Gerald Tostowaryk

Gerald has been a licensed real estate agent for thirty years and an industry instructor for over twenty. He has served on several committees with the Realtors Association of Edmonton and on the Board of the Real Estate Institute of Canada (REIC) Edmonton chapter. He is also an ethics instructor for REIC nationally and enjoys family, various sports, and the outdoors. Check out his popular real estate podcast The Real World of Real Estate here.

realyegrealestate.ca/

The post Ethical Dilemmas: The federal investigation into CREA’s commission rule & Cooperation Policy appeared first on REM.

Another time, about fifteen years ago, I had a home for sale in Edmonton, and we experienced one of those one-in-a-hundred-year rainfall events that caused basement flooding in many area homes. In their home, a small puddle of water appeared in one corner of the basement.

Legal and ethical obligations

We all experience our share of these fun scenarios, and the tough question is always, what is the right thing to do ethically? Our legal obligations are clearer (though not always) than our ethical obligations. 

The Real Estate Institute of Canada, in its superb ethics course REIC 2600, defines ethics as “the difference between what we have a right to do (legal) and the right thing to do (ethics).”

Knowing this, what do we do? What would you do? What did I do?

The answers are both easy and difficult. Many years have passed, and my memory is fading, but let me deal with the first scenario. 

Scenario #1

The easy answer is that we cannot withhold any information that could affect a sale. I had to discuss this situation with my client, and depending upon the instructions I received, I would have to decide if I could continue to represent them. 

I have to tell you, as a young agent hungry for income, I badly wanted this to go away. 

They expressed complete surprise at the allegation and were adamant they did not have any such problem. They had horses, so the several bales of straw in their backyard did not raise any doubts in my mind though I was wondering why they had arranged it as they did (more on this later). 

My broker pointed out that this was an anonymous caller, and how did I know it wasn’t someone with an axe to grind? If that were the case, disclosing this to a buyer would have serious negative repercussions for my sellers. On the other hand, if it were true, not disclosing it would have serious repercussions for buyers.

In the end, I decided an anonymous phone call was not enough evidence to make a conclusion, I certainly was not an expert, and I had no reason not to believe my client. 

An added factor I wasn’t aware of at the time is that it was likely a buyer-beware issue because, to a knowledgeable person, the arrangement of the bales would have been a dead giveaway (I only realized this long after in a blinding flash of the obvious).

I do not recall if the buyers ever expressed any issue after the sale, so I will never know the truth, but the arrangement of the bales was consistent with the less desirable situation.

Scenario #2

In the second scenario, my clients also expressed surprise and said that in seventeen years, they had never had water issues. 

This situation was compounded by two major factors: I was related to the clients, and if this was indeed a recurring issue, it probably constituted a material latent defect, which the clients and I legally had to disclose. 

I found myself again in a no-win scenario and had to determine what to do. If the sellers were correct, disclosing this would improperly affect them negatively; if they were wrong, not disclosing would affect everyone negatively.

Like most agents, I had a lawyer I could call for a bit of free advice before deciding, which I did. I knew the clients well, and they had never once mentioned water in their basement, and we had just had a major rainstorm, so I again concluded that the most likely scenario was that this was likely due to the major flooding event. 

I chose not to disclose.

A couple buyers’ agents did ask if there had been any water problems, and we are legally required to answer all questions honestly, which I did. 

The home sold, passed inspection, and I never heard any more, so I am hopeful I made the correct decision.

I purposely chose these scenarios because sometimes non-disclosure is the correct response, but without sufficient evidence, the right thing to do is always to disclose. 

Did I do well? What would you do?

Gerald Tostowaryk

Gerald has been a licensed real estate agent for thirty years and an industry instructor for over twenty. He has served on several committees with the Realtors Association of Edmonton and on the Board of the Real Estate Institute of Canada (REIC) Edmonton chapter. He is also an ethics instructor for REIC nationally and enjoys family, various sports, and the outdoors. Check out his popular real estate podcast The Real World of Real Estate here.

realyegrealestate.ca/

The post Disclosure dilemmas: Balancing legal and moral obligations appeared first on REM.

