So, you’ve signed up for Zero Value Realty, now what?

You’ve just signed up for ZVR, now you’re ready to start searching for a property, but what do you do now?  The job of searching for properties and deciding what you think they are worth is up to you, ZVR as a system is based on clients being self-motivated.  The process will go as fast or as slowly as you want, based on how aggressively you search, make and submit offers, and how you price those offers.  Whether you are more afraid of not getting something or of paying too much for something is up to you.

ZVR made me retain a lawyer, but how do I know when I should ask him something?

This is a matter of understanding what it is you are doing, and knowing that there are things you don’t know.  A good example is if you make an offer, and the other side makes you a counter-offer, and in their counter they change the price, but they also remove some of the clauses included in your offer, crossing them out.  Unless you are confident that 1) you know exactly what those clauses do, 2) you know what effect, both in terms of what is now permitted and what is no longer required, removing those clauses will have and 3) you are willing to accept those risks, should you be willing to accept the amendment.  You should only proceed without lawyer input if you are confident that you know all three of those things.  Remember: you are making a contract for hundreds of thousands, if not millions, of dollars.  It is essential that you do so in full knowledge of the risks.

What sort of advice can I expect from the lawyer?

Lawyers can only give you legal advice, that means advice on the legal implications of documents or actions.  They cannot give business advice, this is prohibited by the Rules of Professional Conduct for Ontario lawyers.  This means if you ask a lawyer about including a particular clause in a contract, she could tell you that including it protects you from a potentially expensive problem, but she could not tell you how much you should change the amount of your offer based on whether or not that clause is included.

Remember, there are two sorts of concerns with submitting offers: legal and commercial.  Legal concerns or risks are those contained within the contract.  It refers to what can or cannot happen based on the terms of the contract, and who is responsible under the contract should a particular thing turn out to be true.  For example, a clause in a contract stating that “The Seller warrants that the furnace was installed new in 2022.” means that should the furnace turn out to be older than that, the Seller has breached the agreement, and you, as Buyer, can claim compensation.  Not including a term like that means if the furnace is new or old you have no claim for compensation, because the Seller has not made a contractual representation (statement that something is true).  The commercial risk is whether or not an offer will be accepted based on its contents.  You could have a contract full of conditions and representations to protect you, so it guards your legal risks very well, but if no Seller will ever accept it because of those terms, then the contract does not serve your intention of buying a property.  You will need to judge when certain risks are acceptable, so that you do not need contractual terms to protect you.  Taking the earlier furnace example, if the whole house was built new in 2021, you know the furnace will not likely be older than that, so putting in conditions about it specifically is probably unnecessary. 

The other angle from which to view legal and commercial risks comes from contemplating the value to you of taking on a particular risk.  For example, let’s say there is a property you know may have a particular flaw, a damaged roof, let’s say.  You could put a term in the contract making the Seller state that the roof is undamaged, and if you are only interested in having a house with undamaged roof, this is what you should do.  On the other hand, you may be willing to accept the possibility of a damaged roof, but are not willing to offer the value of a house with an undamaged roof for a house which may be damaged.  This will mean you can consider two offers: one for the full price with a guarantee from the Seller that nothing is damaged, and one without that guarantee, but with the price reduced by an estimate of what it will cost to fix what problems you think may be present.  Generally speaking, more conditions means a higher offer price, because you can be more certain of what you are buying, and few to no conditions means a lower price, because of uncertainty.  This process is not easy, because it involves trying to reduce all the different things about a complex purchase, size, age, location, bedrooms, bathrooms, garage spaces, renovations, wear, landscaping, etc., into a single number.  A lawyer can help guide you through what choices you are making, and point out what risks you are accepting, but it will always be up to you to determine the price, both for property, and for risk.  Ultimately, what conditions you include, and what price you offer, is a matter for what risks you feel like taking, including the risk that the Seller will not accept.

The Wild Card: Opposing Realtors

The one thing which is inevitably virtually impossible to predict are the actions of Realtors on the other side of transactions.  Realtors are not formally trained in law, and across the profession the most charitable way to describe their knowledge of law and contract is ‘inconsistent.’  Further, the method Realtors use to sell properties, with all the offers being submitted and then presented together at the same time, is not conducive to negotiating out terms.  This is because Realtors only get paid when deals are agreed, which means Realtors want to put offers before a Seller, and have a Seller just pick one to accept, as it sits.  Negotiation back and forth takes work, and raises the possibility that an agreement won’t be reached.  Realtors don’t want to risk losing their commission by going back to any one of those who made offers and saying they’d like more, or a condition removed, or something.  They’d rather have their client just accept something and be done with it.

This means that you can be fully certain that your offer is exactly what you want to make, and it can even be the best offer, but because it contains a term the Realtor doesn’t like for his own reasons, or doesn’t understand (this happens a lot), and he tells his client not to accept it because of that.  This is a risk against which both your lawyer and the ZVR staff more broadly will not be able to guard.