Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
254 Cards in this Set
- Front
- Back
|
What does OREA stand for?
|
Ontario Real Estate Association
|
|
|
What does RECO stand for?
|
Real Estate Council of Ontario
|
|
|
What does CREA stand for?
|
Canadian Real este assoiciaton
|
|
|
What is RECO's mandate
|
-Administers REBA on behalf of Ontario ministry of consumer and business services
-Administer regulatory requirements of the industry -protect consumers |
|
|
What does REBBA stand for?
|
Real Estate and Business Brokers Act
|
|
|
Who is responsible for setting the educational requirements for individuals who wish to obtain and maintain registration as a RE broker or salesperson?
|
The registrarunder the REBBA act
|
|
|
In order to trade in RE in Ontario, RE brokerages, brokers and salespeople must be registered with who?
|
RECO
|
|
|
When was the "RE brokers act' brought in by the Ontario government?
|
1930
|
|
|
what is the projected population of the GGH in 2031?
|
11.5 mllion
|
|
|
What does GGH stand for?
|
Greater Golden Horseshoe
|
|
|
What are the 8 broad steps in the "ripple effect" a new-home-buyer sets off regarding RE in the economy?
|
1.Building trades people are hired to construct a home
2. Future tax revenues are generated for the municipality 3. Profits and return of capital flow to the developer 4. Profits and cash flow are created for the builder 5. Additional consumers are introduced into the local marketplace 6.Commisions are paid t the RE brokerage and brokers/agents 7. Fees for lawyers, mortgages and others involved in the sale/closing are paid 8.Fees for other experts (inspectors, appraisers and surveyors) are paid |
|
|
What are 8 market opportunities for RE agents/brokers?
|
1.residential resale
2. new homes 3. condos 4. recreational 5. commercial 6. appraisal 7. mortgage financing 8.property management |
|
|
What are 3 types of commercial RE?
|
1. Industrial
2. Retail/office 3. Investment |
|
|
When choosing a brokerage, what are 8 potential differences to consider?
|
Franchise v. Independent
Full service v. Limited service Listing v. Selling Organised RE v. Non-organised |
|
|
What is MLS?
|
Multiple Listings Service is an arrangement among brokers who are RE board members, where each brokerage shares information regarding listings with the other members, who may negotiate a transaction. MLS is a trademark of the CREA
|
|
|
What does Organised RE refer to?
|
Voluntary membership organizations consisting of local real estate boards, provincial associations and CREA
|
|
|
What is CREA concerned with?
|
CREA concentrates on federal issues associated with lobbying, as well as international representation. It is responsible for various trade marks and certification marks associated with member services, the most notable of which are REALTOR® and MLS®.
|
|
|
What is Canada's national RE association?
|
CREA
|
|
|
What is OREA concerned with?
|
OREA provides education, continuing education, registration,
|
|
|
What is the purpose of Real Estate boards?
|
They are non-profit organizations established for the benefit of its members and forming one component of organised RE, the other being provincial/territorial associations and CREA.
|
|
|
What are RE boards concerned with?
|
They operate in defined jurisdictions within provinces or the one territory typically offering MLS services and other member services. Members pay dues to be affiliated with the respective board, as well as OREA and CREA.
|
|
|
What does TREB stand for?
|
Toronto Real Estate Board
|
|
|
what is the largest trade organiation in the world? |
The National Association of REALTORS® |
|
|
What board is responsible for national/international representation of the industry, various codes including the REALTORS® Code of Ethics and Standards of Business Practice, The Privacy Code, and The Pledge of Competition. |
CREA |
|
|
How does OREA help Ontario's REALTORS? List 6 ways |
-Monitors government legislation that affects RE -Provides strong lobbying voice -Maintains high calibre education and professional development -Developing a positive image of REALTORS -Forming affinity partnerships to provide discount programs for members -reporting and analyzing industry news and trends |
|
|
What does AIC stand for? |
The Appraisal Institute of Canada |
|
|
What does the AIC do? |
It dedicates itself to serving the public interest by advancing high standards for members of the appraisal profession through granting professional designations such as CRA (Canadian Residential Appraiser), AACI (Acredited Appraiser Canadian Institute) and P.App (Professional Appraiser) |
|
|
What does CRA Stand for? (Not Canada Revenue Agency) |
Canadian Residential Appraiser. A designation given by the AIC to those who qualify |
|
|
What does AACI stand for? |
Acredited Appraiser Canadian Institute. A designation given by the AIC to those who qualify |
|
|
What does P. App stand for ? |
Professional appraiser. A designation given by the AIC to those who qualify |
|
|
What does REIC stand for ? |
Real Estate Institute of Canada |
|
|
What does REIC do? |
It is an autonomous institute with a mission to establishing, promoting, and advancing professional standards of practice among occupations concerned with RE. It grants designations such as: FRI(Fellow of the Real Estate Institute), CPM(Certified Property Manager, CLO(Certified commercial Leasing Officer), ARM(Accredited Residential Manager) |
|
|
Define brokerage |
A corporation, sole propietership, or a partnership that trades in RE on behalf of others for the compensation or reward, or expectation thereof. |
|
|
What is the common name for a buyer representation agreement or seller represtation agreement? |