Well, the two go hand-in-hand in this case. Professionalism and credibility can both be torn down through your marketing and your actions. Watch!

David Greenspan

David Greenspan, CEO and founder of #MindShare101 is a nationally recognized keynote speaker, trainer and coach who helps sales professionals and businesses improve their sales and marketing efforts by
bridging the gap between online and offline marketing to achieve a higher ROI on every marketing dollar spent. His direct, raw, and real approach is designed to motivate you and give you the advice you need to know.
David’s goal is to help you build MindShare, creating a top-of-mind intuitive, instinctive reaction so when people think of the product or service you offer, they think of your name first, always putting you
in the right place at the right time to take your business to the next level.

The post This is the easiest way to lose your credibility appeared first on REM.

She explained she had been married but eventually got a divorce. However, she and her ex-husband continued to have a business relationship. Everything seemed to be going okay until 2020.

Then the ex-husband decided to file a complaint with RECO against his ex-wife, listing many accusations about her work and professional ethics and of committing fraud. The complaint against her was more than 50 pages long, with documents and the complainant’s notes and remarks.

Our office had to address each complaint one by one and respond to each with proof of our client’s innocence. She had many documents and communications to prove that she didn’t breach any of RECO’s rules.

In these documents and communications, she was very detailed when informing her client about the process and what he needed to do in order to proceed with the transactions between them. She also gave clear instructions in emails to him about where to sign and initial documents related to real estate purchases and sales. She never once advised him to do something against his will or for her benefit. She also maintained her image as a professional agent. In none of those documents did she fail to meet the standards or ethics that RECO sets out for agents.

Our client didn’t commit any type of fraud. She has proven that without any doubt and is able to maintain her integrity and professionalism after this ordeal. After RECO reviewed all the documents, they determined that the allegations against our client did not reasonably establish a substantive breach of the Code of Ethics or any other relevant statute under their jurisdiction. And to our client’s satisfaction, no further action will be taken. The matter was closed.

The takeaway for all agents: keep your personal and professional lives separate and make absolutely sure you never breach the Code of Ethics that would result in a complaint against you from RECO.

You can contact me at any time for any legal questions you may have regarding this article, or any other real estate legal matters. The good news? It won’t cost you anything.

Avi Rosen

Avi Rosen has been a real estate broker for nearly 50 years. He is also a paralegal with a legal focus on the real estate industry. For legal advice on real estate issues, call Avi at (416) 818-6130 or email avi@avirosen.ca.

The post Lessons learned after ethics accusations from an ex-husband appeared first on REM.

Based on cases that I have dealt with over the years, here are some recommendations on how not to get sued by doing a proper job when buying or listing.

One that I believe should be primary: Always go into MLS, search the address of the property you are going to list or sell and go back to see all listings as far back as your system permits. Look for the major criteria – lot size is a big one – easements if noted, broker’s comments. Maybe it had UFFI, a marijuana grow-op, non-zoning compliance and more that your seller today is not disclosing.

If you are in litigation and there were conflicting previous listings, then why did you not check? If someone can find the former listings to hold against you, then you should have found them as well.

Flood plains are a major issue and have resulted in too many cases where agents have been sued for not disclosing. Depending on where you are in Canada, did you go into the website for the local conservation authority or did you look at flood plain maps? I currently have three cases where the agents did not verify these facts and told the buyers that they could build. One involves a multi-million-dollar commercial complex that can never go forward.

Termites are a big deal in some cities. You should know the termite areas. Toronto is one of the most infested of Canadian cities but there are termites in Southern Alberta and on the West Coast as well.

In Toronto, a prudent agent calls the leading termite pest control firms to see if they have a record of treating the house. Recently when I checked on a new listing of mine, I was informed that the attached house next door was treated. That led to a termite inspection of my listing and now, treatment. When acting as the buying agent in a known termite area, a simple clause that the seller to the best of their knowledge did not know about termites nor have treatments is mandatory. In two cases, the agents never inserted such a clause and guess what was found after closing? Yes, termites.

