The presentation segment of the evaluation process

Ross Wilson
The Vancouver Sun

In this continuing series of articles, which are abridged excerpts from my book, The Happy Agent, I address the presentation segment of the evaluation process. With your homework done, and with a value range in mind, this is where the rubber truly hits the road.

With appropriate forms in your briefcase, a lawn sign and lockbox in your trunk and hope in your heart, as you approach the front door, you’re confident and fully prepared. As you step through the front door, you’re greeted by the homeowners in a beautiful foyer with a fantastic mosaic tile floor, rich wood paneling and etched bevelled glass doors to an elegant dining room. Suddenly, your opinion heads to the northern reaches of the value range. Okay, the owners of an outwardly unkempt property aren’t outdoorsy or they fired the gardener. But while inspecting the basement, a whiff of dampness brings another negative tweak. Down it goes again. Oh, but you’re then left breathless by the sight of a dazzling gourmet kitchen featuring Brazilian granite counter-tops and rich cherry cabinetry. Up goes your yet unspoken opinion, maybe even a little higher than the top of your preconceived value range.

My example is clearly exaggerated, but I’m sure you get the idea. Think like an impartial buyer but consider the emotional element. Will the property enthuse or bore? In the final analysis, your ability to view objectively – and think on your feet – is where you justifiably earn a large portion of your fee. It’s that important. If you like percentages, try 40 per cent at this stage, another 40 per cent during offer negotiation(s) and the remaining 20 per cent with absolutely everything else.

Once you’ve completed the inspection, with or without the homeowner traipsing around after you, gather everyone at the dining table for your carefully prepared CMA presentation. Its format might be a sophisticated software program or PowerPoint production on your tablet or the homeowner’s television. Or it might be a collection of unpretentious hi-lighted print-outs of comparables, scribbled with notes upon which you reasoned your range. Or it could be a full-colour customer-friendly portfolio with appropriate charts, graphs, testimonials, business bio and services rendered, along with feature sheets of your previously sold listings (with private information redacted).

If they choose to defer their decision, leaving an expertly prepared booklet behind serves as a silent sales aid that, in your absence, will reinforce your professionalism. If your portfolio is digital, you could certainly email it to them afterward.

To thwart any possibility of their summarily bringing the meeting to an end, I urge you to not lead with your value judgment. Remember the power of curiosity. Keep them wondering. Even though you’ve already done the mental arithmetic, reserve your opinion until you’ve had more opportunity to bond. By reviewing the comparables with them, working up from the lowest sale prices, you’ll not just be telling them; you’ll be showing them how your opinion evolved. Going through them again will also serve as a refresher for you and at the same time, ease them into drawing a similar conclusion. Your opinion, when finally given voice, will become not just the view of a stranger, but a conclusion from someone more familiar. And it will be based on a solid, honest rationale and credible substantiation. If they’re rational, your prospect will reach a similar conclusion. In summarizing, don’t pull any punches. Tell them what they need to know, which isn’t necessarily what they want to hear. Honesty is always the best policy.

You may find yourself competing with other agents who have unknowingly erred or deviously opined with an excessively high opinion. Agents in the latter group can rationalize their behaviour by thinking that if it fails to sell, at least they’ll benefit from sign calls and internet hits.

If you want a long and successful career, I suggest that you avoid both practices; the former because it’s obviously incompetent and the latter because it’s unethical. Don’t “buy” the listing with the intention of seeking a price reduction a few weeks later. Since the market is the final arbiter of value, even with a realistic opening list price, you may need that price change anyway. By innocently or maliciously misleading a homeowner, you’d not only be ill serving them, but also accepting a listing that’s doomed to expire. A faded lawn sign on a stale listing does not enhance your reputation in the neighbourhood, nor earn you a commission paid by a happy homeowner.

At the best of times, evaluating real estate is an inaccurate science. Reinforce the fact that an opinion is simply an educated guess, and that in an open market, anything can happen, favourable or otherwise. When all is said and done, whatever price their property obtains will be fair market value. Assure them that whatever happens, you’ll do everything practically possible to make it as high as the market will bear. You’re on the same team.

