on which the parties have to agree, for example:
- who arranges and pays for property insurance during the term of the rental?
- who will pay property taxes and/or special assessments during the term of the rental?
- can the renter complete renovations or improvements before purchasing the property?
- what happens if the buyer cannot close?
- is the accumulated down payment refundable or non-refundable?
Often rent-to-own contracts will include a base rent for the property as well as an additional monthly payment. Your rent-to-own agreement should stipulate that your additional monthly payment will be held in a trust account until purchase as it will form part of your eventual down payment.
It’s not unusual for there to be clauses in rent-to-own contracts that state if the buyer misses a payment, is late with a rent payment, or chooses to back out of the purchase, the property owner is entitled to keep any down payment funds already received. It’s a good idea to talk to a mortgage broker because they can help determine if you will qualify for a mortgage at the purchase price. If they have concerns about your ability to obtain a mortgage, whether because of your income or your credit, you may not want to proceed.
Something you also need to consider is that property values change constantly. When you enter into a rent-to-own agreement, you agree to purchase the property at a specific price at a point in the future. But, there is no guarantee the property will be worth that amount when you go through with the purchase. Are you prepared to take on that risk? Likewise, if the property value drops significantly—and your purchase price is too high—it may be difficult to find a lender.
The best advice I can give you is that before signing anything, it’s a good idea to have a lawyer review the contract. While a rent-to-own may make it possible for you to purchase a property, you need to make sure you understand and agree with what you are signing.
I’d like to get out of my home purchase because the seller’s real estate agent lied to me about something. If I file a complaint with the Real Estate Council of Alberta, will that get me out of my purchase?
The Real Estate Council of Alberta (RECA) won’t be able to help you get out of your purchase, but you are certainly welcome—and encouraged—to file a complaint against the seller’s agent if you believe they lied to you.
RECA’s complaint-handling process is disciplinary in nature. If an industry member breaches the legislation and industry standards that are in place, for example by misrepresenting something, RECA can issue discipline against them. However, RECA can’t get a consumer their money back nor can RECA’s investigation actions bring an end to a purchase/sale between a buyer and a seller.
Home purchases are contractual agreements between consumers—buyers and sellers. Through the Offer to Purchase that you submitted, which the seller accepted, you created legal and binding obligations. RECA does not get involved in these types of contracts between consumers.
In the event that the lie was significant enough that you believe by proceeding with the purchase, you will be financially or otherwise disadvantaged, I suggest you talk to a lawyer as soon as possible. After your purchase closes, you may want to consider legal action against the seller’s agent, or the seller, if you believe they were involved in the misrepresentation.
When you file a complaint with RECA, RECA will review it, collect evidence, and conduct interviews. Penalties issued against industry members can be significant; up to $25,000 per breach—however, despite any of our investigative findings, our disciplinary process will not award you any damages nor will it enable you to get out of your purchase.
You may have heard that RECA has a Consumer Protection Fund, also referred to as the Assurance Fund. The Fund compensates consumers who suffer a financial loss as a result of fraud or breach of trust by an industry member, or an industry member’s failure to disburse or account for money held in trust. Consumers do not receive compensation from this Fund as a result of filing a complaint. Rather, there is an application process which, in some cases, requires a consumer to file a lawsuit against the industry member in question. Visit reca.ca for more information about the Consumer Protection Fund.
I know the seller has only owned the home for a year, and I’d like to know why they’re selling already. I’m worried that there’s something wrong with the house. Can I find out why the seller wants to sell?
You can always ask, but neither the seller nor their real estate agent are obligated to tell you.
In fact, there are strict rules of confidentiality for real estate professionals. When a real estate professional has confidential information about one of their clients, they need to keep that information confidential. That confidential information includes a seller’s motivation for selling and a buyer’s reason for buying.
If the real estate professional were to share this information with you or others, it could hurt their clients’ negotiating position in the event of an eventual offer to purchase. The seller’s representative needs to look out for their client’s best interests at all times, and disclosing confidential information could put their client’s best interests at risk.
Imagine the seller recently lost their job and needed to sell their home quickly to avoid financial difficulties. If a potential buyer were to find out, they may use that confidential information to their advantage when submitting an offer to purchase.