Zoning: If your client tells you it is a legal duplex or whatever, do you just take their word? No, you go physically to the municipality, you log the time you arrived, who you spoke to and what they reported to you. I can attest to this. You can phone in to some municipalities but I have found too many wrong answers from city clerks who just want to shrug us off. Take the time and physically go. In older sections of larger cities, I do not trust my clients when they say they have onsite parking. I always go to city hall to verify and while there, I ask about building permits.

The law is clear, if the information is in the public domain and anyone could have easily accessed it, then why didn’t you?

Always Google, then Bing, then Yahoo (yes, all three) every civic address that you are working on – always! Surprises do pop up, especially if that property was a crime scene or had a fire or other damage.

There are many more acts of a lack of diligence but these are the dominant cases of late. Too many of the cases that I write expert reports about would never have happened if the agents had exercised diligence, checked facts and asked the right questions. You cannot take a seller’s word for anything. Court cases (Krawchuk v Sherbak) have determined that in Canada.

Be careful, be cautious, be diligent and never be sued!

Barry Lebow

Barry Lebow, FRI, Master-ASA, ABR, SRES, is one of Canada’s most recognized real estate authorities. Now in his 54th year of professional real estate, Barry has been honoured by many real estate associations for his work in the profession. He has testified in more than 500 trials across North America. He is the founder of the Accredited Senior Agent designation program. A teacher, trainer and educator, he is an active broker at Re/Max Ultimate Realty in Toronto. Visit barrylebow.com to contact Barry.

The post Mistakes that land salespeople in litigation appeared first on REM.

Asif Khan

Asif Khan is owner of Re/Max Prime Properties in Markham, Ont. His brokerage received the Rookie of the Year Award in 2017 and in 2020 Khan received the Broker/Owner of the Year Award for Canada. He a recipient of the Re/Max Lifetime Achievement Award and member of the Re/Max Hall of Fame. He is regularly featured on The Region 105.9FM and co-hosts a weekly Real Estate talk show called On The Market. An author, speaker, mentor and hockey coach, he is an active member of the community and a supporter of the SickKids Foundation.

The post Debunking the CBC Marketplace report on agents ‘breaking the law’ appeared first on REM.

Fast forward to last week, October 2021, when I see the media has done the work for the bureau in an undercover story by CBC’s Marketplace. It’s a steering/commission piece, mostly about an unfair playing field for commission-challenged FSBOs based on licensees “steering” clients away from those FSBOs. (Don’t get me started on out-of-area mere postings.)

The news isn’t all bad as there are solutions that are quite simple. At least the one I present here is better than more scrutiny from the bureau. This may not be for everyone, but it helps me avoid the anti-competitive behaviour the bureau is against. After this news story it’s likely it will be at us again.

Let’s go back to our early career when we sought out formal sales training outside of our board or association mandatory courses. I’m talking about Floyd Wickman, Marc and Chris Leader, Dwayne Groome and others. They all taught us to have a “buyer counselling session” BEFORE we showed any properties to our suspects/prospects. That way we can “bona-fy” the (hopefully) soon-to-be client and set a level playing field, with everyone knowing all the rules.

Here in B.C. like many other jurisdictions we have Buyer Agency Exclusive Agreements. These contracts create loyalty, define our expected commission set out in dollar value (not a percentage) and the timeline we will be engaged with our client. There are two negative options to this for the consumer: they must not use the services of another licensee in the geographic area of the clients’ desired purchase,  and the buyer must pay us a commission.

In our B.C. contract, Clause 6A says: “The Buyer(s) will pay the Buyers Brokerage a fee of ________.”  This is where we, knowing what our remuneration requirements are, because we all did a business plan, fill in the dollar amount.

The trouble is many licensees that I see day to day in my instructor’s role do not use a business plan. Some see the industry a place to print money and many more cannot justify their commission or show their value and why they deserve any commission.

Under 6A, I add into the blank space these words: “$12,000 (or whatever amount fits the property and my needs) paid by the Sellers and the Listing Brokerage.”