A listing agreement |
|
|
Under common law what is a brokerage also viewed as? |
A brokerage is viewed as an agent |
|
|
What is the legal definition of the "agency relationship"? |
"...being between two persons, one of whom [the principal] expressly or impliedly consents that the other [the agent] should act on his behalf, and the other of whom similarly consents so to act or so acts." (Ref: Bowstead on Agency, 15th ed. (1985).) |
|
|
Th common law term "angency" and other related terms (e.g. agency relationship) do not appear in the REBBA, 2002 and associated regulations. Instead what term is used in the legislation? |
"representation" |
|
|
Define agent/agency? |
Agent is "one who is authorised by a principal to represent the principal in business transactions with a third party. In RE the agent is the brokerage" Agency is "The relationship between principal and agent, wherein an agent is employed and authorised by the principal to represent the principal in business transactions with a third party" |
|
|
Define "salesperson" according to REBBA |
Salesperson means an individual who has the prescribed qualifications to be registered as a salespersonn under this Act (REBBA) and who is employed by a brokerage to trade in real estate |
|
|
What are three types of brokerages? |
sole propietership, partnership, corporation |
|
|
What is a "broker of record"? |
A "broker of record" is a designated broker (required by REBBA) within the brokerage who ensures that the brokerage complies with REBBA and associated regulations . A brah office manager can also be appointed and can either be a broker or salesperson provided the meet criteria set out in the statute to act in a management capacity. |
|
|
What are the 6 components of the listing/selling process? |
1. listing 2. prospecting 3. qualifying and showing 4.offer preparation 5. offer presentation 6. follow-up |
|
|
Explaine the listing process |
A listing agreement is entered into by the seller and RE brokerage, authoriing the brokerage to act as the seller's agent in offering the pproperty for sale. A large part of the process is developing leads and converting those leads into saleable listings to provide the brokerage with "goods on the shelf".Once the saleable listing has been obtained, the agent/brokerage represents the seller and must fulfill regulatory and common law duties and meet the standards of any RE organisation they may be a member of. |
|
|
Explaine prospecting |
Prospecting involves looking for qualified buyers for listed property through advertising and other methods of getting the word out |
|
|
conventional commission plans are also known as: |
split plans |
|
|
what is the benefitof taking a desk fee plan? |
When an agent enters into a desk fee style commission plan they mustpay a flat fee to the brokerage but they receive a higher commission split |
|
|
What does ICI stand for? |
Investment, commercial, industrial |
|
|
what are professional appraisers in Canada usually referred to as? |
fee appraisers |
|
|
What are two things a registered sales person specialiing in new home sales be spending most of their time doind? |
1. qualifying buyers 2. discussing new home plans and options |
|
|
Who is responsible for regulating the activities of RE brokerages, brokers and salespeople in Ontario? |
RECO |
|
|
Who administers REBBA, 2002 on behalf of the provincial government? |
RECO |
|
|
RECO is responsible for interpreting, enforcing and suggesting modifications regulations, but to what aim? |
to ensure : regulation in trading of RE builds and sustains public trust in RE marketplace. |
|
|
There are a number of ways RECO protects the interests of the public. Give 6: |
-Enforcing standards requiered to obtainand maintain registration as a brokerage, broker or salesperson and delivering the duties of the registrar -Establishing minimum requierments for pre-registration and continuing education -Conducting routine inspections of brokerage offices to ensure compliance with REBBA 2002 and educating brokers on correct procedures -Addressing inquiries, concerns and complaints about the conduct of registrants received from all sources and taking appropriate action to protect the public interest. -Establishing and administering insurance requirements which includes consumer deposit protection -Promoting ongoing education and competent, knowledgeable and professional service |
|
|
How is RECO's Board of Directors structured? |
Governed by a 12-member boards of directors. 9 are registered RE brokers or salespeople; 3 from from each of the three election regions. The remaining three directors are appointed by the ministry of small Business and Consumer Services on behalf of the provincial government. The board of directors establishes committees and task forces to fulfill its mandate with input from consumers, government and registrants. |
|
|
How is RECO structured? |
Board of Directors Standing Committees and Task forces Office of the President/CEO Office of the Registrar Corporate Services |
|
|
What Do RECO`s Standing committees and task forces do? |
Standing Committees and Task Forces focus on specific intitiatives addressing issues that impact Ontario consumers and/or registrants. The role of each task force is to identify, research, consult and make recommendations regarding such matters. Members include consumer, industry and government reps and sometimes experts. |
|
|
What is RECO's President/CEO in charge of? |
The CEO reports directly to the board of directorsand is responsible for day-to-day management of RECO and its employees. |
|
|
What is the role of RECO's registrar? |
