Comments on: Commission lawsuit settlement could reshape real estate landscape … or not

By: Bruce Brown

Bruce Brown — Wed, 03 Apr 2024 14:34:47 +0000

In reply to Bruce.

I can’t say I know it for sure at this stage, but banks have every reason not to disincentivize home buying. They will not be funding any more commissions than they are now – they will simply be itemized and transparent.

RECO bulletin 6.2 (Remuneration Clause) includes the following statement:

RECO consulted with financial institutions regarding the use of a remuneration clause in an agreement of purchase and sale, noting that this type of clause is already in use in Alberta. The financial institutions did not see any distinction between the use of a remuneration clause in an agreement of purchase
and sale and the use of other agreements that obligate the seller to pay the buyer’s brokerage fees. The remuneration clause is not a “cash back” clause.

in my opinion, a remuneration clause is a temporary workaround. What needs to be created and will become standard IMO is a statement / ledger / direction produced by the Buyer’s lawyer to be transmitted to the lender who then transfers the mortgage funds. The statement will include: CMHC fees, mortgage principal, buyer’s brokerage commission/fee.

By: Barbara Grodaes

Barbara Grodaes — Wed, 03 Apr 2024 14:22:58 +0000

In reply to Bruce. Do you know this for sure? (“ As long as buyer’s broker’s commissions can be included in mortgaged funds (and Canadian lenders have already expressed an understanding this will be necessary and acceptable)” - Will the purchase contract change to reflect this? Where do we get more information about this?

By: Bruce

Bruce — Wed, 03 Apr 2024 12:45:25 +0000

It’s going to be a lot easier for a seller to sign up for a 2.5% commission than a 4.5% commission where 2.5% is paid to the buyer’s broker. Commissions may well increase as a result of this change. As long as buyer’s broker’s commissions can be included in mortgaged funds (and Canadian lenders have already expressed an understanding this will be necessary and acceptable), it won’t take too long for buyers to get used to the idea they can agree to their broker’s fee up front and not have to worry about a fee offered by the seller being higher or lower than the buyer has contracted with their broker.

Brokers who add outstanding value won’t work for less than 2% to 3% because it’s just too much work, cost, and responsibility to accept any less. Total fees on transactions are unlikely to change much, and in some cases will be higher once fees are decoupled from home prices and each party determines the fee for their side of the transaction.