Seller’s Guide
Congratulations! You are about to sell your home and turn to the next chapter of your life!
A. Important Background Knowledge for Selling a Home in Toronto
It might have been a while since your last home purchase, so let us review couple fundamentals of real estate transactions:
- Seller and Buyer each should have their own representative realtor. It is best that two parties do not share the same realtor to make sure their best interest is represented respectively. The realtor represents the seller is commonly known as Listing Agent.
- Mass majority of the homes for sale are centralized in a database called Multiple Listing Service (MLS), which is accessible by every single licensed and registered agent with local Real Estate Board. Buyers do not need to work with multiple agents. The chosen representative realtor, listing agent, will list seller’s home on MLS so it is visible for public.
- Real estate transaction data is accessible by public and completely transparent. The transaction information for every property listed on MLS, such as asking price, sold price, days on market, is visible to not only realtors, but also buyers and sellers, via websites, apps. Everyone could easily locate comparable properties and evaluate the subject property’s market price. Hence, every property will be bought and sold close to its true market value, thanks to this public information.
Home selling is lot alike bidding. Imagine selling a Van Gogh’s painting: is Sotheby who gathers many worlds’ wealthiest art lovers more likely to sell at a great price, or a small auction house? If there is one secret to sell a property fast and for top dollars, it is powerful and extensive marketing exposure! A property being promoted under integrated marketing communication will attract most potential buyers. The more people come to the showing, the more offer the seller will receive. The more offers a seller receive, the more likely higher price and better condition can be obtained. Now we understand the key to home selling!
Unfortunately, more often than it should, many agents only upload the property’s information to MLS, but plan and conduct no other marketing activities. Such listing service resembles a commodity, home selling result is identical from a realtor to another – equally unideal! A property without great exposure cannot expect a great sales outcome. The key criterion to choose the listing realtor is his/her marketing plan and execution. Whoever has the most extensive marketing activities planned and carried out is the one who will generate the highest demand for your home. And since the price is a function of supply and demand, the highest demand will translate into highest sold price!
B. Home selling process
1. Find and interview suitable real estate agents candidates
Pick Out 2 to 3 Full Time Toronto Real Estate Agent Candidates
- Much like the selection process for a seller’s agent, when selecting a buyer’s agent, the buyer should research the agent’s reputation through their social media, check on platforms such as Google, Yelp, and Facebook to see other people’s reviews.
- Assess their professionalism by checking if they ever published any industry related blogs or videos, if so, you can definitely tell their professionalism by their published content.
Interviewing Real Estate Agents and Picking the Right One - One That Can Find You All the Properties, Responsive, & Competent.
Below are some of the things a home buyer should consider and questions to ask each of the real estate agent candidates.
- During the interview with each candidate, evaluate whether the candidate provides a systematic and thorough introduction of their service, the more formal and prepared they are, the more likely they are to provide the same quality of service in the future.
- Consider the extent of their ability and property search, see if they can find properties beyond what’s on MLS, such as exclusive listings, pre-construction assignments, coming soon properties, and bank foreclosures, etc. Top real estate agents in Toronto often have access to these kinds of properties that are not readily available to the general public.
- Does this real estate agent offer any kind of value added service or result guarantees? Such as 24-hour communication guarantee, buyer satisfaction guarantee so their buyer doesn’t get stuck with a home they are not satisfied with, or a cash savings guarantee to help buyers get the best possible price?
- Ask about each candidate’s past experience, transaction volume, whether or not they have a team supporting them, etc. Although a solo agent can definitely also deliver 5-star service, but time and time again, agents with a team have proved to deliver much better service and give clients better results than solo agents. An experienced full-time real estate agent with a supporting team can bring their combined experience to the table, they are more likely to help buyers find the best property, identify pros and cons of each property, and negotiate the best price possible. Teams are often more responsive and well rounded with talents across various aspects of a real estate transaction.
- In Toronto and throughout Canada, the work of a real estate agent is as much a professional field as that of a lawyer or accountant. Even if the candidate is someone within the personal sphere, their professionalism and ability must be vetted thoroughly. They may not rip the buyer off,and honesty and integrity are definitely important, but it's not sufficient. An honest but incompetent real estate agent can be just as costly to the buyer.