I then move on to clause 6B, which describes how I will get paid, which is generally through the sellers and the listing brokerage as I have added in 6A.

I then discuss Clause 6C and it states this: “Monies, if any, under clause 6B (6B is about what is being offered as remuneration by the listing brokerage) shall be deducted from the amount due and payable by the Buyer under clause 6A and the Buyer shall pay any shortfall owing to the Buyer’s Brokerage.” Pretty clear here. That is, if it is explained properly or at all.

I state that any shortfall is covered by the buyers. I state where my paycheque goes –  X per cent to the brokerage, 25 per cent raw income tax costs, GST costs, money re-invested back into the business and the amount my spouse and I use to run the household expenses (car, house, insurance, vacation).

I also state what my business expenses are in a general way, making sure they understand this business is stark on health and welfare benefits. I get no EI or pension plan and my E&O deductible is $2,000 per incident, plus my brokers’ portion, another $2,000. Read your contractor agreement and see. I get no argument and people are happy to pay me.

Let’s be real here, what other industry waits 30 to 120 days or longer to get paid after the deal firms? Not many. We need to be in control of our business and contracts help us do that.

Now I have the discussion about the discount commissions that may be encountered. I tell the buyers that they are expected to make up the shortfall. I will inform them what dwellings offer in commission and let the buyer decide which ones they want to see. I also say it is rare for me to see many discount commission structures and they needn’t worry about it and we will cross that bridge if and when we come to it. This avoids me having to steer them away from what could be a perfectly good purchase for the buyers. Isn’t that what we are here to do, work for the client?

Here is the point: Let the buyer decide, not you, if they want to see properties listed with discount commissions, or if they will make up any shortfall. Be prepared to justify your income. Let them avoid those properties, not you. The consumer has every right to not see them based on their needs and ability to deal with your service contract. Know it before going into the relationship.

Yes, you may end up losing or referring the client out based on the agreement you enter into. That is the risk and your business model to defend, or not. In 25 years, I have taken one discount commission. Not a bad stat. It’s not all that common because discount brokerages where I work are a small percentage of the market. For you, it may be different and you must be creative and show better value.

There are, in some jurisdictions, the ability to negotiate a better commission with the listing brokerage and the seller in other ways, like fee agreements. I will leave it to your board or association to determine that method as they are sometimes not easy and can be controversial.

This idea is not a panacea and I am sure there are better ideas out there as to how to handle steering, but this is easy and is staring us in the face.

No wonder the Insights West poll from 2017 says only about 50 per cent of Canadians have a positive view of Realtors for being ethical, trustworthy or transparent. I have been in Professional Conduct and Ethics for over 15 years and I see it. We have a lot of work to do and with every negative media story we look worse all the time. Not one client has ever asked me if I was a Medallion Club member – they mostly do not care. That is a space occupied in between our ears, not the public’s. The client simply wants their needs met.

Takeaways: We are in a media world, cameras are everywhere. Know your role, learn agency and be a good communicator and always work within your area of expertise. Know, inside and out, all the documents your clients will be using/signing or agreeing to. Be able to summarize in an accurate fashion what these contracts mean to the client – the good, the bad and the ugly. Figure out what you need to live on for income, show your value/expenses (in a general way) and work for it. There are few if no easy shortcuts in real estate that are ethical.

We also need to be the good educators of the public, one client at a time, with every new rule or change in professional practice. It’s up to us or we get to spend a ton of cash on defending ourselves against a very unsympathetic government. Good luck and keep your stick on the ice.

Wes Jamison

Wes Jamison CRB CNE is an associate broker based in Langley, B.C.

The post Commissions: Steering our way into trouble appeared first on REM.

Actually… if you’ve attended one of my Trusted Advisor seminars or are a regular reader of these tips, you’re likely thinking, “Of course there’s harm done! Why would that person ever trust you or loan you anything again?”

There’s the rub – most people are not stupid, and they do remember obligations. Even if they’re too polite to mention them.

