Ontarians planning to buy a home in the next two years cited various financial strategies to save for a down payment, with the most common approach being to create a budget. Forty per cent of those surveyed said they would create a budget, whereas 36 per cent of respondents said they would cut costs and 36 per cent said they would earn more money.

These are findings from a new research initiative launched this past summer called the Ontario Home Ownership Index. The tool, created by the Ontario Real Estate Association (OREA) in partnership with global research firm Ipsos Reid, reveals the latest market outlook and home ownership trends across the province.

The index showcases details of the public’s perceptions and expectations of the real estate market, intentions to buy or sell, views on home ownership, housing trends and more. The research is being conducted twice a year throughout Ontario.

“The home buying process begins with a long hard look at one’s finances and knowing what you can afford – any real estate expert would agree with that,” says Costa Poulopoulos, OREA president. “The fact that creating a budget came out on top shows that financial preparedness is important to buyers; it’s one element that is mandatory when buying a home.”

Interestingly, only six per cent of respondents said they would rely on gifts or contributions from family to buy a home. Nearly a third of respondents (30 per cent) said

Many buyers today are looking for investment properties like apartment buildings or vacation homes that they can rent out. The residential investment market offers its own rewards and challenges, according to three REALTORS® interviewed by The EDGE newsletter. These experienced real estate professionals from across the province share their insights about this segment of real estate and serving clients who seek to buy rental properties.

Each of the REALTORS® offers a unique perspective. Although circum-stances differ from one community to another, the sources all say they enjoy the challenges and rewards of working in the rental sales market.

The sale of investment properties is about numbers rather than emotion, says Jamie Troke, a broker of record in Belleville. “Investment purchasers are much more analyticalthan people buying their own home,” he observes.“They’re not focused on the colour scheme. They’re looking at the age of the roof and the cap rate.” (The cap rate is the return on an investment property based on the expected income that it will generate — the ratio between net operating income and the original price paid.)

Because Troke works in a small market, he deals with various types of rental investment properties. “I’ve sold everything from duplexes to 80-unit apartment buildings,” he says. One challenge in his area is “finding quality properties that are not already picked over. There are fewer transactions and less property turning over here than in a big city.” Since some properties are not even advertised, a strong network of contacts is vital for real estate salespeople, he says.

Closings on these properties can take much more time than a standard residential transaction, notes Troke, who has 20 years of real estate experience. That’s because a much more detailed review of the property is required – an environmental audit, insurance inspection and

mechanical system inspection are examples. “Because interest rates are at all-time lows, the properties may become over-leveraged,” he says. These kinds of transactions can be complex, he adds.

His ability to provide in-depth analysis on all of these factors to his clients is the key to his success with investment properties, he says. “The role of the REALTOR® is to smooth the process. We add a great deal of value through our market knowledge and product knowledge.”

Sharon Ellis-Gill is an Ottawa broker who entered the realty business 13 years ago to join forces with her son, who is a real estate salesperson. The residential investment business in the nation’s capital is challenging, especially in the condominium market, notes Ellis-Gill, a former stock broker.

“Condo prices have been down for the past two years and the market has an oversupply,” she says. “Upgrades in new condos make it tougher to move the older ones.”

Reaping rewards from rental salesInsideRep enters withoutpermissionpage 2

Real estate and the municipal elections Inside Edge

Difficult conversations require strategy Inside Edge

HotsheetTips to prevent house fires Fires claim lives and cost millions of dollars in damage every year. To prevent these tragedies, the Insurance Bureau of Canada offers tips for preventing house fires and saving lives. Installing and regularly checking smoke detectors is at the top of the list, followed by creating an emergency preparedness and fire evacuation plan for your family. Frequently inspecting and cleaning chimney flues and installing the proper wattage light bulbs are other tips. For the full report, visit www.ibc.ca and click on Media Releases.

Market Watch Employment growth looks brighter for late 2014A recent rebound in economic growth and expectations for solid future growth bode well for employment prospects, according to a new report. A report from BMO Financial Group reveals hiring intentions of Canadian business owners, and shows a brighter picture for the months ahead. It reveals that service sector job growth has led the way, with the manufacturing industry expected to pick up. As well, large businesses are more likely to expand their workforce than small businesses, the report shows. For details, visit www.bmo.com and click on What’s New.

