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Commercial real estate sustainable?
Commercial real estate
sustainable? Market Watch: Homeowners are more
financially fit Clauses should clarify terms of agreement
between buyer and seller Good clause dos and don’ts Not all clauses/conditions are appropriate for the APS. The purpose of the agreement is to establish the terms of the agreement between buyer and seller and to create a binding agreement. As a general rule, clauses that are inserted solely for the benefit of the brokerage should not be included in the agreement. Avoid clauses:
OREA was recently contacted by a member who has become increasingly dismayed and alarmed by many of the clauses that are now commonly included in agreements. When a clause is inserted in an offer, it becomes an essential part of the negotiations. If one of the parties objects to the clause, it can be removed and this can result in a counter-offer. This can be a problem, particularly in a multiple offer situation. It would be unfortunate if a clause inserted purely for the benefit of the brokerage makes the difference in whether or not a client’s offer is accepted. The Real Estate Council of Ontario recognizes the importance of this issue. In a discipline decision concerning the conduct of the listing brokerage and salesperson (http://www.reco.on.ca/publicdocs/20040128_5940.pdf), RECO stated: “The Agreement of Purchase and Sale is not an appropriate document for commission changes or issues between the seller and listing brokerage.” There is also a strong legal argument that such clauses have no force. The brokerage is not party to the agreement and it can be argued the buyer and seller are not receiving any consideration for agreeing to clauses that benefit the brokerage. Deal with the deal The basic rule is: if it does not clarify the terms of the agreement between buyer and seller, the clause should probably not be included in the agreement. Even the condition to verify the piano can be moved into the property is a valid concern for the buyer and may be appropriate for the offer, but a clause authorizing the brokerage to advertise the sale – not likely! “My REALTOR® had all the
answers” With less focus on humour and a more straightforward telling of the REALTOR® value message, the commercial’s theme is “My REALTOR® had all the answers.” The ad emphasizes the knowledge and expertise of the REALTOR®, who can give advice or suggestions about anything from good neighbourhoods for your kids to tips to avoid costly mistakes. The new ad began airing the last week of August, and features a series of individuals with testimonials of their positive real estate buying or selling experience. The 30-second commercial has all of the individuals, real estate clients and customers, reading the same script, with one face transitioning into the next in a unique way. The commercial, called Faces, is sponsored by CREA and OREA, and is shown across Canada, with supplementary distribution in Ontario. “My REALTOR® had all the answers” resonated well with consumers and REALTORS® alike in focus groups.> “It focuses on the essence of who we are as REALTORS® – promoting and protecting our clients’ best interests,” said Dorothy Mason, 2010 OREA President. The goal is for the new commercial to build on the success that the REALTOR® value campaign has had so far, and to keep a positive message out there about REALTORS® and organized real estate. The original campaign started in the fall of 2006. We have a winning message The TV commercial called “Never-ending negotiations” which began airing in September 2009, picked up a bronze award in the single service category of the 2010 Marketing Awards, sponsored by Marketing Magazine. The ad featured a key value that REALTORS® bring to the table – negotiating skills. We see the same two couples, initially in their 20s, sitting across from one another at a table as they attempt to negotiate a private sale. The couples can’t seem to agree on a price, and as a result the process drags on to the point where we see the couples age to their 40s and then their 60s and in the final frame, probably in their 80s, as the husband in one of the couples is no longer conscious. The voice over advises: “REALTORS® know things you might not…like how to close the deal.” The commercial drives consumers to the website www.howrealtorshelp.ca. The 2010 Marketing Awards took place June 9, 2010, with all winners receiving a Marketing ‘M’ trophy. ON THE MARKETS: Lending rate hike won’t
greatly impact real estate market In its announcement the B of C said, “The global economic recovery is proceeding but is not yet self-sustaining. Greater emphasis on balance sheet repair by households, banks, and governments in a number of advanced economies is expected to temper the pace of global growth relative to the Bank's outlook in its April Monetary Policy Report (MPR).” The Bank’s press release cited economic factors including inflation, employment growth and global uncertainties as reasons for the rate increase. The release also stated that the decision leaves considerable monetary stimulus in place to achieve the bank’s two per cent inflation target and that any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments. Here’s what some of the experts had to say about the rate hike: Mortgage broker David O’Gorman says, “While the prime rate has gone up, longer fixed term rates have come down 10 to 20 basis points with mortgage lenders. This is good news and suggests a B of C directed change towards more stability in the residential real estate market. The rate change itself should have little effect on the market. If we have too many more in succession, however, we should be very concerned.” O’Gorman also cautions, “The US – our neighbour and largest trading partner – is still in extreme circumstances. The overall economy and specifically their real estate markets have not settled down. While Canada's economic activity has been the envy of the Western world, expect it to slow down a bit. Basically, if everyone but you in your office has the flu, no matter what precautions you take, chances are you will catch it soon.” Barry Lebow, broker, appraiser and educator says no one should be surprised by rising interest rates since the government and economists keep saying rates are going up. He predicts rates will hit 7 percent within the next year. “We have to remember that we functioned for years with rates between 10 and 12 percent. But interest rates have been artificially low for a long time now.” Lebow says he doesn’t see higher interest rates hurting the real estate market. “In fact when the market shifts, it will be the better salespeople who will benefit. The competition will change because many part timers will leave the arena making room for the professionals to compete on what they do best. The public will start demanding more of REALTORS® and the ones who can provide