Consider how often this happens with clients. To gain the business, we might offer a slight extra, “We’ll also throw in such and such.” Or the customer asks for some slight change, which we assure them won’t be a problem. Later we conveniently “forget” about the little extra. We assume the customer probably forgot about it. So, the customer needs to either remind us about it or overlook the shortfall. Either way, we lose trust. No harm done?

My fellow professional speaking colleague, Peter Legg, once told me about a time he wrote a cheque to a client for a $14 sandwich. The speaking contract stipulated the client would cover sleeping room expenses. Peter had charged a sandwich to his room. He said, “When the client is paying thousands of dollars for my presentation, they likely won’t balk at a $14 charge. But when they receive the cheque and realize I paid attention, it builds trust. It’s another reason to make them want to bring you back.”

That lesson stuck with me. Clients don’t forget agreements. And if they do forget, we shouldn’t. It’s your reputation. Your brand. Your word. Never assume they’ll likely forget about it. Keep your promises, no matter what it costs you.

Jeff Mowatt

This article is based on the bestselling book Influence with Ease by customer service strategist and Hall of Fame motivational speaker Jeff Mowatt. To obtain your own copy of his book or to inquire about engaging Jeff for your team, visit www.jeffmowatt.com.

The post A common assumption that ruins reputations appeared first on REM.

I’ve read some of the REM articles and felt compelled to send this to you. I have forwarded my ideas to CREA, OREA and to the real estate brokers and business ministry, whenever there is an invite to “give us your feedback” but I never ever hear anything back. So I’m picking on you.

Lately I have read some your articles regarding our current market and of course how unfair it is to buyers. I felt even REM misses the point.

We need to do the following:

1. All offers should be disclosed to all buyers just like a real auction. 

That’s transparency and it works for everybody. Also, why can the listing agent see all offers when he has a buyer who is offering? That’s not right at all. Why does the rule even exist that terms of another offer can not be disclosed to other agents/buyers? This should be wide open. Transparency.

2. Home inspections.

This is another annoying thing. We cry that buyers are unprotected when purchasing a home in a competitive multiple-offer scenario. Why don’t we just make it a rule that all sellers must have a home inspection report made available?

What’s so hard about that? It solves a lot of problems. It’s total rubbish that home inspectors will not assign their report to another person without consent. Once a buyer pays for it, why can’t they share it? I’ve heard all the reasons when engaged with home inspectors. Final question is always, why would the report be any different?

These two simple changes would make a world of difference for both buyers and sellers. Without them, we will continue to under-list homes and reward our buyer with multiple offers with no conditions and place the buyer at great risk, which can so easily be avoided.

It’s not us, the Realtors, who are making it easy for ourselves to sell a home – it’s the lack of meaningful rules.

There are many other things we need to change. I have a list of things that would make this industry a much better and fairer place for buyers and sellers. For example, Realtors who cut commissions but take the reduced portion away from the selling agent without disclosing the consequences to their vendor. And Realtors who win a listing by overstating a realistic selling price and signing the vendor to a long-term listing, from which they can not escape even though the listing has no chance of performing at that price.

Our industry can easily change for the better for everyone. It’s not that hard. We just need sensible people making sensible rules.

Chris Staeger
Royal LePage Triland Realty
London, Ont.

REM Editorial Team

realestatemagazine.ca

The post Letters: I am a very annoyed Realtor appeared first on REM.

The plaintiff, a 26-year-old first-time home buyer, wanted a house large enough to live in with his parents and three sisters. He retained the defendant real estate agent to help him find a suitable home. The same real estate agent acted for the seller of the property.

The agent told the plaintiff that the home size was 2,100 square feet, but this information came from the seller and a 12-year-old listing of the home. The MLS listing, based on the same information, represented the size of the home to be 2,000-2,500 square feet.

However, the agent did not measure the home himself to confirm the dimensions.

The buyer visited the property twice before making an offer to purchase and observed all the rooms while accompanied by family members. During one visit the seller told the plaintiff that the property was about 2,000 square feet.

The APS was signed and shortly before the scheduled completion date, the buyer received an appraisal of the property in connection with his mortgage application. The appraisal indicated that the size of the home was only 1,450 square feet.

