How to Optimize your Return on Canadian Real Estate

Apr 7, 2020

This week our guest blogger Michael Walsh looks at how you can optimize your return on Canadian Real Estate when exploring tax management strategies.

An Acquisition Strategy to Optimize your Return on Canadian Real Estate

Optimize your Return on Canadian Real Estate when you relocate

Thinking of seeking second citizenship in Canada. Have you considered how you will find your future home?

For international ultra high net worth families, the implementation of a Canadian strategy can be an important component in overall tax management and wealth preservation.  A critical element of any Canadian strategy is the acquisition of a Canadian residential property (whether a primary or secondary home). The question is how to execute the purchase in a way that will optimize your return on the Canadian property.

The first option is usually to contact the listing agent for a chosen property. This means relying on their advice to consummate the transaction.  Needless to say, this is not ideal. The listing agent’s obligation is with the seller to achieve the highest possible price.

When trying to optimize your return on Canadian real estate should you engage your own agent?

Alternatively a prospective buyer could engage their own agent. However this has its own complications. The issue is contract law.  All agreements for representation, whether buying or selling (whether in Toronto, Montreal, or Vancouver), are legally binding contracts between the consumer and the real estate brokerage, not the individual real estate agent.

In law, a real estate agent is simply an employee of a real estate brokerage. They sign on behalf of the brokerage.  All obligations to the buyer flow from the brokerage’s commitments. This is outlined in the buyer representation agreement (all obligations to a seller flow from the listing agreement).

Optimize your Return on Canadian Real Estate get the process rightThere is an immediate and obvious conflict of interest in any transaction where the buyer’s agent works at the same brokerage as the listing agent. In effect, the brokerage has committed to represent financial interests of two parties with diametrically opposing financial objectives.

It is impossible for the brokerage to deliver an undivided loyalty.

One of two things has to happen.  One option is that the brokerage will favour one of the principals over the other. The second possibility is that the brokerage will fail to deliver the anticipated level of service to either party.  As a buyer your negotiating position is severely compromised.  The transaction is put at risk of rescission.

The solution? How engaging an exclusive buying brokerage can help.

How is it possible to overcome the potential for such a conflict of interest? Prospective buyers may wish to engage an agent from a brokerage that works exclusively for buyers.  These brokerages do not accept sales assignments/listings.  Their clients are never faced with a situation where the brokerage has a pre-existing commitment to the home seller. Prospective buyers receive a guarantee of undivided loyalty, no matter the home in question.

There are literally thousands of real estate agents ready to assist with the search for one’s dream home.  But only an agent from an exclusive buying brokerage can guarantee unconflicted financial advice. Just as with selecting a Back-up Plan advisor, the key to success in selecting a professional to assist you in purchasing a property is aligning their financial motivation with your family’s goals.

About the author 

Michael Walsh is President of Exclusively Buyers Inc, a real estate brokerage based in Oakville, Ontario, Canada, and catering exclusively to the needs of property buyers. Reach him via email at michael.walsh@exclusivelybuyers.ca .

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