Side Deals in Edmonton Real Estate

More often than not the winner is! The Seller. Why? What sense does it make for someone dealing with hundreds of thousands of dollars to cut breaks to a purchaser? “Well, if there’s no agents involved, there’s no commission, therefore I pay less and the Seller is paid more” is the most obvious argument.

 Such a person would be right in the Seller offered fair market value and then subtracted the cost of commissions while offering the representations and warranties as offered by the stand form Alberta Real Estate Purchase contract. But, after a few 24 hours of spending my waking moments buying and selling real estate, I have yet to see but one instance where this is the case.  

The Buyer usually pays a little more than market value, without the Seller paying commission nor being held to account on pricing, representations, warranties or disclosures, measurements, or repairs. Why? The buying and selling of real estate is based on consumer emotion. “I feel like I am saving money” is all it can take. It does not matter that the neighbour sold for 15K less, paid commission, had to provide and pay for a real property report, disclose a fixed leak in the basement, and paid for the home to be measured. The buyer and seller of Sale A feel like they have beat the system, while objectively, Seller A is the beneficiary of a windfall purchase.

Buyer A has now paid 15K over market value (on a 300K purchase that is the buyers down-payment or equity) and has waived their rights and protections granted to buyers under a more conventional property transaction structure.

This begs the question to begin with, if Seller A was offering such a good deal, why wouldn’t they seek the highest bidder on the open market, why are they so incentivized to give you a deal? Because the open market will scrutinize a seller. There is risk that the market does not agree with the Sellers pricing, and the market is going to know the same or more about buying and selling of real estate than the Seller. The playing field is now, at best, even, or even worst for the Seller, more experienced purchasers can exploit their superior knowledge for a deal.

The idea is that the open market bolstered with buyer and seller representation will bridge the gap of experience and knowledge between both parties so a fair transaction can take place through well documented, contractualized, legally protected process.

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