Consent Agreement ~ Implications for Other Professionals

consent agreement

Consent Agreement ~ Implications for Other Professionals

The Consent agreement reached 24 October 2010 between CREA and the Competition Bureau will have a profound impact upon the real estate industry and the marketing of properties for sale.

At first, there will be resistance by the mainstream realtors, leaving the market open to the discounters. But, life has changed since the internet. Just ask anyone who used to work in the travel industry or for Blockbuster Video. Following closely will be the mainstream realtors, who will offer “unbundled services” just to compete. They will offer the product and consumers will take them up on it. That’s the problem; it’s not all or nothing. It’s just one small step, and that’s all the consumer wants.

What about other professions? Lawyers, surveyors, home inspectors, home stagers, photographers, videographers, printers, newspapers, online website advertisers, mortgage brokers, appraisers, insurance brokers, title insurers; what will happen to them?

So, let’s consider the implications first from the “sell” side of the equation, and then the “buy” side.

The Sell Side (Vendor and related parties)

In this situation, we speculate that the seller has opted for a “mere posting” and will handle all the details and inquiries personally.

 Lawyers

The seller now may have the lawyer look at the listing, draft an agreement of purchase and sale and handle the negotiations. This is going to be an extra expense.

Home Stagers

Many realtors had included full home staging in its full services package. This won’t happen on a regular basis anymore. Home staging will still be offered, but it will be something that can be negotiated out of the contract.This means that many home stagers will have to drop their prices.

If the client is truly “paying” for the service and it’s not free, then sellers will want to see the statistical evidence offering proof of its value.

The home staging market will become somewhat more competitive and less lucrative as a result. Lowered discounted prices will be available.

Photographers

Professional photographers are required for every listed property. But the FSBO seller will likely either know somebody or have access to somebody in the business, or just take his own pictures. Professional photographers will have to compete with “professional” amateurs in a more competitive environment.

Videographers

Virtual tours are now here to stay. At first, they looked clumsy, but the better videographers came into the marketplace and the virtual tour has been elevated to the next level.

The real question is who is going to pay for it? With a menu driven fee schedule, this is an “extra”. Some consumers will pass this option by at the outset, and simply say, “we’ll look at this again in xx days if it doesn’t sell”.

Printers

Every listing needs a flyer, brochure or some kind of handout. The question is how many? At a certain cost per page, the FSBO seller, will not purchase too many, and is not able to buy in discount quantities. The FSBO seller doesn’t usually need the “just listed” cards to circulate through the neighbourhood. Those were marketing documents for the listing agent. Various flyers to be delivered, all with the listing agent’s picture will not be required.

The FSBO seller will likely go to a discount printer and order copies in groups of twenty-five. If a listing agent orders too many, the leftovers are used for marketing.

Here, printers will see a loss of revenue.

Newspapers

Newspaper print advertising is in trouble for a variety of reasons, but mostly the internet. As advertising in the real estate sections drop, the papers increase their advertising prices. That might not make much sense, but you’ll have to speak to the newspapers about their advertising strategies.

The result is that the higher prices will not encourage the FSBO seller to advertise. Any special deals to “one-off” FSBO’s will infuriate the regular advertising realtors.

So, the result here, seems clear: newspaper advertising revenue will drop.

Online Website Advertisers

These are sites like Craigslist and KIJIJI. Since they are technically free, they will prosper. Two things are clear about the internet. No one wants to wait. And, no one wants to pay.

There are also specialized sites that just deal with real estate in certain localities or certain types of properties.

 The FSBO seller will make full use of these opportunities and forsake the more traditional methods.

 The Buy Side (Purchaser and related parties)

In this situation, we speculate that the seller has opted for a “mere posting” and will handle all the details and inquiries personally. However, the buyer still has a need for support services from professionals, and may even have his own realtor.

Lawyers

If the FSBO seller is using a lawyer to handle the negotiations, then the buyer will seek legal advice at this point too. The risk is that the buyer may feel that he might be outsmarted, so he will pay for services even though he might have his own realtor, just in an attept to “level the playing field”.

Surveyors

When title insurance became popular, the need for a new survey was often ignored. That’s too bad and not the way it should be. But, the good news for surveyors is that the Consent Agreement will likely have no effect upon them.

The need for a survey is largely driven by the purchaser’s solicitor, so nothing will change here.

Home Inspectors

The Consent Agreement should come as a boon to the home inspection industry. While it is now becoming increasingly commonplace for a home inspection to be required as a condition in the due diligence phase, it will now be a necessity.

Who will trust the FSBO seller? The seller who can’t get a realtor to represent him! Get a home inspection at once and see what he’s hiding. There must be something!

Mortgage Brokers

The buyer needs to pay for the property, and probably doesn’t have all the money. So, a mortgage broker will still be in demand. It’s difficult to determine that there would be much impact on this industry.

Appraisers

Appraisers are just as important as before, even more so, because sometimes that last 5% of the purchase price needs to be rolled into the deal, and become part of the value of the property so it can be financed. Rarely, will the appraised value exceed the purchase price paid.

Although appraisals may become more difficult, demand will remain the same.

 Insurance Brokers

Fire and liability insurance will be required in all transactions. So, the Consent Agreement doesn’t really have an impact here.

Title Insurance

The demand is largely driven by lawyers and mortgagees. This will not really change going forward.

Summary

The Consent Agreement will have an impact upon the demand for services of other professionals who support the real estate industry. Lawyers will be the chief beneficiaries, followed by home inspectors. Home stagers, printers, photographers, videopgraphers and anyone else involved in the advertising and marketing aspect of the sale (for a fee) will suffer.

These comments are based simply upon what might happen, only time will tell if they really materialize. In about one year’s time, the statistics should be clear.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com

Reduce Risks in the Home Staging Business

Home Staging and Risk Management

By Brian Madigan LL.B.