October 2014

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Budgeting is key strategy for buyers

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they would sell or borrow against other real estate they owned and almost a quarter (23 per cent) said they would invest in savings or RRSPs to save for their down-payment.

Saving strategies differed among types of buyers: Two-thirds (67 per cent) of first-time home buyers said they would create a budget, compared to only 29 per cent of repeat home buyers; half of first-time buyers (54 per cent) and only a third (29 per cent) of repeat buyers said they would cut costs or delay spending; the majority of Generation Y respondents (54 per cent) said they would create a budget whereas only 19 per cent of baby boomers said the same; only a quarter (26 per cent) of baby boomers and 44 per cent of Gen Y said they would cut costs.

“Strategies to save for a down payment depend on the buyers – their lifestyle, experience with real estate and often their stage in life, dictates which strategies will be most effective,” says Poulopoulos. “However, regardless of age or experience, home ownership is one of the biggest financial commitments most people will make in their lives; it takes proper plan-ning to do it right.”

Recently, OREA asked its members for their impressions on the financial prepared-ness of first-time home buyers. Three out of four (75 per cent)of REALTORS®

found that these buyers tend to do their research and are prepared when they begin the home buying process.

Various factors play into the home buying and selling decision. The index intends to explore these factors over time. Here are some findings from the research:

Ten per cent of Ontarians surveyed say they are “very likely” to purchase a home within the next two years; 14 per cent say they are “very likely” to sell a home within the next two years; a majority (57 per cent) believe the provincial real estate market is favourable while 20 per cent say it is un-

favourable; 82 per cent agree that real estate is a good investment; 84 per cent think it makes more sense over the long term to own a home rather than rent. Those Ontarians surveyed ranked their top three reasons for buying a home as follows: long term investment value (29 per cent); affordability/availability of homes (26 per cent); and desire to own a home of their own (26 per cent).

To read more, visit the News Releases section of www.orea.com. Regional results of the Ontario Home Ownership Index can be seen in the Members section of the website and on the OREA blog at www.oreablog.com. You can also print colourful, visually appealing handouts featuring infographics that highlight key findings from the index to share with your clients. Look for “OREA launches the Ontario Home Ownership Index.”

Research reveals different buyer strategies

RECO: Sales rep enters without without permission The following decision from RECO Discipline and Appeals Hearings has been condensed and all names have been changed.

THE FACTSTara, a sales representative with Fine Realty, booked an appointment for Jane, her client, to see a property the next day. Tara made the appointment with the listing brokerage, Lima Realty, and was paged with the lockbox code.

A few minutes after booking, Tara was advised that an offer had been made on the property, to be considered that day. As scheduled, Tara took Jane to view the property the following day. Tara told Jane that the property had been sold conditionally and the conditions would expire in a week.

Around the expiry date, Tara called Susan, the seller rep at Lima Realty, to ask if the property had been sold. Susan told her the sale had fallen through. Susan was advised by the seller, Paul, to consider further offers several days later. After this, Tara arranged with Jane to see the property the next day, a Friday. Lima Realty confirmed the visit.

On Thursday, Susan called Tara advising her of a “bully offer” to be considered that night. Tara asked Susan to hold off until the next day so that Jane could see the place during the scheduled appointment. Susan told Tara that Paul instructed her to consider the offer that had already come in.

Tara tried unsuccessfully several times that evening to contact Susan in order to arrange to take Jane to the property the same night. Later that night, Tara took Jane to see the property without Paul’s permission, using the lockbox code previously provided. While Susan and Paul were reviewing the bully offer, they spoke with Tara on her cell. She admitted she was inside the premises. Paul asked her and Jane to leave immediately, which they did.