© 1989-2020 REM Real Estate Magazine

Vancouver homes will remain expensive

Ephraim Vecina
Mortgage Broker News

Despite the threat of COVID-19 to housing prices, Vancouver homes will remain far out of reach of average Canadian households, according to a RE/MAX analysis.

“Given the current trajectory of the market, and the other factors at play within Vancouver, the fall-out is expected to be minimal,” RE/MAX said recently. “Unfortunately for prospective home buyers, this means that we may not see the downward pressure on prices that would have made the Vancouver real estate market more accessible.”

The city might encounter a slight speed bump in the markedly lower number of wealthy immigrants entering the market.

“With foreign buyers making up a significant portion of the Vancouver market, the tight travel restrictions in response to the virus outbreak will inevitably leave its mark on the housing market. In fact, realtors reported a notable dip in Chinese travellers and buyers during Chinese New Year,” RE/MAX.

However, this will not be a major factor in improving affordability. Even the BC Real Estate Association’s predicted 30% to 40% annual decline in sales activity this month will not be enough to affect prices in one of Canada’s hottest housing markets.

“The Vancouver market hasn’t yet shown signs of slowing down. Condo unit sales under $1 million have been steady since the onset of the outbreak in Canada, and prices have yet shown signs of faltering,” RE/MAX said. “With such heavy demand for Vancouver property, a pronounced lack of inventory within the city, and continued population growth fuelled by immigration, this market is poised to return to business as usual.”

Copyright © 2020 Key Media

Across Canada tenants miss pay rent

Frank O’Brien
Western Investor

As the COVID-19 pandemic continues to devastate the Canadian economy, small landlords – who account for the majority of rental units in western cities – are being hammered particularly hard.

With evictions banned, up to 45 per cent of B.C. tenants in some buildings did not pay rent April 1 and about 30 per cent of all Alberta tenants also failed to pay rent on time. In Saskatchewan, 27 per cent of tenants did not pay rent April 1.

There are concerns May 1 could see similar scenarios right across Western Canada.

While large landlords, such as real estate investment trusts, may have deep enough pockets to weather the pandemic storm, owners of small apartment buildings and those holding rental condos and secondary rental suites often depend on rental income to cover their own mortgage payments, property taxes and other costs.

B.C. has banned rental evictions for three months, and its direct payment of $500 per month to landlords barely cuts it in Vancouver where the average monthly rent is the highest in Canada at $2,700, landlords say.

David Hutniak, CEO of LandlordBC, said that, with no potential for evictions, landlords have little  protection if a tenant refuses to pay.

“This is wide open to potential abuse,” Hutniak said.

“Two-thirds of landlords in Metro Vancouver are mom-and-pop situations,” Hutniak added. These owners are also struggling during the current crisis, he said.

According to a December 2019 survey by Canada Mortgage and Housing Corp., there are 67,000 rental condos in Metro Vancouver, and investor condos are a mainstay of the rental universe across Canada.

A survey of Vancouver landlords found that, in some buildings, nearly 50 per cent of  tenants did not pay rent April 1, according to Mark Goodman, a multi-family specialist with Goodman Commercial. 

Hutniak also noted a naïveté in the recommendation that landlords seek a mortgage payment deferral. 

“We have heard advocates speak about landlords getting mortgage deferrals so they can ‘pass those savings on to renters.’ But a mortgage deferral by a bank does not constitute any savings to the landlord. It has to be paid back with compound interest on the deferred amount.  In other words, interest upon interest,” zHutniak explained. Any deferred amount is added to the mortgage principal, whereas a landlord doesn’t have any security for deferred rent from a tenant, he noted, or from the loss of legal rent increases.

The Alberta government banned evictions for non-payment of rent April 1, suspended late fees for three months and froze rent increases for the duration of the COVID-19 emergency. Similar measures are in place in Manitoba and Saskatchewan.

Paul Jones, president of the Alberta Residential Landlord Association, told the Edmonton Journal that 30 per cent of tenants did not pay rent April 1 and many landlords are worried by the number of tenants simply walking out on leases.