Once the buyer has picked out the best candidate, the two parties will then establish their representation relationship, and the real estate agent will start providing his/her service to the buyer.
Real Estate Buyer Agent Commission
- Generally, when buying a property in the Greater Toronto Area or anywhere in Canada, buyers do not need to pay commission to their real estate agent. The buyer agent’s commission is paid by the seller, the listing price of a property already accounts for the commission. Currently, the most commission offered to a buyer's agent is 2.5% of the selling price. However, in an extreme seller’s market, sellers may occasionally only offer 2.25% or even 2%.
- In Toronto, when a real estate agent establishes an exclusive representation relationship with a buyer, they must sign a standard Buyer Representation Agreement from the Ontario Real Estate Board. This agreement outlines the commission that the agent is entitled to receive. Sometimes, the agent may indicate that their commission will be "as per MLS listing", which means they will accept whatever commission the seller is willing to offer, even if it is only $1. This can create a dilemma as it is part of the agent's fiduciary duty to show their client all available properties, but if the commission is very low, the agent may lack the motivation to show the property to their client and buyers risk missing out on a home fitting their need. To avoid this conflict, it is recommended to specify the exact commission that the buyer's agent is entitled to, such as the industry standard 2.5%. This way, even if the seller is only offering $1 commission, the agent can either negotiate with the seller or have the buyer pay the difference to ensure the commission is fair.
- In Toronto's Asian market, especially among the Chinese community, it is not uncommon for real estate agents to offer commission rebates to buyers. While rebates may seem like a good deal for buyers, they can actually be counterproductive. For many buyers, a home is the largest purchase they will make in their lifetime and is intimately tied to their daily lives. Ultimately, buyers want to find a home that meets their needs and expectations, have a professional real estate agent that can guide them through the process, avoid traps, and get them the best price possible. Real estate agents in Toronto who offer rebates often do so because they lack other competitive advantages, such as a strong client base or value-added services. These agents may also struggle to provide high-quality service. In contrast, real estate agents who do not offer rebates but still remain competitive are often capable of delivering exceptional results for their clients, which ultimately leads to greater overall benefits than any rebate could offer. Therefore, buyers who prioritize the end result should be cautious when selecting a real estate agent in Toronto to represent their interests. They should focus on factors such as the agent's experience, expertise, and level of service rather than simply seeking out the highest rebate. After all, if saving money was the most important factor, buyers could easily forego using an agent altogether and purchase a home on their own. Ultimately, professionalism should be the main criteria for selecting a real estate agent, not rebate.
2. Picking the Right Real Estate Agent, Confirm Home Selling Plan, Sign Listing Agreement
A. Renovation and Remodeling
Some buyers love newly renovated homes. It is understandable as the new home can be a symbol of their new life when they move in. While it is true that these buyers are willing to pay extra for a home with recent renovation, it does not mean all homes should go through renovation before selling. Whether a renovation should be done or not before listing the property, following factors need to be considered:
- Renovation may last 1 to 9 weeks. If the contractor does not have availability, longer waiting period is required. Can the seller wait?
- Depending on the luxury level, renovation or remodeling may require significant amount of capital, and it is not easy to get a loan. Can the seller arrange?
- Can the market value of the renovated property cover or bigger than the value before renovation plus the renovation costs?
The last point is particularly important because market is often unpredictable. For instance, if a renovation project started in the price uprising trend encounters a sudden change of market during the course, it may end up worth less when the project finished, or at least not covering the renovation costs. Imagine a renovation started in Feb 2022 but ended in April when the market plummeted. The theory is even more so if the market is sliding. Negative time value will eat up into the renovation value.
However, couple quick fix could uplift the property appearance and attract more buyers, especially for homes with good bones but aged by time.
- Interior paint
- New flooring
- Dropped ceiling and baseboard
- Resurface the cabinets
There are also some relatively longer period projects that could increase the property value more significantly, but they are accompanied by greater risks addressed above. Homeowners could conduct these projects while occupying the property to enjoy the improved living condition, rather than merely to boost the sales value at the end of the residence.