THE FINDINGSThe RECO panel determined that Tara acted unprofessionally when she failed to get authorization from Paul, through Susan or Lima Realty, before using the lockbox code to enter the property. Tara failed to reschedule the appointment. Tara also did not advise Jane that entering Paul’s property without his consent might put her at risk. The panel ruled that Tara breached the following sections of the REBBA 2002 Code of Ethics: (3) Fairness and honesty, etc.; (5) Conscientious and competent service, etc. and (39) Unprofessional conduct, etc.

PENALTYTara was fined $5,000 and ordered to complete the Ontario Real Estate Association (OREA) Land, Structures and Real Estate Trading course. The full decision is among those dated 2012/12/11 and can be viewed at www.reco.on.ca. Look under “Complaints and Enforcement” on the bottom left of the page and then go to “Discipline and Appeals /Hearings

and Decisions.” Choose the year 2012 and search by date only.

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Many young buyers who bought condos as investments hoping to rent them and trade up to larger accommodations are now trapped, she says. “They were riding the wave and some got caught in their first purchase.”

The sale of smaller rental buildings with four to six units is more brisk, she says, especially to first-time buyers who are recent immigrants to Canada. With university expansion in Ottawa, the demand for student housing fuels this segment of the market, she says. “Many of these first-time buyers are not traditional buyers,” says Ellis-Gill.

“They’ve saved all their money for this investment and are prepared to offer much more cash up front. They have family members living there before renting it out and they renovate the place.”

First-time buyers of rental properties should be made aware of a property’s return on investment, she advises. “These buyers don’t always have a full understanding of concepts like the cap rate,” says Ellis-Gill. “They just want to get into the game. It’s important to have a full discussion with them about expenses and return on investment.”

Buyers of own-to-rent property should understand operating costs, the expense of repairs and the status of existing leases, she says. “I warn them that they don’t want to be in the business of evictions. That’s not a good way to start your real estate investment.”

Investors should have more cash than the building’s purchase price, says Ellis-Gill, because unexpected costs often arise. “I tell them they’ll need more money, and sooner than they think. They can’t be short on cash,

because if the washer overflows or the stove explodes, there’s another bill to pay.”

A good REALTOR® should also outline potential pitfalls, including issues detailed in the Residential Tenancies Act, says Azizali Kanjee, an owner and broker in Oakville. Knowledge of the act is crucial for people buying own-to-rent properties, he says.

“One of the biggest challenges is educating buyers about the act and its implications for their investment,” says Kanjee, an OREA director with 40 years’ experience in real estate. “These buyers need to consider issues such as rent control, how to serve notice, deposits from renters, and what happens when tenants don’t pay. It’s challenging at the best of times.”

Kanjee advises investors to consider hiring a property manager rather than handling renter issues themselves. Managing a property is demanding and time-consuming whether it is a single condo rental or a full apartment building, he says. “Buyers need

to realize that this investment is more than a Monday-to-Friday, nine-to-five proposition,” says Kanjee. “The owners can’t always get away from it. I tell them that property managers can find tenants for them, keep them separate from renters and deal with rent tribunal issues — and if it comes down to it, property managers also know how to evict tenants, based on processes required by the act.”

Financing for an investment property is more complicated than a residential sale, Kanjee adds. “It’s no longer about you. It’s about whether the property can pay for itself. The investor and the bank must evaluate the risk and we as REALTORS® can help the buyers to work that out.”

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Return on investment crucial to rental sales

Political Affairs Conference in November

Train for success with new online course

The Ontario Real Estate Association will hold its 2014 Political Affairs Conference (PAC) from Nov. 23 to 25 at Toronto’s Park Hyatt Hotel, 4 Avenue Road. The event will feature prominent politicians from all three major political parties at Queen’s Park, along with journalists and commentators. Delegates from real estate boards will have the opportunity to meet with their local MPPs to discuss and lobby on various issues of importance to the real estate industry. The conference also features the Jam with a Past President musical event in support of the Ontario REALTORS Care Foundation on the evening of Monday, Nov. 24. For more information on OREA’s lobby issues, visit the Government Relations section of www.orea.com.