It is up to landlords to work out relief with tenants, according to Louise Elsey, who took over as chief operating officer for Avenue Living Communities just as the pandemic hit. Within days, Calgary-based Avenue Living had voluntarily frozen rent increases and was offering tenants weekly payment options. Avenue Living has around 10,000 suites in 19 markets across the Prairie provinces, which it manages for investors.

“The COVID-19 crisis has certainly added an additional layer of pressure. There is a heightened level of responsibility to our residents, our staff and our investors,” said Elsey. The proactive stance appears to have paid off: Avenue Living reported April 27 that 92 per cent of tenants had paid their April rent.

Recommendations from landlord associations include an idea that governments offer some form of rental bank that would offer low-interest loans to allow tenants who would pay it back over time.

William Blake, a landlord who owns small rental properties in Alberta and British Columbia warned that  banning evictions is just delaying an inevitable wave of evictions as landlords will eventually need the money to pay taxes, mortgages and maintenance fees.

Copyright © Western Investor

The Impact of the Crisis on Canada’s Real Estate Industry

REW

To address the uncertainty we all feel right now, REW and RealtyNinjapartnered up to ask you, the people that make this industry tick, what the impact of the crisis has been and what to expect in the future

Market insight, direct from your peers to help you respond to an unprecedented challenge.At time of publishing this report, we had an incredible 639 responses to the survey.

Read the full survey HERE

The Ontario Court of Appeal grappled with the question of what happens to a real estate agent?s uncollected commissions

Shaneka Shaw Taylor & Eugenia Bashura
REM

In Firepower Debt GP v. TheRedPin, the Ontario Court of Appeal grappled with the question of what happens to a real estate agent’s uncollected commissions when their real estate brokerage becomes insolvent. 

The brokerage, TheRedPin.Com Realty, had a roster of real estate agents actively engaged in trades, which entitled the brokerage to commissions. Red Pin had commission-split agreements with their agents. Before all of the commissions were collected, Red Pin became insolvent and a receiver was appointed. 

The receiver went to court to seek guidance on whether the agents’ commissions, when collected, had to be held in trust for the benefit of the agents or the brokerage. Guidance was needed as secured creditors can collect from an insolvent business before unsecured creditors.  If the secured creditors deplete all of the assets of the business, there will be nothing left for unsecured creditors to collect. If the commissions were held in trust for the benefit of the agents, the commissions would be excluded from Red Pin’s available assets and secured creditors would not be able to access those funds before the agents. If on the other hand, the commissions were not held in trust, then the agents’ claims to their share of commissions would be as unsecured creditors, ranking them behind secured creditors. 

The motions judge found that a trust had not been created for the benefit of the agents, as there was no evidence of Red Pin and the agents’ mutual intention to create such a trust. The agents appealed. 

The Ontario Court of Appeal agreed with the motions judge. The Court of Appeal found as follows:

(a) Agreements between Red Pin and the agents.

The independent contractor agreements between Red Pin and each of its agents neither explicitly created a trust, nor required that one be created in relation to the treatment of commissions. This failure to express that intention indicated that the parties did not intend to create a trust.

(b) Red Pin’s financial statements.

Red Pin’s financial statements supported an inference that there was no intention to create a trust. Red Pin’s financial statements reflected certain amounts as held in trust in the “Restricted cash” category. That category, however, did not include the agents’ commissions. Instead, the agents’ commissions were shown as assets of Red Pin in the “cash and cash equivalents” category. The financial statements were approved as accurate and not misleading by the auditors and by Red Pin’s Board of Directors. 

(c) History of a separate commission account at Red Pin’s banks.

Red Pin had three bank accounts – a trust account where buyers’ deposits were kept, a commission account where all commissions were deposited and an operating account in which Red Pin transferred its portion of the commission split. The commission account was not opened as a trust account at Red Pin’s bank but rather as a standard operating account. This supported the conclusion that there was no intention to create a trust.

(d) Trade records sheets.

The reference to the “contract” in the trade records sheets was to the independent contractor agreements between Red Pin and its agents and that these agreements, as discussed above, contained no mention of a trust. Therefore, the fact that the trade records sheets showed that the agents’ commissions were split with Red Pin and stated that it constituted a commission “trust” agreement “as set out in the contract”, this was not determinative of the parties’ mutual intention to create a trust. 