You can always get your real estate professional to ask the seller’s representative, but the only time a real estate professional can share their client’s confidential information is if when required by law OR the seller provides their permission to disclose the information.
You are clearly concerned that the seller is selling so quickly because there’s something wrong with the house. Our experience is that sellers rarely sell because of a problem with the house, and their motivation for selling rarely affects the value of the house. That being said, even without knowing why the seller is selling, there are things you can do to ensure the house is the right one for you.
If you put in an offer to purchase, make sure you include a home inspection condition, so that you can have the home inspected before making it a firm purchase. Likewise, talk to your real estate professional about other concerns you may have, for example, flood plan location, neighbourhood amenities, or quality of schools nearby. Your real estate professional can help you get this type of information, which may put your mind at ease about the property.
The fact is, there’s likely nothing nefarious going on with the house, but the seller’s circumstances have obviously changed and they no longer want to live there. You need to discuss your concerns with your real estate professional who can help you access the available information that will help you make a sound decision. Good luck.
I’ve heard that calling myself a “customer” of a real estate professional means I won’t have to pay them for their services. Is that correct?
No. Choosing to call yourself a customer has very little to do with payment. Being a “customer” is a specific type of working relationship you may have with a real estate professional.
Simply calling yourself a customer doesn’t change anything; it’s what is in your written agreement with your real estate professional that dictates responsibilities and obligations, and possible payment.
When you are the customer of a real estate professional, they will act honestly, ensure any information they give you is correct, and exercise due care and skill at all times, but they are not working on your behalf to advance your interest. They cannot give you advice or use their judgement to help you. They can facilitate the deal by providing you with property information and statistics, helping you fill out offers and counter offers, present those offers, and relay information back and forth.
In a client relationship, the real estate professional owes you fiduciary duties, which boils down to your professional working in your best interests at all times. They will give you advice and use their professional judgement to advance your interest in a transaction.
Paying your real estate professional — no matter the type of relationship you agree to—is negotiable. In residential real estate, client relationships require you and the professional to agree to and sign a written service agreement, and RECA encourages the use of a Customer Status Acknowledgement form if you’re going to be a customer. These agreements outline any compensation, and if you cannot agree on the terms of payment, you shouldn’t sign the agreement and you should find a different real estate professional to work with.
Typically, in a client relationship, the client and the real estate professional will agree on a commission percentage to be paid to the professional upon the completion of a deal.
In a customer relationship, it is less likely that your real estate professional will ask you for payment. This may be because they are in a client relationship with the other party involved in the transaction, who is providing the financial remuneration. That being said, they can certainly ask you to enter into a fee agreement, but you don’t have to agree. Make sure you fully understand any agreement you sign, as it would be legally binding.
Your professional will outline the potential relationship options and any applicable payment before you sign an agreement. It doesn’t matter what you call yourself, it matters what your agreement says, and how you interact with your real estate professional.
I’m interested in a property that says they are selling it in “as is, where is” condition. Should this be a red flag?
A property listed “as is, where is” isn’t necessarily a problem, but definitely should lead to further investigation before making a commitment.
A property listed in as “as is, where is” condition does not necessarily mean the property is in bad shape. In fact, such a comment may have absolutely no relationship to the condition of the property; the property may be perfectly fine. What it does mean, however, is the seller is making no guarantees about the property’s condition, essentially attempting to absolve him or herself from any responsibility related to a warranty or representation of the property’s condition.
“As is, where is” may be more common than you think, but that doesn’t mean you shouldn’t do further investigation.
There are a couple of situations when properties are more likely to be listed “as is, where is:” these include judicial sales and foreclosures, and estate sales.
If a homeowner stops making mortgage payments, the mortgage lender can begin Court proceedings to foreclose the property. The Court can order a judicial sale of the property, and while title is still in the owner’s name, the Court is the seller of the property.
The lender and the Court likely don’t know much about the condition of the property, so they don’t want to offer any guarantees about its condition. They’ll use “as is, where is” wording in the listing. The property may be completely fine – but the Court doesn’t want to bear the responsibility if it isn’t.
