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Edge News Ontario home starts down in April
Ontario home starts down in
April Market Watch: HST squeezes middle-class
homebuyers Do your homework ahead of time to protect
the deal In an attempt to protect their commission, some members have resorted to creating and adding new clauses to the Agreement of Purchase Sale (APS), which may cause more concerns, especially since the brokerages are not parties to the APS. The APS is not the place to deal with changes to commission or method of payment. In fact, Interpretation 20.1 of Article 20 - RESPECTING CONTRACTUAL RELATIONSHIPS of the REALTOR® Code of Ethics and Standards of Business Practice states: “A REALTOR®, when negotiating on behalf of a Buyer, shall not use the terms of an offer to Purchase to modify the Listing broker's offer of Compensation to co-operating brokers, nor make the submission of an offer to Purchase contingent on the Listing broker's agreement to modify the offer of Compensation.” As well, the MLS® Rules and Regulations of most Ontario real estate boards contain a similar provision. The best way to ensure there is enough equity in the home to cover your commission is to verify financial details ahead of time. When you meet your sellers, go over their financial position and ask some basic questions and confirm their answers. Here are a few points to raise:
Buyer representatives may also want to insert a clause in the offer to help deal with any shortfall. Here is a typical one: “The Seller hereby acknowledges that the real property is subject to registered encumbrances that may, given the Seller’s obligation to pay commissions and other related closing costs, exceed the available proceeds of sale from this transaction. This Offer shall, therefore, be conditional upon the Seller obtaining the written approval of all Chargees/Mortgagees and other registered encumbrancers as to the final acceptance of this Offer and their agreement to discharge their encumbrances without payment in the aggregate of more than the available proceeds from this transaction. Unless the Seller gives notice in writing delivered to the Buyer or to the Buyer’s address as hereinafter indicated not later than ______ p.m. on the _______ day of ___________, 20____, that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. This condition is included for the benefit of the Seller and may be waived at the Seller’s sole option by notice in writing to the Buyer within the time period stated herein.”(OREA Standard Clause- Mort-8 Condition – Over-leveraged Property. In today’s market, overleveraged properties are all too common. Knowledge is your best defence to deal with a shortfall situation before it arises. OREA has several standard forms and clauses pertaining to overleveraged properties as well as power of sale properties. You can also learn about dealing with overleveraged properties in OREA’s continuing education seminar called Power of Sale. For more information visit www.orea.com. Power of sale: What you should
know The power of sale process is subject to strict requirements and time limits that have to be adhered to in order for it to be legally accomplished. Any lapse in the process or apparent lack of good faith in carrying out a power of sale could result in exposure of liability to the mortgagee. A mortgagee will typically list a property under power of sale with a local brokerage that is skilled in selling that kind of property. However, the mortgagor may also have listed the property with another brokerage. The mortgagor, as the registered owner, has the authority to list the property for sale. The mortgagee, selling under power of sale, gains the authority either from the mortgage document (contractual power of sale) or by the provisions of the Mortgages Act (statutory power of sale). A power of sale listing will usually contain a clause specifying that in the event the transaction does not close, commission will not be paid. When dealing directly with the mortgagor, the brokerage may not get paid and may be forced to sue for the commission if there are insufficient funds available after satisfying all debts. Before a brokerage accepts a power of sale listing, it’s important to determine that the mortgagee is in a position to list the property. This is not usually a problem when dealing with financial organizations, but may be a concern when dealing with private lenders. In order to comply with the obligations imposed on a mortgagee to act in good faith and ensure that reasonable precautions are taken to obtain the true market value of the property, a brokerage should follow some basic guidelines when listing a power of sale property:
OREA forms and clauses OREA has developed standard Form #106, Seller Selling Under Power of Sale, for use in conjunction with Form #100, the Agreement of Purchase and Sale to confirm that the seller is entitled to sell the property, that a default of the particular mortgage has occurred and that the mortgagor has a right to redeem, and the seller is selling the property “as is” and without any guarantee as to the inclusion of any chattels or fixtures. OREA standard clauses pertaining to power of sale transactions include MORT – 8 – Condition, Overleveraged Property, and MORT/POS – 1- Power of Sale (General Provision). OREA also offers a continuing education course called, Power of Sale that will take you through the power of sale process, the rights and obligations of the mortgagee and the mortgagor, and a registrant’s role in a power of sale transaction. The two-credit course also teaches how to protect a buyer when purchasing a power of sale property. For more information, visit www.orea.com. Members can also review several power of sale scenario questions, asked and answered, on the Legal Forum under Topic – Mortgages and Subtopic – Selling/Buying Power of Sale. WIRED OFFICE: Keep your website