- Finish basement
- Kitchen countertop and cabinets
- Bathrooms
- Driveway and backyard deck
B. Home Staging
Home staging decorates a property before it goes on the market for sale. Staging makes a home appealing to the highest number of potential buyers, thereby selling a property more swiftly and for more money.
Staging gives an immersive feeling to home viewers so potential buyers can see themself living in and, thus, desire to purchase. Depending on the size and the property type, the cost of staging service varies. In 2022, A two-bedroom condo apartment in GTA costs around $2,000/month.
Like recommending other professionals, listing agent may recommend some staging companies for sellers to compare and choose. Sometimes, listing service includes staging for free. Do make sure it is not traded against the true core service of listing – marketing!
C. Pricing Strategy - Bidding vs Non-bidding Asking Price
A properly set listing price is key to successful sale of any property.
a). Bidding
The stronger the seller’s market, the more effective the bidding strategy is. Listing agent can refer to the market price, mostly indicated by the similar properties’ most recent sold price in your neighborhood, to determine your property’s current market value. When a bidding sales strategy is adopted, the asking price can be lower than the market price. On the bidding date, also known as the offer review date, all interested buyers are invited to submit an offer. Depending on the marketing efforts of listing agent, the more attention is drawn, the more people viewed your property, the more offers you will receive, from which, higher price and better-quality offer can be expected. Listing agent will collect and sort all the offers and present one by one to the seller, and help seller choose the best one to sign back or accept.
Bidding is the best way to test the market. Thanks to the public and transparent flow of information, when a property is listed on MLS, plus extra marketing exposure brought by the listing agent, all potential buyers in the market should have known and viewed it. Those who are interested will participate in the bidding. Therefore, the best offer among all received should reflect the market’s highest interest. Seller should acknowledge that no higher offer will appear soon after the bidding.
Seller could decide to review pre-emptive offers before the announced offer-review day. Pre-emptive offers are often of high quality, with no condition, and at a higher price than the market value. Buyer boosts the offer to induce the seller to give up the offer review, so they could win the property without bidding day drama. Seller should carefully evaluate if the pre-emptive offer’s extra value is a good trade-off against the opportunity of seeing all the possibilities on offer review day. After all, the buyer who brought in the boosted pre-emptive offer might not join the final bidding.
b). Fair Price Listing
In balanced market, or buyer’s market, there are fewer buyers. Price a property around the market value will attract serious buyers. Again, listing agent could refer to similar properties’ most recent sold price in the same neighborhood. Seller should carefully review these data and determine the property’s market value together with the listing agent.
Seller should not let the emotion cloud the judgement, no matter how attached he/she feels to the home. If pricing is not done correctly and much above the market price, it would make neighbor’s properly priced properties appear to be value-for-money and help them sell fast. Poorly priced property could end up staying in the market for too long. The longer the days-on-market, the more negative public perception towards it, the more price reduction the seller would be forced to undertake. As a result, very often, too high initial asking price backfires.
Pricing Strategy
The stronger the seller’s market, the more effective the bidding strategy is. Listing agent can refer to the market price, mostly indicated by the similar properties’ most recent sold price in your neighborhood, to determine your property’s current market value. When a bidding sales strategy is adopted, the asking price can be lower than the market price. On the bidding date, also known as the offer review date, all interested buyers are invited to submit an offer. Depending on the marketing efforts of listing agent, the more attention is drawn, the more people viewed your property, the more offers you will receive, from which, higher price and better-quality offer can be expected. Listing agent will collect and sort all the offers and present one by one to the seller, and help seller choose the best one to sign back or accept.
Bidding is the best way to test the market. Thanks to the public and transparent flow of information, when a property is listed on MLS, plus extra marketing exposure brought by the listing agent, all potential buyers in the market should have known and viewed it. Those who are interested will participate in the bidding. Therefore, the best offer among all received should reflect the market’s highest interest. Seller should acknowledge that no higher offer will appear soon after the bidding.
