Buying a House Without a Realtor in Ontario: Risks and Steps

A private sale, sometimes called for sale by owner, can feel simpler and cheaper. It can also leave you with gaps that no one is responsible for filling, because nobody is guiding both sides through the usual steps.

This article explains the main risks and the steps you would need to cover yourself. It describes how things generally work in Ontario, so have a lawyer review the paperwork before you sign anything.

What changes when there is no agent

In a typical sale, a brokerage prepares the offer, handles the deposit and helps with deadlines. In a private sale, those jobs fall on you, the seller or your lawyers. Nobody should assume someone else is checking the details.

The most important decision is to involve a lawyer before you sign, not after. Once an agreement is firm, changing it is hard.

The offer, conditions and deposit

When an offer is received, the seller may accept it, reject it, make a counter-offer, or ask the buyer to revise it. With competing offers, the seller may negotiate with one buyer while setting others aside, and does not have to take the highest price.

Conditions, such as a satisfactory home inspection or financing, must be waived or performed by the agreed time before the deal becomes binding, and must be used in good faith. Depending on how a condition is worded, if it is not met the buyer may terminate or the contract may end automatically, with the deposit returned. Once all conditions are waived, the agreement is firm and binding.

Be careful with the deposit. Paying it late or withholding it can itself breach the agreement. In a brokerage sale, the deposit is normally held in a real estate statutory trust account and can be released only with a mutual consent or release signed by all parties, or under a court order. In a private sale, how the deposit is held and released depends on your agreement and your situation, so settle it in writing and confirm the arrangement with a lawyer.

If the seller has already accepted a conditional offer, the seller may still consider other offers, using an escape clause that gives the first buyer a set time, for example 48 hours, to waive or satisfy its conditions. If the first buyer does so within the deadline, the seller must sell to that buyer on the original terms. A backup offer should be conditional on the first deal ending.

Checking the property yourself

With no agent to ask questions, your own checking matters more. Build the time into your conditions.

• Ask whether proper permits were obtained for any renovations. A building permit is required before most construction, additions, renovations and changes of use, and the municipal building department can confirm what permits exist.
• Arrange a home inspection and include it as a condition.
• Have your lawyer search title and review the statement of adjustments.
• Ask whether tenants live in the home, and see below.

If the home is tenanted, ask early how vacant possession would work. A landlord who has signed an agreement of purchase and sale for a residential complex of no more than 3 units, or a condominium unit, may give an N12 notice if the purchaser in good faith needs the unit for themselves, their spouse, a child or parent of either, or a caregiver. The termination date must be at least 60 days after the notice, and the selling landlord must pay one month's rent or offer an acceptable unit by the termination date. Tenants in larger buildings cannot be ended this way. If the purchaser does not move in, the former tenant can apply to the Landlord and Tenant Board within one year of moving out.

Taxes and costs still apply

Skipping an agent does not remove land transfer tax. It is charged on the value of the consideration, which can include an assumed mortgage and any benefit conferred, not just the stated price. This matters if you buy from a relative below market value. The seller may also face deemed proceeds at fair market value for income tax purposes.

Budget for legal fees, inspection and adjustments as well. Any saving on commission should be weighed against these costs and the risk of a mistake.

What to do next

• Speak to a lawyer before making or signing an offer.
• Get mortgage pre-approval and understand which conditions you need.
• Agree in writing who holds the deposit and how it is released.
• Arrange an inspection and confirm permits with the municipal building department.
• Ask whether any tenants live in the home and how vacant possession will work.
• Keep copies of every document and message.

Frequently asked questions