(e) Evidence of Red Pin’s founder.

Finally,the evidence of Red Pin’s founder, Tarik Gidamy, who testified that the commissions were held in trust for the agents, was after-the-fact evidence inconsistent with his behaviour at the relevant time (i.e. his representation to Red Pin’s auditors and Board of Directors of the financial statements where the agents’ commissions were shown as assets). 

Based on the above, the Court of Appeal dismissed the agents’ request that they receive priority over secured creditors, in respect of the uncollected commissions.

What does this mean for agents and brokerages?

If it is the expectation of real estate agents and their brokerages that commissions, when collected, will be held in trust for the benefit of the real estate agents, this intention should be clearly articulated in the agreement between the agent and the brokerage. At a minimum, that mutual intention should be recorded in the agreements that the real estate agents have with their brokerage. If necessary, have a lawyer prepare or review any independent contractor agreement to ensure that the parties’ reasonable expectations are clearly communicated. 

As the business progresses, ensure that the parties’ behaviours are consistent with what would be expected for a trust relationship including respecting the fiduciary obligations owed by a trustee to the beneficiaries of the trust.

© 1989-2020 REM Real Estate Magazine

Public confidence key for restaurants to return to profitable operations

Glen Korstrom
Western Investor

B.C. restaurants could be allowed to open their dining rooms as early as next month, although the provincial government has made clear that any loosened restrictions will come from provincial health officer Bonnie Henry.

When she issues orders to loosen restrictions, she will act in part on recommendations that the industry has drafted and provided to government.

Henry said on April 20 that she wanted to work with the industry to come up with “innovative ways that we can have in-restaurant dining that protects both the staff, as well as people who are coming in.”

Customers may have to pick up their food from an area in the restaurant that is behind a Plexiglas shield, Ian Tostenson, CEO of the BC Restaurant & Foodservices Association suggested.

Hand sanitizer will almost certainly be at the entrance, and customers and employees may have to be temperature-checked before entering the premises.

If the bistro has servers, they may be required to wear masks and gloves. There will almost certainly be a limit to the density within the restaurant – perhaps halving the number of seats that it is allowed to service.

Whatever proportion is necessary to maintain physical distancing, Tostenson said, would also have to allow a restaurant to remain viable.

Tostenson sprang into action when he learned that Henry wanted to work with industry to come up with guidelines for how to open dining rooms. He put together an “A Team” of hospitality-sector leaders to come up with a plan for how to operate safely and profitably.

He then organized an April 22 conference call with several dozen industry insiders from companies such as the Glowbal Group, Earls, Cactus Club and Starbucks. Unions were also represented.

Henry ordered a stop to all dine-in service at restaurants provincewide on March 20 – a crushing financial blow to many in the industry.

Some switched to take-out only, or debuted delivery service, but even with those stop-gap measures many wondered how long their ventures could survive.

Tap and Barrel Restaurants Group CEO Daniel Frankel – one of the restaurant owners in Tostenson’s group – had to lay off approximately 600 hourly workers at his six restaurants. He is left with 100 salaried staff.

“The key is eliminating as many touch points as possible,” Frankel said.

Some of Frankel’s restaurants are licensed to serve hundreds of people, and much of the seating for them is outside. He said it could make sense to have a different maximum allowable density outside because Henry has said repeatedly that transmission of COVID-19 is much easier inside.

Gaining the public’s trust is as important as convincing Henry to loosen restrictions.

An Angus Reid poll released April 20 found that 60 per cent of Canadians said that they would wait at least until their province had gone two weeks without discovering a new case of COVID-19 before they would return to pre-pandemic routines.

Copyright © Western Investor

Jared James Video Cast on the non-housing crisis

Jared James
other

Watch The Video HERE

Unemployment increased 36% from February to March

Western Investor

The number of Canadians who were unemployed increased by 413,000 (36.4 per cent) from February to March, the largest monthly change since comparable data became available in 1976, chiefly related to the COVID-19 pandemic. However, almost all of the increase in unemployment was due to temporary layoffs, meaning that workers are expected to return to their job within six months, according to Statistics Canada.