Real Estate Professionals at Work is a new online professional development course designed for REALTORS® to apply the principles of professionalism in their day-to-day practices. It is now being offered by the OREA Real Estate College. Full details and a course preview are available on www.orea.com. Choose OREA Real Estate College from the main menu. Scroll down to Continuing Education in the blue bar and then click on Training for Success.

The judge concluded, “I interpret the lease as providing that the total cost of replacing the entire parking lot is beyond what was contemplated in the tenants’ obligation to pay on a monthly pro-rata basis for “repairs (reasonable wear and tear excepted)” or “maintenance” of the common areas. Accordingly, I find the applicant tenant is not liable for the repaving costs attributed to it.”

Parsons v Sbrissa 2012 ONSC 6098

MERV’S COMMENTS

The judge added that “reason and common sense would require that this tenant’s proportionate share of the paving cost ought to be amortized over a period of 20 years, being the landlord’s evidence as to longevity, with the resulting figure then being divided by 12 to create a monthly figure to be added to the monthly charge, and that the tenant would be liable only for that amount for the months between September of 2010 when the notice of paving charges was given, and October 2011, when the lease expired. To require this tenant to be responsible for its proportionate share of the entire repaving cost, when the paving job has a life expectancy of 20 years, and the tenant has only 14 months left on its lease, is unfair and unjust.”

The courts will look at the specific clauses in the context of the actual situation. Whether you are dealing with an Offer to Lease or the actual lease, do not rely on vague words such as ‘gross’, or ‘net’, or ‘net-net’, or ‘net-net-net’, or ‘triple net’. Use clear language that makes common and legal sense and choose wording that reflects what the parties intend.

The commercial tenant in this case had a three-year lease that was renewed for two years and then for a further two years. The lease was said to be on a “net-net basis” and the wording stated that it was a “completely carefree net lease to the lessor”.

Within the year before the end of the lease term, the landlord had the entire parking lot repaved using materials that would ensure a 20-year lifespan of the parking lot surface. The landlord billed the tenant a proportionate share. This was not a monthly common expense charge but a lump sum amount. The tenant was responsible “for the costs and expenses of repairing the property... reasonable wear and tear excepted... and maintenance of the common areas.”

A court case ensued. The court had to determine whether a complete repaving with a 20-year lifespan was covered by “repairs”, or “maintenance”.

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LEGALBEATCaught in a “net-net” of confusing language

To: REALTORS®

From: Mervin Burgard, Q.C.Memo

OREA NEWS

Address inquiries or comments about REALTOR® EDGE newsletter to: Editor: Mary Ann Gratton • Writers: Elaine Smith, Mary Ann GrattonREALTOR® EDGE • Ontario Real Estate Association • 99 Duncan Mill Road, Don Mills, Ontario M3B 1Z2 1-800-265-6732 • Email: orea@orea.com

Website: www.orea.com • OREA Real Estate College • 1-866-411-6732

REALTOR® EDGE newsletter is published 11 times a year by the Ontario Real Estate Association. The newsletter aims to provide practical and useful news and information about the real estate industry to members of the association. The opinions expressed in the newsletter are not necessarily those of the publisher. Submissions from the real estate community are welcome, including letters to the editor, opinion pieces, events and news. The newsletter reserves the right to edit, based on space restrictions and/or suitability, and/or to refuse submitted material for inclusion in the newsletter without reason. All rights reserved. Reproduction in whole or in part without the express written permission of the publisher is prohibited. Contents are copyright of the Ontario Real Estate Association.

The court examined how a tenant with 14 months left on his lease

should be billed for a complete repaving that would last 20 years.

FPO

Second video produced in OREA seriesA new video aimed at helping you to connect with consumershas been produced by the Ontario Real Estate Association(OREA). This video offers insights into the benefits of working with a REALTOR® and is the second in a series. This past spring, OREA launched a video featuring

“The Millers”, an average Canadian family buying their first home, with the help of an Ontario REALTOR®. This new video features the same family, some years later, now selling their home and downsizing. The latest offering is based on OREA’s popular How to Sell Your Home book. For more details, visit the OREA blog at www.oreablog.com or the OREA YouTube channel at www.youtube.com/oreainfo.

