Alan Wiggins

New Rules to Profoundly Change How REALTORS® Work With Consumers

Vancouver, BC – June 15, 2018. On June 15, 2018, changes to Rules under the Real Estate Services Act that dictate how REALTORS® work with consumers will come into effect. The Rules, mandated by the Office of the Superintendent of Real Estate (OSRE) and finalized on April 27, 2018, have been amended to ensure that REALTORS® make adequate disclosures, so that consumers can make informed decisions.

“BCREA, together with the Real Estate Council of British Columbia (RECBC), has been hard at work to update the Applied Practice Courses for new licensees. BCREA has also been updating its continuing education courses and nearly two dozen standard legal forms that have been impacted by the changes,” said British Columbia Real Estate Association (BCREA) CEO Darlene Hyde. “The new rules governing real estate practices mark a significant shift in how REALTORS® in BC work with their clients. It’s important that consumers know what to expect when the changes come into effect.”

REALTORS®, consumers and conflicts of interest
One of the changes is a ban on dual agency. Dual agency occurs when a REALTOR® represents more than one party in a real estate transaction. That can be a buyer and a seller, two or more buyers, or a landlord and a tenant. The ban was recommended by RECBC’s Independent Advisory Group in 2016. Exemptions will be possible in limited circumstances. Under the prohibition on dual agency a real estate agent cannot represent two clients with competing interests at the same time. 

REALTORS®, consumers and compensation
From June 15, REALTORS® are required to make more disclosures on the commissions they receive on transactions. Once the amendment comes into effect, a REALTOR® must give the seller a copy of the disclosure form before presenting each offer or counter-offer from potential buyers. This form explains how the commission will be shared with other brokerages involved in the transaction (the buyer’s brokerage) and any other payments the REALTOR® expects to receive as a result of the transaction. 

BCREA and the 11 member boards have been working with RECBC and OSRE to make these changes as seamless and as transparent as possible. We are actively working to educate REALTORS® on the implications of these changes so they can continue to serve consumers with integrity and professionalism when the Rule changes come into effect.

“These changes will profoundly alter for the foreseeable future the way consumers initially interact with their REALTOR® and the ban on limited dual agency will have a negative impact on consumer choice with respect to their selection of REALTOR® in some circumstances,” said Hyde. “BCREA has done its utmost to facilitate the transition to the new Rules and we stand behind a strong regulatory regime, informed and knowledgeable customers and professional REALTORS®.”

 



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Condo - Depreciation Reports


 
The British Columbia provincial government recently passed regulations (Regulations) pursuant to the Strata Property Act (Act) that require all strata properties with more than four units to have a common property depreciation report completed by December 13, 2013. 
 
According to the Act, the depreciation report is to provide estimates for “the repair and replacement costs for major tems in the strata corporation and the expected life of those items” . The strata corporation can then use that information to assist it in determining the appropriate amount for the annual contribution to its contingency reserve fund. A depreciation report is already a mandatory requirement for strata corporations in several other provinces and many US states.
 
Section 6.2 of the Regulations sets out the specific requirements for depreciation reports and examples of the ‘major items’ that must be evaluated therein. The depreciation report should be prepared by a qualified individual, typically an engineer or architect with proper liability and errors and omissions insurance coverage.  In summary, a depreciation report must contain: • a physical inventory of the common property, including building systems; anticipated maintenance, repair and replacement costs for common expenses projected over 30 years; and a financial forecasting section that contains at least three cash flow funding models for the contingency reserve fund.
 
The provincial government anticipates that depreciation reports will assist strata owners with the prudent management of their common property by providing information on repairs and replacements that will need to be funded, as well as determining the amount that should be contributed to the contingency reserve fund.
 
While depreciation reports are now mandatory under the law, the strata corporation may defer obtaining a depreciation report by passing a resolution with a 3/4 majority vote of the strata owners authorizing such deferral. If such a resolution is passed, the deferral would be valid for a maximum of 18 months, and the  resolution would then need to be re-passed in order to continue to defer the report.  Once prepared, the depreciation report is valid for up to three years, after which it must be updated.  It is important to note that  the law does not require that the funding requirements identified in the depreciation report be implemented.  While the strata corporation remains in charge of determining the amount of contingency reserve fund contributions, the provincial government has now made it easier for a strata corporation to build up its  reserve fund levels by eliminating a barrier which in the past has prevented some strata corporations from
meeting the maintenance and replacement requirements of their common property  In the past, an annual 3/4 majority vote was required to increase reserve fund contributions beyond 100 per cent of a strata corporation’s operating budget, but that law has now been amended so that a strata corporation can now do  so if the strata owners simply pass a majority vote to that effect. 
 