The national unemployment rate increased 2.2 per cent to 7.8 per cent in March. This was the largest one-month increase on record, and brought the rate to a level last observed in October 2010.

The unemployment rate increased in all provinces except Newfoundland and Labrador and Prince Edward Island. The largest increases were in Quebec ( up 3.6 percentage points to 8.1 per cent), British Columbia (up 2.2 percentage points to 7.2 per cent) and Ontario (up 2.1 percentage points to 7.6 per cent).

In March, the number of people who were out of the labour force – that is, those who were neither employed nor unemployed – increased by 644,000.

In general, workers in less secure, lower-quality jobs, were more likely to see employment losses in March. Decreases were observed across all types of temporary work, led by those in casual employment. 

Of those not in the labour force, 219,000 had worked recently and wanted a job but did not search for one, an increase of 193,000 (743 per cent). Since historically the number of people in this group has been generally very small and stable, the full monthly increase can be reasonably attributed to COVID-19. •

Courtesy: Statistics Canada

Copyright © Western Investor

The four towers located at 1600 Beach Avenue and 1651 Harwood Street

Kenneth Chan
other

Existing condition of Beach Towers at 1600 Beach Avenue and 1651 Harwood Street, Vancouver. (Goodman Commercial)

Site plan of the cancelled 2015 development for Beach Towers at 1600 Beach Avenue and 1651 Harwood Street, Vancouver. (IBI Group / Devonshire Properties)

A residential real estate deal on downtown Vancouver’s English Bay waterfront has been deemed the largest single-asset multi-family transaction in Canadian history.

Goodman Commercial announced today the Beach Towers at 1600 Beach Avenue and 1651 Harwood Street in the West End neighbourhood have been sold, with the deal worth $305 million.

The significant deal was made in 2019, but limitations on an announcement have only been lifted now.

Beach Towers entails four rental apartment towers ranging in height between 19 and 21 storeys, completed in 1965 and 1968. There are 601 rental homes, with a unit mix of 562 one-bedroom units, 23 two-bedroom units, and 16 two-bedroom penthouse units.

The 2.7-acre property spans two sites and, of course, boasts panoramic views of Burrard Inlet and the Vancouver Westside portion of the Burrard Peninsula.

The property’s latest assessed value is $296 million, with $152.3 million for the land and $143.7 million for the structures.

According to the City of Vancouver, the complex is not listed on the Vancouver Heritage Register, but it is identified in the municipal government’s Recent Landmarks inventory in the “A” evaluation category. Designed by acclaimed local architect CBK Van Norman and built by Block Brothers, they are an example of the brutalism style of architecture, where concrete is an integral part of the composition.

“Beach Towers is of heritage value for its contribution to the development of the West End, as a cultural landscape, and for its architectural design,” reads a city staff report.

“The influence of Le Corbusier’s planned cities and British post-war experiments in high-density residential communities can be seen at Beach Towers.”

Expansive open plaza spaces and landscaping cover the footprint of the two sites, which provides the property with immense infill development and improvement potential, as indicated by the value of the deal. These aging buildings will likely be in need of reinvestment within the medium term.

There was an unsuccessful attempt to add density and perform significant renovations over the past decade.

In 2010, the property owner submitted a rezoning application designed by IBI Group to increase the allowable floor area on the Beach Avenue site from 298,959 sq. ft. to 388,054 sq. ft. for 118 additional secured market rental units, and the Harwood Street site from 55,398 sq. ft. to 96,304 sq. ft. for 15 additional secured market rental units.

On the Beach Avenue site, the development would have added a four-storey building with townhouses along the property’s Beach Avenue frontage, and a nine-storey building and a one-storey amenity building at the property’s corner with the intersection of Harwood Street and Cardero Street.

Across the street on the Harwood Street site, the additions would have created two three-storey buildings fronting Harwood Street and two two-storey townhouse buildings along the laneway.

The design of the new buildings were conceived as a contemporary addition that is distinctive but complementary with the brutalist architecture of the existing towers.

The controversial proposal was approved by city council, but in 2015 the property owner made a decision to not proceed with construction, effectively shelving the project.

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