(Ontario Real Estate Source)

The Home Staging industry is still unregulated, and to some extent it is still in its infancy.

As society becomes somewhat more litigious, it would seem to be wise that those in the home staging business take some precautions on their own to reduce their potential liabilities.

In the real estate business, the home staging industry is placed in the forefront of disclosure, concealment, repair, rectification of defects, and renovations.

And, it is the home inspection industry which is in the forefront of having to discover problems. As an industry, it is also unregulated.

Home stagers are at risk for covering something up, and home inspectors are at risk for not finding them.

However, none of this really helps the individual practitioner. So, let me make some recommendations for risk management:

1) Have a website. Make sure it is full of information for the consumer.
2) Have a business services model. Make sure that the nature and type of services that are available are outlined.
3) Carry professional liability insurance. Ensure that it covers errors and omissions made in the ordinary course of business.
4) Maintain other insurance additional coverages as may be required.
5) Draft a Code of Ethics and publish it for the consumer.
6) Draft a standard form contract that provides protection from liability.
7) Specify the client, ensure that the client is protected and that your first obligation is to the client and not someone else. This should not be vague.
8) Clarify roles of referral agents.
9) Clarify the role of contractors.
10) Outline the obligations of the homeowner in terms of disclosure.
11) Outline the obligations of the real estate agent in terms of disclosure.
12) Limit liability by agreement to a refund of fees paid.
13) Encourage the owner to deal directly with the contractor, if possible.
14) Require a deposit on account of a retainer.
15) Provide a written report and recommendations.

Some of these steps will go a long way to reducing and limiting liability.

They will never eliminate every potential risk. If you are going to be sued, you might be, simply because you took on the wrong project.

However, if you follow some of these steps you will enhance your professional image while you await accreditation and regulation of the industry in some more formal way.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com

Should Home Stagers have a Consumer Based Code of Ethics?

Code of Ethics for Home Stagers

By Brian Madigan LL.B.

(Ontario Real Estate Source)

The home staging business has grown rapidly over the last decade. It is not a regulated industry in Ontario.

Those individuals who practice in the field seek accreditation from a variety of associations and organizations. The industry as such is seeking “professionalism”.

One of the very primary factors in assessing whether a business is truly “professional” is the adoption of a Code of Ethics by its members.

There are other factors as well, including:

• Qualifying educational requirements
• Educational course requirements
• Continuing educational programs
• Examinations and credentialing
• Membership in an association
• Subscription to and adoption of a Code of Ethics
• Complaints process
• Discipline process
• Censure and penalties for non-compliance

So, let’s have a look at the home staging business. What would the Code of Ethics look like? Here is one from the International association of Home Staging:

International Association of Home Staging

Accredited Staging Professional Code of Ethics
• I believe in my ability to help my clients Stage® their properties.
• I will follow and protect this Code of Ethics for the good of all Accredited Staging Professionals™ (ASPs).
• I will establish and maintain professional policies to hold my clients accountable to prepare their homes for sale and keep them in staged showing condition until the home is sold and the inspection and appraisal are completed.
• I will protect the quality of Staging by following the Staging criteria and will only use the word “Staged” to describe homes that have truly met or exceeded the criteria
• I will protect the Stage® trademark by including the registered trademark symbol (®) with any derivation of the word in any print advertising or marketing that I do.
• I will protect the Accredited Staging Professional™ trademark by including the trademark symbol (™) with any marketing or print advertising that I do with the ASP™ designation.
• I will honor the Staging University by not releasing my password to the University to any non-ASPs.
• I will display and marker my ASP Designation in my staging marketing materials to inform people that I am an Accredited Staging Professional™.
• I will educate my clients and the public as to the meaning and origin of Staging to enhance the ASP Designation for all ASPs.
• I will bring credit to the ASP Designation through my honesty, my integrity and by honoring my clients and myself.
I will honor all ASPs with the dignity and respect of the designation for the greater good of all.

And, here is another one, this time from RESA-PRO, known as “The Real Estate Staging Association”:

The RESA-PRO™ Code of Ethics:
1. To always conduct myself as a professional with integrity, sincerity and sensitivity.
2. To ensure my employees and business associates conduct themselves in the same manner
3. To treat my clients and colleagues with respect
4. To refrain from making unsolicited comments, verbally or in writing about other stagers, clients, customers or Real Estate Agents
5. To refrain from revealing any confidential information about my clients
6. To fulfill my commitments
7. To never commit to a project that I am not able to fulfill
8. To fully educate my clients on the process of staging, fees, and all recommendations to properly stage their home or listing prior to any work being started
9. To never display disrespect for any Staging Professional. We are a diverse society of Stagers and respect all designations and backgrounds
10. To maintain and improve the standards of the home staging industry
11. To become and remain informed on issues affecting home staging
12. To keep my profile and blog on the RESA Site professional and positive
13. To resolve conflicts with professionalism and appropriateness
14. To mentor and educate other stagers to the best of my ability
15. To use only my original written material in all electronic and print media including my website and blog. National or international statistics, charts and reports not written by the stager should be labeled as such.
16. RESA-PRO™ designees agree to not use ANY STOCK PHOTOS on their website or in their marketing materials.

These Codes seem really quite weak and rather sparse. They are far short of a formal code of ethics that specifies requirements for the delivery of service to consumers. Certainly, the similar code for real estate professionals is stringent by comparison.

Obviously, there could be some improvements made. That would be an appropriate step in the journey to “professionalism”, which is always a difficulty for an unregulated industry. It would be wise for the associations to have a lawyer prepare a formal code of ethics. A reasonable precedent to use might be one drawn from the real estate industry.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com