Likewise, in an estate sale, when the owner of the property has passed away, the executor of the estate is unlikely to know the condition of the property and will list it “as is, where is.”
Other instances of “as is, where is” in a property listing are exactly what you may think: the property is in poor shape and is listed for land value only. This may occur more frequently in older, inner-city neighbourhoods or on large country properties where the value is in the land, and not necessarily in a run-down house on the land.
Talk to your real estate professional before making an offer on an “as is, where is” property. Your real estate professional may be able to find out more information or you may be able to somehow inspect the property before making an offer. That might be your best option because there is a good chance that if a property is listed “as is, where is,” the seller won’t accept an offer that is conditional on a home inspection. Be careful.
I’m shopping for a vacation home on Vancouver Island, and I’d like my Alberta real estate agent to help me, can she?
No, unfortunately, she can’t. To work in another province, someone needs to be licensed in that province. Real estate has different licensing rules and criteria from province to province, and while there are a lot of similarities, individuals need a licence in a jurisdiction before working there.
The fact is, if you’re buying a property in B.C., or any other place outside of Alberta, don’t you want someone looking out for your interests who is familiar with the market and the rules in the area in which you want to buy? While I’m sure your Alberta real estate professional is a consummate professional and knows the ins and outs of our industry, the fact is, she knows Alberta real estate and Alberta real estate rules.
You will be better represented by working with someone in the area in which you’re buying, someone who is licensed by the provincial authority in that province (in the case of B.C., it’s the Real Estate Council of British Columbia).
However, there are other things that your Alberta real estate professional can do to assist you. Many real estate professionals have networks of professionals in other provinces and your real estate professional may be able to make suggestions of someone to work with. Alternatively, if you have friends or family that live there, you can ask them for a recommendation and of course, you can do Internet searching on your own.
I also suggest that you do as much as you can to research the market in which you’re looking for a property.
Real estate transactions are significant commitments, with a full slate of obligations and responsibilities. And, things can certainly be a bit trickier when you’re buying in a location in which you don’t primarily live. The best advice I can give you is to do all you can to ensure you’re represented by a licensed industry professional who is knowledgeable about the market in which you are about to trade.
I provided a deposit as part of my offer to purchase a house. Is that my down payment?
When people talk about down payments and deposits, they often do so interchangeably, but they are not the same.
Your deposit is something you provide along with your offer to purchase to show you’re serious about buying; sort of a good faith offering. Typically, you’ll write a deposit cheque to the seller’s real estate brokerage, and they hold it in trust for both parties until the deal closes. In the event it was a conditional offer to purchase, and you don’t waive your conditions, the seller’s brokerage will return your deposit. If you do waive your conditions, but the deal ends up falling through, the purchase contract you have with the seller will outline which party gets to keep the deposit funds.
Your deposit amount is entirely up to you. However, your real estate professional will advise you on an appropriate amount for a particular property.
Whatever deposit you provide, it is not automatically the same as your down payment; however, it is usually part of your down payment.
Your down payment is the amount of your own money that you are putting towards your purchase; it’s the part of the purchase price that you don’t have to obtain from a mortgage lender.
Your mortgage lender may require you to put a certain amount of funds down in order to secure a mortgage generally, or to secure one at a favourable rate or favourable terms and conditions.
You should also know the Canadian Government recently introduced new rules for down payments. For purchase prices of less than $500,000, you must provide a down payment of at least 5% of the purchase price. For homes between $500,000 and $999,999, you must have a down payment of at least 5% on the first $500,000, and 10% on the portion above $500,000. For homes that are $1 million or more, you must provide a down payment of at least 20% of the purchase price.
With those rules in mind, consider how your deposit and down payment can be different on this example:
On a $500,000 purchase, you will need a down payment of $25,000. However, your deposit, which you provide along with your offer to purchase, can be substantially less than that. If you provide, for example, a $10,000 deposit when you write your offer to purchase, that means on the closing date for your purchase—you will have to provide the remaining down payment funds; in this case, $15,000 in order to close the purchase along with the mortgage funds from your lender.
Your real estate and mortgage brokerage professionals are the best individuals to advise you on a course of action for your deposit and down payment.