Remorse

Enough Millennial-bashing, already. Let’s do something nobler. Like trashing realtors.

Over the past few years this pathetic blog has warned you (repeatedly) against signing anyone’s BRA. The Buyers Representation Agreement may make perfect sense from an agent’s or broker’s point of view, but it can come to bite buyers in the rear.

In case you just became sentient, the BRA is a document real estate boards have been pushing for years in order to obligate buyers who are shopping the market. The clauses are draconian and rarely explained. No wonder. If most people understood what was being pushed in front of them, they’d freeze.

This thing ties you into one agent, which means if you decide to buy a house with another realtor, you may owe commission to the first guy who did nothing to assist you. It’s common practice for an agent insisting on a BRA to make it for a long period of time (I’ve often seen six months, sometimes a year) and for a broad geographic area (like an entire city). Other agents just refuse to show a home to you unless the document is executed.

So the first thing is to refuse. If that doesn’t work, agree to aBRA only for a specific house. Write that address in, and make the document effective for two days. The agent will hate you, but c’est la vie.

Now, here’s an instructive tale.

Obviously Marcello and Anita are among the handful of Canadians not addicted to this site. They listed their north-GTA house months ago and made an offer with agent Vince to buy another one for $1.3 million, after he asked for a BRA. Then the market tanked. M&A panicked since they’d bought firm without selling their existing place. After weeks of debate, they walked. The risk, they felt, was just too great.

So they lost their deposit – as anticipated. They now face a potential lawsuit from the jilted sellers who can go after the difference between $1.3 million and the ultimate selling price, plus costs and damages. And, to their profound shock, they owe Vince almost $40,000 in commission on a purchase that never materialized.

Huh, you say? Don’t vendors pay commissions? Why would they be responsible?

Yes, because of the BRA. One of the nasties in there clearly states that in the event a buyer inks a deal using the agent, then fails to complete that transaction, “due to the buyer’s default or neglect,” they must pay. Here’s what realtor Vince told a reporter: “…they refused to close, stringing sellers, agents, mortgage brokers and lawyers along the way… This is a case of a client taking advantage of the current situation of the housing market due to buyer’s remorse.”

If this goes to court (a bad idea), Marcello and Anita can add twenty grand in fees to a litigation lawyer to the pile they’ll be ordered to pay Vince. It’ll be good practice for being screwed-over by the lawyers for the sellers they walked out on. They may feel wronged and victimized, but those are the downfalls of ignorance and house lust.

So here is the realtor-bashing part: if Vince failed to explain the document clearly, to spell out the gravity of its provisions when he presented it to his clients, he was negligent. Moreover, when the buyers were considering abandoning their purchase, the commission grab should have been spelled out as a key consideration. Given all the cash M&A will be piddling away, it might have made sense to close, rent out one of both properties, and weather the equity storm until markets heal. At least then they’d have assets, not merely regret.

How does this compare with the financial business – where clients rarely make million-dollar decisions in less time than they spend buying underwear? Simple. An advisor failing to disclose risk, making an unsuitable recommendation, or guiding clients into a $40,000 loss without providing any tangible benefit, would be covered in peanut butter, naked, and thrown into a pen of hungry weasels. With fleas.

Never sign a BRA. If you do, make it for a single address. Make it short. Strike out offending clauses. And if an agent refuses to represent you as a result, find another. There are 120,000 of them in the nation and 45,000 in the GTA alone, where Marcella and Anita now contemplate their miserable future.

Imagine. If only they’d come here, they would have found salvation. For blessed even are the greater fools.

Special

Is she everyman’s dream? Barely 30, badger-aggressive, six-figures, killing it in the boy’s club as an equities trader, based in Vancouver. “So,” she barks into her headset between clicks, “here’s the deal.” I wait in abject anticipation. “I wanna retire, like those other people you did it for. Eight years.”

Turns out that would make less than her forty. She fantasizes following in the footsteps of my two egomaniac, insufferable clients who achieved millionaire status by thirty, told their bank overlords to shove it, and set off to consume the world.

What would you do when you retire, I asked?

“Travel. Hang out. You know.” And you’d be surprised how many times I hear this from people of the same age. It seems the notion of ‘career’ has shrunk from something over 30 years to something closer to a decade or a dozen. Hedonistic, entitled, special. Working for decades is so analog. So Boomer.

Hungry girl has assets of $110,000 and no debt. Not bad compared to peers. But not enough to turn into a lifetime income fund in eight years. Not even close. Besides, it’s all in high-interest savings accounts and GICs. Turns out the equity tosser doesn’t trust stocks. Interesting.

Generalizations usually suck, and say more about you than them, but it seems some common themes are at play. This was emphasized by the moister-wrinklie slugfest in yesterday’s comments section. The kids are uber-educated, insanely risk-averse, materialistic, disloyal to employers, financially illiterate, and know everything. They may be savers, but not investors. They’re employees, not entrepreneurs. Like most young, they’re lefties. A key part of social justice is taxing the crap out of old people with assets. That’s only fair. They’ll die, anyway.

Boomers aren’t used to the political pendulum swinging away from them. For their entire lives they’ve been in the majority, moving markets with their wants and desires, living for the most part in the expansion and inflation their sheer numbers created. But now the moisters outnumber them, more so daily. The son of the father is prime minister. Wealth and assets are under attack, with taxes rising. It’s all too much.

More conflict lies ahead. The kids will push for equal treatment of all dollars – whether earned as an employee (like them), a small business guy, monied investor or old retired divvy-collecting dude. Look for T2 to play to the crowd in his second term with an increase in the capital gains inclusion rate, a potential change to the tax treatment of dividends and even start contemplating a wealth tax. Maybe’s we’ll even end up like Norway – a moister fav – where you can go online and punch up anyone’s tax return.

Well, the solution for all of this – unrealistic expectations of retirement, wealth envy, financial ignorance – is for everyone to invest money. That way even the screwiest Mill can see another path forward, one of their own design with unlimited potential for success (or failure). Start with the TFSA. When that’s full split money between an RRSP (to shift tax into other years) and a non-registered portfolio (to benefit from capital gains and dividends). Stick with it, max the tax-free account with pre-authorized debits from your bank account and never, ever listen to [email protected], eschewing costly mutual funds and brain-dead GICs.

Have a balanced portfolio, with 40% in safe stuff and 60% more growth-oriented. Since rates are rising, keep the bond exposure slim (they pay nothing but reduce volatility) but have lots of rate-reset preferreds which swell along with bond yields. Carefully weight Canadian, US and international assets, taking into consideration that we’re currently on fire, Trump’s a time bomb, the US is expanding, Europe’s in recovery and nobody should bet against China. Never hold individual stocks (unless you have seven figures to invest and can achieve diversification – which requires about 60 positions).

If you have a little money, hold three or four ETFs. If you have a lot, then 17 should be about right. And keep a small cash position, since that’s a defensive asset as well as ammo if an opportunity arises.

So, 2% cash in a HISA, 20% in a mixture of government, corporate, provincial and high-yield bonds plus 18% in preferreds make up the safer stuff. Put 5% in REITs, then hold 16% in Canadian equities, an equal amount in US markets and 23% in internationals, for the growth portion. Rebalance once a year. Put higher-taxed stuff (bonds) in a tax shelter. Reserve the TFSA for fast growers (like emerging markets). Enjoy a 50% tax break on capital gains in your non-registered. And don’t forget about income-splitting with your squeeze, which can be done through a spousal plan or maybe a joint account.

Or, you can go to a pathetic blog, whine about people with more than you and plan to retire shortly after puberty. Good luck.