the better service will do well.” In a report by TD Economics, senior economist Pascal Gauthier states: “While the Bank of Canada raised its overnight rate by a quarter-point on July 20, typical five-year fixed rates stabilized in early May and have actually decreased by about a quarter-point since then. It comes as no surprise that the housing market continued cooling from the record levels of activity established last year. After improving markedly in 2008, home affordability eroded significantly in 2009. With the typical lag, this is naturally slowing the pace of sales. Nonetheless, the housing market slowdown should be cushioned by an improving employment and income picture. The level of interest rates remains quite supportive of sales activity, and rising interest rates would only occur against a stronger overall economic backdrop.” Canada Mortgage and Housing Corporation (CMHC ) Ontario Regional Economist Ted Tsiakopoulos, says, “For those households committing to a variable rate mortgage, the cost of borrowing has increased in light of the Bank of Canada hike in the overnight rate. However, most prospective buyers in recent months and over time have preferred long term mortgage rates. With uncertainty surrounding the global economy coming back to the forefront, long term interest rates have been dropping recently. On net, the interest and mortgage rate story has been a positive development for the housing market in the last couple of months. Also, a number of prospective buyers have brought their purchases forward into the early part of 2010 to avoid higher mortgage carrying costs and new policy changes. As a result, less first time buyer demand has dampened sales in recent months. This story will likely continue until year end at which point improved affordability will boost sales and enable prices to stabilize through the course of 2011.” Finally, mortgage broker and author, Peter Kinch said in a recent press release. "Often consumers are confused when they hear about a rate hike. They think that interest rates are going to sky rocket, making housing unaffordable. The rate increase is a warranted response to our strong economy, and we will see the prime rate rise as a result. But Kinch cautions consumers not to confuse the prime rate with long-term fixed rates. "The last time rates moved, we actually saw the long-term rates fall the day after the announcement." RECO Decision: Stolen identity, misrepresentation
punished The Case Registrant A was registered with Brokerage A but was about to transfer her registration to Brokerage B when she was contacted by Consumer A1 and A2 who were looking for a residential property to lease. Registrant A arranged for them to view a property for lease and they decided to make an offer. Consumer A1 and A2 met with Registrant A and signed a lease application and an offer to lease. Also, at Registrant A’s direction, they acknowledged a Confirmation of Cooperation and Representation form. The offer and Confirmation of Cooperation and Representation indicated that Brokerage B was the cooperating brokerage representing Consumer A1 and Consumer A2. However, Registrant A had not yet transferred her registration to Brokerage B. The salesperson on behalf of the cooperating brokerage was shown on the documents to be Registrant B, from Brokerage B. However, Consumer A1 and Consumer A2 had no dealings with Registrant B when they viewed the property or made the offer to lease. Registrant A never provided Consumer A1 and A2 with a written representation agreement for their signatures in respect of her services. As part of the lease application and for the purpose of making the offer, Consumer A1and A2 provided Registrant A with documents and information about their identity and financial situation, including credit history and employment income. The offer to lease was not accepted and Consumer A1 and A2 had no further dealings with Registrant A. A short time later, Registrant A applied for a loan of $200. To support the loan application, she provided the lender a statement of employment earnings and deductions purporting to contain information about herself. In fact, the statement contained information about Consumer A1. Registrant A falsified Consumer A1’s statement of earnings and deductions by inserting her own name, address and bank account number on the document. Although she received the $200 loan from the lender, the company later contacted Consumer A1 and confirmed that the statement provided by Registrant A was false. The Findings
Registrant A therefore breached the following sections of the REBBA Code of Ethics: Section 3 – Fairness, Honesty etc. – A registrant shall treat every person the registrant deals with in the course of a trade in real estate fairly, honestly and with integrity. Section 4 – Best Interests – A registrant shall promote and protect the best interests of the registrant’s clients. Section 5 – Conscientious and Competent Service – A registrant shall provide conscientious service to the registrant’s clients and customers and shall demonstrate reasonable knowledge, skill, judgment and competence in providing those services. Section 38 – Error, Misrepresentation , Fraud – A registrant shall use the registrant’s best efforts to prevent error, misrepresentation, fraud or any unethical practice in respect of a trade in real estate. Section 2(1) Brokers and Salespersons – A broker or salesperson shall not do or omit to do anything that causes the brokerage that employs the broker or salesperson to contravene this regulation, i.e. Section 14. Buyer Representation Agreements - If a brokerage enters into a buyer representation agreement with a buyer and the agreement is not in writing, the brokerage shall, at the earliest practicable opportunity, reduce the agreement to writing, have it signed on behalf of the brokerage and submit it to the customer for signature. Penalties and Costs LEGAL BEAT: How to save your client’s money Question to the Ontario Ministry: Ministry response:
MERV'S COMMENTS In the second example you pay for nine additional deed registrations - and may have to pay the seller's lawyer additional fees for preparing nine more deeds. Assume that is $75 $100 x 9 = $1,575. What was the net saving for your client? Just be certain that you follow the Ministry process noted above and confirm it with the buyer's lawyer before you finish drafting the APS. Real Estate as a Professional Career is now
offered in class OREA offers classroom sessions for this course because:
For more information, go to www.orea.com and click on Become a Real Estate Professional, Real Estate as a Professional Career, or call the OREA Real Estate College at 416-391-6732 or 1-866-411-6732.
More information about the new one credit, online CE course can be found on www.orea.com. Be the
REALTOR®every client wants
More information can be found at www.orea.com. |
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