Seller could decide to review pre-emptive offers before the announced offer-review day. Pre-emptive offers are often of high quality, with no condition, and at a higher price than the market value. Buyer boosts the offer to induce the seller to give up the offer review, so they could win the property without bidding day drama. Seller should carefully evaluate if the pre-emptive offer’s extra value is a good trade-off against the opportunity of seeing all the possibilities on offer review day. After all, the buyer who brought in the boosted pre-emptive offer might not join the final bidding.
d) Move Up or Size Down
For homeowner who want to sell their home and buy another and need the proceeds from home sale to purchase next one, a good plan needs to be in place.
In theory, when the market is uprising, one should purchase next home before sell the old one. But if the market is declining, then the opposite should be done. Even in the “sell first” strategy, one should start looking for next home while listing the old one. Note that as long as proceeds from the home sale is required to be the down payment of next home, one should be cautious and not make an offer on the new home unless current home is sold firm and waiting for closing. On the other hand, if current home is sold firm pending for closing, but new home’s closing day is earlier than that of current home which requires fund that’s not readily available yet, we could always apply “Bridge Loan” form banks, using current home’s sold firm APS as collateral.
Although quite often move-up or size-down clients arrange two transactions (purchase and sell) on the same closing date, prudent homeowners can have sale closing date couple days earlier, so, with certainty, funds will be ready for the following closing of new home purchase.
e) Sell a tenanted property
The purchase agreement states that subject property needs to be vacant possession at closing. So, unless agreed otherwise, if the property was tenanted, then the seller is obliged to terminate the lease and have the tenant move out before closing.
If the tenant does not wish to renew the lease, he or she can notify the landlord 60 days before the lease ends. Tenant and Landlord can form an agreement by filling Landlord and Tenant Board form N11 “Agreement to End the Tenancy”, and tenant move out on the agreed upon date.
However, if it is the landlord who wants to vacate the property while the tenant wants to stay, the situation can be a lot more complex. Unless certain specific conditions are met, e.g., landlord or his/her direct family needs to take the property back for their own residence, Landlords cannot vacate a tenant simply because he/she wants to sell the property. However, a landlord can list a property for sale even it is tenanted. New Homeowner of such a property has two options:
a). Continue to rent the property to current tenant. Do note though, as long as the law-abiding tenant wishes to stay and renew the lease, new owner cannot vacate in order to find a new tenant who is willing to pay higher rent.
b). Buyer or Buyer’s direct family move in the newly purchased property. When the purpose of the purchase is buyer’s own residence, after the purchase agreement is firmed, the seller can issue the tenant Form N12, “Notice to End Your Tenancy Because the Landlord, a Purchaser or Family Member Requires the Rental Unit”. file:///Users/priscillahon/Downloads/N12.pdf The notice period is 60 days. So the seller should make sure the closing period is long enough, so the tenant will be properly notified and have time to move out.
Follow the steps above to set up a complete listing plan. Then it should be ready for showing soon!
3. List the Property for Sale - Get Ready for Showing
Once the property is publicly listed, interested buyer will come and see the property along with their agent. It is important to keep the property as clean and tidy as possible for the best presentation. Showing should be make simple and convenient for buyers, because only with more showings, the seller will get more interested buyers and offers. This is one of the key challenges when trying to sell homes with tenants.
4. Reviewing and Picking the Best Offer
No matter how many offers seller receives, only one can be chosen to accept or to sign back. Once an offer is signed, within the irrevocability, to whom it signs, it is a biding legal document. Therefore, seller should never sign back more than one offer at a time, because if opposite sides happen to all accept the counter, the seller must sell the property to multiple buyers. Obviously, it cannot be done.
On the other hand, choosing the best offer might not be as easy as you think.
Other factors affecting the quality of the offer include:
a). Financing Condition
When buyer’s offer is accepted, the financing condition gives the buyer agreed number of days to get mortgage application approved. If by the end of the condition period, the buyer does not find satisfying financing solution, the buyer can exercise the condition’s right and not proceed with the purchase without penalty
b). Home Inspection Condition
Inspection condition allows the buyer to hire a professional to inspect the house, and if the inspection report is not satisfactory to the buyer. The buyer can back out from the accepted offer and terminate the purchase without penalty.
c). Status Certificate Review Condition
For condominium property, Status Certificate is a document prepared by that condo corporation that records the operation and the status of the condo building. It contains pertinent information about the individual condominium unit. Among other things, the certificate would indicate if the current unit owner were in default of paying the monthly common expenses, if an increase in the common expenses has been declared by the condominium board, and the amount in the reserve fund. SC Review Condition gives the right to the buyer to have a real estate lawyer review, and if anything found substandard or abnormal, buyer has the sole discretion to seek mutual release of the purchase agreement.