The buyer then decided not to complete the purchase of the home. Litigation ensued with the buyer seeking the rescission of the APS and the return of his $50,000 deposit, which was opposed by the real estate agent and the seller.

In 2019, a trial occurred. Prior to trial, the agent admitted that he was negligent in failing to verify the size of the home. However, the defendants maintained that the plaintiff was not entitled to rescission since the plaintiff had visually observed the property and had entered into the binding APS before receiving the appraisal.

The remedy of rescission may be obtained on the basis of misrepresentation where a defendant makes a false statement that is material and induces the plaintiff to enter into the contract Panzer v. Zeifman et al., 1978 CanLII 1658 (ON CA); Singh v. Trump, 2016 ONCA 747, at para. 156.

In the circumstances, the trial judge found that the buyer was entitled to rescission based on the misrepresentations of the square footage as being 2,000 (or more) square feet. The misrepresentation was “material” and notwithstanding that the buyer had conducted inspections to see the property in person, his observations did not override his expectation that the size of the property was greater than 2,000 square feet. The trial judge found that the buyer’s young age, inexperience with square footage and being a first-time home buyer were all relevant factors to take into account when considering the reasonableness of his belief.

In November 2020, the Ontario Court of Appeal dismissed the defendants’ appeal from the trial decision. One of the defendants’ arguments was based on the legal proposition that where a purchaser inspects a property, their reliance on a misrepresentation as to the size of the property will be displaced. The Court of Appeal did not accept that this was an absolute proposition of law and stated that this would depend on the particular facts and circumstances in a given case.

In the Court of Appeal’s view, there were several reasons why the defendants’ misrepresentation concerning the size of the home was material to the buyer’s decision to purchase:

• The agent made explicit statements about square footage to the buyer and had formally admitted that he was negligent in making these statements. The seller also admitted that he told the buyer that the property was about 2,000 square feet.
• The discrepancy between the negligently communicated size of the home (2,100 square feet and 2,000-2,500 square feet) and the actual size (1,450 square feet) was substantial (ranging from a 27 per cent to 42 per cent discrepancy).
• The buyer’s reliance on the representations about the size of the home was supported by the fact that he remained ready to close the purchase until the moment he discovered, through the appraisal of the property related to his mortgage application, that its actual size was only 1,450 square feet. Upon learning this information, he immediately communicated that he was not prepared to complete the purchase.
• Age and experience (or lack thereof) in home buying are, in appropriate cases, relevant contextual factors to be considered by the Court: Beer v. Townsgate I Limited (1997), 1997 CanLII 976 (ON CA).

As a result, the appeal was dismissed with costs to the buyer of $10,000. The decision affirms that a misrepresentation as to the size of the property may be grounds for rescission.

One issue that did not need to be addressed in the case but could come up in similar circumstances is the decision that a buyer must make when discovering a potential misrepresentation before closing. When discovering a misrepresentation before closing a buyer generally faces an election to either rescind or affirm the APS. A party who affirms a contract after becoming aware of the nature of the misrepresentation may lose the right to rescind on the grounds of the original misrepresentation.

Accordingly, if the buyer intends to rescind an APS on the basis of a misrepresentation as to the size of the property it is important to raise the issue immediately, as any steps taken thereafter in furtherance of the closing may be seen as affirming the APS. The buyer in this case did so and thus was entitled to the return of the deposit.

The takeaway for sellers and listing agents is to take steps to verify measurements before making any representations about square footage to a potential buyer. The same issues could arise with regard to any similar misrepresentations of fact about a property listed for sale.

James R.G. Cook

James Cook is a partner at Gardiner Roberts in Toronto and has been with the firm since he articled there in 2002. As a litigator in the firm’s Dispute Resolution Group, he has experience in a broad range of commercial, real estate and professional liability litigation. Phone 416-865-6628; email jcook@grllp.com. This article is provided for educational purposes only and does not necessarily reflect the views of Gardiner Roberts LLP.

The post Misrepresentation in square footage leads to rescission of Agreement of Purchase and Sale appeared first on REM.