Technology and strategy the focus of eventsBoosting your technology skills and enhancing your strategic approach to your real estate business are the focus of a series of events offered this fall by the Ontario Real Estate Association. Emerge: Moving You Forward with the Tools for Tomorrow will feature topics designed to develop your skills and knowledge on emerging tools and technologies. Topics include: developing an online strategy; building and maintaining your database; and CRM driven business growth. Two sessions have already been organized, and upcoming events are as follows: Thursday, October 9 - St. Catharines (Holiday Inn & Suites Conference Centre); Wednesday, October 29 - London (Best Western Lamplighter Inn & Conference Centre); and Thursday, November 13 - Kanata. (Holiday Inn & Suites). Full details are posted at www.orea.com/emerge.

If you’ve ever said something in anger that you wish you could take back,you’re in good company.

Many of us get drawn into conflict and then blunder our way through a difficult conversation, saying things in the heat of the moment that just escalate the tension, according to author and facilitator Mary Byers.

Byers spoke on the topic of Tough Talking: Initiating and Managing Difficult Conversations earlier this year at the Ontario Real Estate Association (OREA) 2014 leadership conference. She talked about the skills needed to start and maintain uncomfortable discussions in a way that is non-threatening and leads to better understanding.

“When you’re angry, you’ll give the best speech you’ll ever regret,” Byers notes. “Difficult conversations take more time, and you need to spend time planning those conversations before you have them.”

Many people prefer to avoid conflict, so they procrastinate or avoid conversations that are difficult but may be necessary in both work and personal relationships, she says.

Building quality relationships beforehand is a crucial foundation for interactions with others, she says, and it is challenging to have a difficult conversation with someone when trust is lacking between those individuals.

“You can’t pretend to care about someone,” she says. “If you don’t have their trust or respect before you enter into a difficult conversation, you won’t be able to manufacture it 30 seconds before that conversation starts,” says Byers. “You must have equity in the relationship ahead of

time. That’s why you have to take care of people and treat them well, even when you don’t feel that they deserve it.”

Trust is vital to an open dialogue and to difficult conversations, she says. “People only open up when they feel it is safe and if they feel that you genuinely care. Ask yourself how trustworthy your own actions are.”

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Promoting Professionalism

INSI

DEEDGEPromoting Professionalism

Fall 2014

Municipal elections are being held on Oct. 27 in cities and towns across Ontario. These present an ideal opportunity for us to convey to local candidates the issues that matter to REALTORS® and real estate across the province.

The key issue for our members in this election is the municipal land transfer tax (MLTT).

That’s why this fall we are launching the second phase of Don’t Tax My Dream, an advocacy campaign that aims to prevent the spread of the MLTT. This tax is currently levied only in Toronto, but municipalities across the province are seeking ways to generate revenue and considering the implementation of a similar tax in the future.

Elections are a crucial time to talk about policy. As voting day approaches, we are working hard to keep this issue on the radar across the province. Our goal is to prevent the spread of this tax to other municipalities and to get it repealed in Toronto.

You as REALTORS® have told us loud and clear that the tax is bad for your business and bad for the economy. New research has also shown that the MLTT does not just hurt the real estate industry – it is responsible for a huge loss of jobs and economic activity. We are standing up against a tax that adds thousands of dollars to the cost of buying a home, discourages consumers from moving and taxes their dream. The MLTT is added on top of the existing provincial land transfer tax.

You may recall the slogan “Say no to another home owner tax – don’t tax my dream.” This was part of the advocacy campaign we launched

this past spring. We created a new video and website as part of the advocacy and media relations campaign to raise awareness. The latest phase of the campaign highlights new research that focuses on five cities around Ontario (Mississauga, Ottawa, London, Hamilton and Thunder Bay) and the harmful effects that an MLTT would have on those communities.

Watch for our ads on billboards and bus shelters in these cities that keep the focus on this important issue. (See ad at bottom of page.) We at the Ontario Real Estate Association (OREA) urge you, our members, to take the message to your local candidates and to your clients, friends and neighbours. For more information, visit www.donttaxmydream.ca, or visit the Government Relations section of the OREA website at www.orea.com.