The depreciation report can serve as valuable disclosure information for potential buyers.  In fact, the Property Disclosure Statement for Strata Properties provides a specific inquiry regarding the possible  existence of a depreciation report. Owners of strata properties can expect prospective buyers to inquire about the existence of a depreciation report and request its production if one has been prepared.  Furthermore depreciation reports may be requested by mortgage providers as part of their financial risk  assessment process.  A strata corporation that has organized its affairs to incorporate long-term planning
and integrated maintenance in accordance with a depreciation report will likely be well positioned to maintain  its building systems, protect its common property assets and reduce the costs to strata owners associated with unexpected failures of such systems or assets, and the potentially costly consequential damage. If a  strata corporation defers the preparation of a depreciation report, it may negatively affect the marketability of  strata units as well as the ability of potential buyers to obtain mortgage funding or current owners to obtain  refinancing.

For more information on depreciation reports, visit www.housing.gov.bc.ca/strata/regs.

Thank you to Brian Taylor & Bill Housser for providing this article.


BCREA Bulletin – May 2012

 

HPI – CLIENT INFORMATION

www.vreb.org

What is the MLS® HPI?

The MLS® Home Price Index (MLS® HPI) is one of several tools your REALTOR® uses to help you gain a solid understanding of the changes in home price trends and their impact on the market value of homes.

Developed using data from the Multiple Listing Service System, the MLS® HPI is used to compare trends locally — for specific housing types and neighbourhoods — or across Vancouver Island, the Lower Mainland, and in most major cities in Canada.

More importantly, it helps you approach one of life’s most important decisions – buying or selling a home – with greater confidence.

How Does the MLS® Housing Price Index Work?

The MLS® HPI can help you gauge changes in housing prices over time, including changes in:

Overall home prices for the market as a whole

Prices for specific housing categories in a given area, or for the overall market.

This information will help you to more accurately understand pricing trends in your local market area.

How is it Calculated?

The MLS® HPI concept is modeled after the Consumer Price Index, which measures the rate of price change for a basket of goods and services. A basket is the combination of goods and services that Canadians buy most such as food, clothing, transportation, etc.

Instead of measuring goods and services, the MLS® HPI measures the rate at which housing prices change over time, taking into account the types of homes sold. The HPI uses a number of baskets representing benchmark homes.

HPI identifies benchmark homes by using a set of quantitative and qualitative attributes that do not change over time, permitting apples-to-apples comparisons of price over time.

These features together become the benchmark house, townhouse or apartment in a given area. A benchmark property is designed to represent a typical residential property in a particular MLS® HPI housing market, such as Colwood, Oak Bay or Saanich.

The MLS® HPI tracks changes in home prices by comparing price levels at a point in time with price levels in a base (reference) period. The base period value is always 100. 2

For example, if the base period for single-family homes is 2005, and the MLS® HPI value for single-family homes in December 2011 is 149.1, you know that the value of single-family homes is up 49.1%, compared with 2005 (149.1 −100 = 49.1%).

While the HPI shows us the percentage change since 2005, the system also determines values for benchmark homes during the same period. The values produced by the system track the prices of benchmark homes over the same period of time.

How is the MLS® HPI different from average and median home price calculations?

The MLS® HPI is based on values assigned to various housing attributes, which tend to evolve gradually over time.

This means that price changes calculated using the MLS® HPI are less volatile than those derived using common measures like average and median, which can swing dramatically in response to changes with high-end or low-end sales prices from month to month.

It is often difficult to determine if average or median price fluctuations really reflect changes in buyers’ willingness to pay for certain housing attributes, or just changes in the volume of very expensive or inexpensive home sales from one time period to the next. The MLS® HPI removes that uncertainty.

Is the idea of a Home Price Index new to Canada?

A: An HPI is not new in Canada. The real estate boards of Greater Vancouver and Fraser Valley have had an HPI in place since 1996, when they hired economists to build a local housing price index for the BC Lower Mainland. The HPI has been widely recognized as providing the most accurate indication of housing price trends in those markets.

The MLS® HPI has been in use since January 2012. The Victoria and Vancouver Island Real Estate Boards are joining eight other boards to collaboratively use MLS® data to track trends in home prices in markets across Canada. We are 10 partners and growing!

How often is the MLS® HPI published?

A: The MLS® HPI is published at or near the beginning of each month to reflect activity that occurred during the previous month.




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