simple For starters, your website should be “usable”. What is the main purpose of your website? Who is your audience? How quickly can they find the information they need? Is it easy to find information on your site? Is the language simple enough for everyone to understand? Is the font size large enough to read? Is the layout clean and simple? A consistent layout throughout your site makes it easier for your users to navigate your site. It may seem really cool to load up your site with music, animations and graphics, but unless these things contribute directly to your content, they merely act as distractions. They also affect the amount of time it takes for your website to load. If your users have to wait, they’ll go elsewhere. Internet users are an impatient lot. General appearance If you are going to use colour for your backgrounds, use a text colour that contrasts well. Black or dark blue text on white background, while perhaps bland in appearance, is still easiest to read. One fact to keep in mind when designing your site is that studies suggest about eight to 12 per cent of men and about one-half of one per cent of women experience some type of colour blindness, and have difficulty distinguishing some colours, most often reds and greens. Go ahead and use colour for things like links, but be sure to have them underlined as an additional way to distinguish them from the rest of your text. Non-serif fonts such as Arial or Verdana are easiest to read on screen. For most of your content, use sentence case type, which means the first letter of the sentence is capitalized, with the rest being lower case, unless requiring capitalization for a specific reason such as proper nouns or acronyms. If you choose to use uppercase, use it sparingly and for emphasis. Text that is left-justified and ragged-right is easiest to read. Use low resolution images. They’ll load faster and will not detract from the appearance on the Web. Provide text descriptions in the form of “alt tags” for images so that screen readers (software programs that read the text out loud to users - often visually impaired) can interpret the text. With these in place, you’ll be able to see the text description when you hold your cursor over the image, and screen readers will be able to read these out loud. Content If you’re looking for content for your website, OREA provides free articles which you can use on your website or in newsletters. These articles can be found in the Members Only section of the OREA website. Scroll down to Sales Tools in the side menu, and then select Articles for Your Use. You can select the text and then copy and paste it into your preferred method of communication. Encourage clients and potential clients to contact you. Provide your business contact information on your website, such as a business e-mail address, office address, and office phone number. For safety reasons, do not post your home address, phone number, etc. Keep in mind that anyone who has Internet access can see your contact information. Also keep this in mind if listing the details of a client’s home on the internet. The Internet is dynamic – change is constant. Be sure to update your website content on a regular basis so your website visitors will have something new to read on return visits. A website can be the equivalent of slapping your business card on the Internet (kind of like gluing it on your screen), or it can be a place where people will return time and again to find information because it is well presented and easy to follow. Make your site one to which people will want to return. RECO decision: Overly inflated price leads to
penalty The Case In September 2006, RECO received a complaint from a Company that held a mortgage for a property located at 1-A Street. The printout of the MLS® listing which was provided to obtain the mortgage in November 2005 showed that 1-A Street was listed at $229,900. When 1-A Street went into foreclosure it was determined that 1-A Street was worth less than $65,000. A review of the listing showed that 1-A Street was listed by Brokerage A with Salesperson A in November 2005 at $229,900 and the listing was set to expire on July 17, 2006. In November 2005, 1-A Street sold for $220,000. The Agreement of Purchase and Sale indicated that there were no real estate brokerages involved in the transaction as the acknowledgement and commission trust agreement sections of the Agreement of Purchase and Sale were not signed. Further the deposit was to be held by “The Vendor”. On inquiry into the transaction RECO Staff met with Broker A, the Broker of Record of Brokerage A and confirmed that 1-A Street was not sold through Brokerage A. Further, the appointment log on file showed that 1-A Street had never been shown during the time it was listed with Brokerage A. Salesperson A wrote to RECO Staff