Sincerely,

Costa PoulopoulosPresidentOntario Real Estate Association

President’s Message

Difficult conversations require strategy: speaker

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The goal is to create a situation and a resolution that works for everyone, says Byers. Ideally, both parties will be willing to listen to one another’s points of views. If people do not feel they are in a safe or trusting situation, they may employ various tactics, including:

• Masking – Understating their true opinions or sugar coating their views

• Avoidance – Steering away from sensitive subjects

• Withdrawal – Pulling out of the conversation altogether

• Verbal Violence – Any verbal strategy that attempts to convince, control or compel others

• Control – Forcing their views on others or dominating the conversation

• Labelling – Name calling

• Attacking – Belittling or threatening the other person.

When people don’t feel they are in a trustworthy or safe environment during a difficult conversation, their response is often silence or anger. They become silent if they believe their views won’t be heard, or express anger to ensure that they are.

“Whether it’s at work or at home, if you tend towards anger, your challenge is to move towards silence,” she says. “If you tend towards silence, your challenge is to move towards being more verbal.”

Asking questions is crucial when you are having a difficult conversation, she notes. “First find out if the other person is going to be willing to listen to you. Ask how you can create a safe environment for the conversation.”

She suggests taking the following steps during a difficult conversation: Ask first; listen second; speak third. “That

recipe will make you a leader unlike most others. Many leaders are busy thinking about what to say instead of what to ask. But people support what they help to create.”

“Asking for an opinion shows the other person that you care and builds rapport. Ask a simple question like, ‘How does this look from your perspective?’ If you change the question, you may also get a different answer. If you’re a leader, you want to touch peoples’ hearts. Ask, ‘When all is said and done, what has to happen at this meeting in order for it to be successful?’”

Mary Byers is just one of the speakers featured in video interviews in the Leadership section of www.orea.com. Listen to various experts by scrolling down the left-hand side to “Leadership Podcasts” and clicking on the interview of your choice.

Promoting Professionalism

Trust, planning needed for difficult conversations

Examine your own motives – Before embarking on a difficult conversation, take the time to ask yourself questions and answer them honestly: “Ask what I really want for myself here. What don’t I want? What do I really want for others? What do I really want for the relationship? How would I behave if I really wanted these results? This might also mean asking what I’m willing to give up.”

Plan the conversation in advance – Prepare to express how you feel in a non-judgemental manner, in response to someone’s actions, without attacking or criticizing, she says. You can say, “I feel (insert emotion) when (insert action) because (insert reason.) For instance, you can say to your teenager, “I feel scared when you’re not home by curfew because I love you and worry about you.”

Find a suitable location – Location is vital to a difficult conversation. “The more difficult the conversation is, the more you need a private space. A hallway or restaurant is not good, and you shouldn’t have this conversation anyplace where a TV is on. Turn off cell phones and avoid distractions. Think about how and where you’re seated. You can arrange the chairs so that you and your colleague or employee are on the same side of the desk or table.”

Have an exit strategy – When you’re talking and you know you’ve lost your listener or you know the tension is escalating, pause, and then apologize, not necessarily for the conflict, but for the impasse. Say “I feel we’re both getting heated and I apologize for that. Clarify and commit to a future dialogue. Ask, ‘Can we finish this later?’”

Listen – Aim to listen so that people will talk. They will be more open if they feel you will really listen. “We need to care what other people have to say before we move the ball forward. Your proposals, ideas and projects will be stronger if you take the time to listen to the viewpoints of others.”

Ask questions – This can defuse or de-escalate a situation, Byers notes. “Questions build bridges. Questions get you unstuck. When others become furious, we should become curious. Once you see someone getting angry, ask a question such as: ‘I wonder what this is all about?’ ‘What happened?’ A good question to ask is ‘What do you suggest in order to make this better for both of us?’ Or, ‘Is there a way to solve this so we each get a little of what we need or want?’ Another great question is: ‘If you were in my shoes, what would you do?’”

Tips for difficult conversations: Mary Byers