There are more conditions than above, but these three are most common in offers. If an accepted offer has any condition, there is a chance that the buyer declare condition not met, then the purchase agreement would be void. Most of these conditions are written in a way to give the buyer sole discretion to decide whether the condition is met. So, in theory, a buyer could easily leverage the condition to terminate an otherwise acceptable property. Therefore, Seller should fully gauge the after effect of accepting a conditional offer. If decide to go ahead, then try shortening the conditional period. In a bidding, if receive multiple offers, try avoiding the ones with conditions even though their price might be higher, because if the buyer exercises the rights and back out from the purchase a few days later, the whole bidding fails. By then, the buyers who offered second highest but unconditionally might have bought something else and moved on.
Closing Day
Closing Day is also an important element in the Agreement of Purchase and Sale (APS). Closing could be any business day. Like many other terms in APS, it is negotiable between the buyer and seller.
If no special arrangement, 30 to 60 days from the offer day is most typical waiting period before closing. Shorter than 30 days, the buyer might not have enough time to arrange funds for closing. Sellers often prefer to close faster, so they could collect the selling proceeds as soon as possible, unless they need to wait for a certain closing date to move in their next new home. All funds, including buyer’s deposit, down payment, and the mortgage that buyers loaned from the bank will only be released to the seller on the closing day.
In case sellers sell one property and buy another, moving up or downsizing, listing info can specify seller’s preferred “possession date”, aka closing day, so it can be the same day as the new home’s closing day. The merit of this approach is that the seller can directly move in new home without transition. Buyers can hand in an offer catering to the seller’s need to increase offer’s attractiveness. Real Estate lawyers of each party can plan and work together for transactions to close on the same day.
5. Closing & Getting Paid!
Within 24 hours after both parties reach an agreement, symbolled by one party’s the acceptance of the other’s offer or counteroffer, buyer needs to make the deposit to the listing brokerage’s trust account. Payment method include a). Deliver the bank draft or certified cheque to listing brokerage office b). Direct Deposit c). Wire Transfer. Wire Transfer is often used by buyers who are not present in Canada when the agreement is signed. Fund transferred from overseas may take longer than 24 hours to arrive Canada banks, but listing brokerage may accept the bank receipt stating wire transfer is conducted within 24 hours after offer acceptance. Once funds arrival is verified by the listing brokerage, a formal receipt is issued, and the property listing status will be changed to SOLD, or SC (Sold Conditional).
Buyers will act within the conditional period, such as getting the mortgage approval, inspect the house, review the Status Certificate…etc. If conditions are met, buyers can issue “Condition Fulfilment”, if not, but the buyers decide to still move forward with the purchase, then “Waiver” will be given to the Seller. Both the “Condition Fulfilment” and the “Waiver” work in similar ways, turning the deal from “sold conditional” to “sold firm”. However, if conditions are not met and the buyer is unwilling to proceed, he or she could exercise the right and terminate the purchase without penalty. If that happens, then the seller will have to relist the property and recover the listing status as “new” on MLS.
When a property is sold firm, the seller should hand in all signed documents to the chosen real estate lawyer to lead the rest of the process till closing. The realtor could also recommend lawyers if the seller does not have one already.
Both seller and buyer’s lawyers will work on the utility bill reconciliation, make sure that expenses are properly calculated and charged to the right party based on the closing date, and the balance will be adjusted in the closing costs.
Buyers often request two visits before closing date in the purchase agreement. If the seller still occupies the property, then the buyer should give the seller 24 hours’ notice. Second visit usually takes place just a few days before closing, so the buyer can come to check and make assure all electronic appliances, plumbing, and electric wiring are all in working order. Otherwise, according to the purchase agreement, the buyer could ask the seller to either fix, or ask for closing credit as the compensation for buyers to fix by themselves.