and stated that the Seller was introduced to him by a client in October 2005, and that a few days later, the Seller asked him to view the Seller’s property. When Salesperson A looked at the property, he advised the Seller that the property was worth about $100,000 dollars. A week later, the seller contacted him and offered the listing to him but the Seller insisted that the property be listed at $229,000. Salesperson A stated that because he did not have many listings at the time, he was excited to get one and therefore listed the property at the price suggested by the seller. Salesperson A also confirmed that the listing expired without any showings. The hearing proceeded by an Agreed Statement of Facts. The Findings a) listed 1-A Street at a price that he knew was overly inflated, and; b) did not do what a reasonably prudent registrant would have done to avoid allowing his services, including authorizing MLS® listings that included grossly inflated property value, to be used for improper purpose. Salesperson A thereby breached the following Rules of the RECO Code of Ethics: Rule 1(2) – Ethical Behaviour– A Member shall endeavour to protect the public from fraud, misrepresentation or unethical practice in connection with real estate transactions. Rule 10 – Misrepresentation or Falsification – A Member shall not make any statement or participate in the creation of any document or statement that the Member knows or ought to know is false or misleading. Rule 42 – Competence – A Member shall render conscientious service with the knowledge, skill, judgment and competence, in conformity with this Code of Ethics and the standards which are reasonably expected of Members. When the Member is unable to render such a service, either alone or with the aid of other Members, the Member shall decline to act. Rule 46 – Unprofessional Conduct – A Member shall not engage in an act or omission relevant to the practice of the profession that, having regard to all the circumstances, would reasonably be regarded by Members or the public as disgraceful, dishonourable or unprofessional. Penalties and costs Discipline Under REBBA 2002 Relating to this matter, see Section 4 – Best Interests LEGALBEAT: Fax cover sheet muddies
commission The listing provided for a commission of 5% of the sale price followed by this written in by hand, “or 3.5% if Anne/Gary sells. "When Gary sent it to the seller for signing, his fax coversheet said "Royal LePage, Re/Max co listing (5% selling expenses if with another REALTOR® and 3.5% in the case of Dual Agency)." Another representative from the LePage brokerage found a buyer client and a deal was made and closed. LePage represented both the seller and the buyer so therefore it was dual agency. However, it was not Anne's buyer client. LePage invoiced the seller for 5% but they refused on the basis that they only owed 3.5% according to the listing and the fax. The judge decided that the language in the listing was a shorthand reference to the brokerages and since LePage did sell, the commission was 3.5%. The fax cover sheet does not clarify that dual agency only means if sold by Anne or Gary. In any event if there is any confusion the judge would apply the contra proferentem rule of construction and apply an interpretation that benefits the party who did not prepare the contract with an ambiguous provision. It might have been different if the fax had referred to the possibility of a sale by another salesperson even if employed by LePage or Re/Max. Royal LePage Your Community Realty v Duncan Hill Homes MERV'S COMMENTS Home energy audit bill
amended Under the amended version, the seller shall provide a home energy audit report to the person making the offer to purchase before accepting that person’s offer. However, the Government has added a section allowing buyers to waive the mandatory requirement in writing. The amendment replaces the requirement for the seller to make information reports or ratings related to energy efficiency of the home available to any prospective home buyer, with a new requirement that a seller must provide to the prospective home buyer prior to an offer being accepted. While the Ministry of Energy and Infrastructure has yet to completely clarify a number of issues relating to the amendment, REALTORS® can be proud that their advocacy efforts have resulted in positive changes to Bill 150. OREA will continue to work with the Government of Ontario to further clarify the amendment and how it will impact real estate transactions. Broker viability study findings
released OREA’s Broker Viability Task Force studied the conditions under which residential brokerages operate in Ontario and explored ways of increasing the viability of the industry as a whole. The findings will help owners and managers assess their operations to find ways to make them more profitable. This is an ongoing project with OREA conducting the survey every two years in order to track benchmarks over time. Other confirmed dates include: October 1 at Peterborough Lions Community Centre, from 10:30 a.m. to 1:00 p.m. for the Northeastern board broker/managers, and October 5 at London and St. Thomas Association of REALTORS® from 11:30 a.m. to 1:45 p.m., serving the western area. For more information, contact Kris Fortomaris at 416-391-6732 or kris@orea.com. |
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