The registrar is appointed to pursuant to the REBBA, 2002 and ensures that the provisions of the Administrative Agreement are fully complied with. The registrars duties include granting, reviewing, suspending or revoking a registration, ordering an immediate or temporary suspension of registration and requiring the cessation of false advertising. He also establishes, reviews and approves education curriculum for registration courses and ongoing education. |
|
|
What are three personal factors that can prevent registration of a salesperson with RECO |
Bankruptcy criminal charges and convictions work permit |
|
|
How long is a registration cycle in Ontario? |
2 years |
|
|
What is the Ontario Labour Mobility Act? |
It ensures that workers certified to practise in one province or territory are entitleed to be certified in that occupation in Ontario without having to complete additional material trainging, experience, exams or assessments. |
|
|
What is another name for Regulation 580/05? |
Code of Ethics |
|
|
What does Regulation 580/05 say about the "certificate if registration:broker or sales person"? |
"every broker or salesperson shall carry his or her certificate of registration , and on the request of any person, shall show it to the person. O. Regn 580/05, s. 31." |
|
|
What does regulation 580/05 say about "certificate of registration: Brokerage" |
"(1) a brokerage shall ensure that every certificate of registration issued to the brokerage is kept at the office to which the certificate relates. O. Reg 580/05, s. 32(1) (2) A brokerage shall, on the request of any person, show to the person any certificate of registration issued to the brokerage. O Reg. 580/05, s. 32(2)" |
|
|
What does Regulation 580/05 say about "Certificates of registration for brokers and salepersons kept by brokerage"? |
"(1) A brokerage shall ensure that all duplicate original certificates of registration given to the brokerage in respect of brokers and salespersons amployed by the brokerage are kept in a safe place. O Reg. 580/05, s. 33(1) (2) A brokerage shall, on the request of any person, show the duplicate original certificate of registration given to the brokerage in respect of a broker or salesperson employed by the brokerage to the person. O Reg. 580/05, s. 33(2)" |
|
|
Why might the Registrar refuse to grant registration? |
If the appliant cannot be be reasonably expected to be financially responsible in the conduct of business, if the past conduct affords reasonable grounds to beleive that business will not be carried out legally, honestly and with integrity or the applicant makes a false statement in the application. |
|
|
How long must an applicant wait to reapply if their application was refused by RECO? |
At least 12 months |
|
|
What type of people are exempt from registration with RECO? |
(a) An assignee, custodian, liquidator, receiver, trustee or other person acting under the Bankruptcy and Insolvency Act (Canada), The Corporations Act, The Courts of Justice Act, The Winding-up and Restructuring Act (Canada) or a person acting under the order of any court, or an Executor or trustee selling under the terms of a will, marriage settlement or deed of trust; (b) an auctioneer if the trade is made in the course of and as part of the auctioneer's duties as auctioneer; (c) a person who is registered under the Securities Act if the trade is made in the course of and as part of the person's business in connection with trade in securities; (d) A bank or authorised foreign bank within the meaning of section 2 of the Bank Act (Canada), a credit union as defined in the Credit Unions and Caisses Populaires Act, 1994 or a loan, trust or insurance corporation trading in RE owned or administered by the corporation. (e) a person in respect of any mine or mining property within the meaning of the Mining Act or in respect of RE included in a Crown grant or lease, a mining claim or mineral lands under the Mining Act or any predecessor of that Act; (f) a full time salaried employee of a party to a trade if the employee is acting for or on behalf of his or her employer in respect of land situate in Ontario; (g) a solicitor of the Supreme Court of Justice who is providing legal services if the trade in RE is itself a legal service or is incidental to and directly arising out of the legal services; (h) a person, on the personè own account, in respect of the person`s interest in RE unless, (i) the trade results from an offer of the person to act or a request that the person act in connection with the trade or any other trade, for or on behalf of the other party or on of the other parties to the trade, or; (ii) teh interest of the person in the RE was aquired after the offer or request referred to in subclause (i) whether or not the trade is the result of the offer or request (i) a person in respect tof the provision for another, for remuneration other than by commission, of all consultations, undertakings and services necessary to arrange for the routing of a right of way including the aquisition o land or interests in the land for the purpose, and the personèe empployees engaged in the project; (j) a person who trades in RE solely for the purpose of arranging leases to which the Residential Tenancies Act, 2006 applies; or (k) such persons or classes of persons that are prescribed as exempt from registration in respect of any class of trades in RE. (2)An independent contractor is not an employee for the purpose of clauses (1)(f) and (i) |
|
|
How much time does a registrant have to inform the Registrar of any changes to registration information? |
5 days failure could result in charges for non-disclosure |
|
|
Insurance is required by both brokers and salespeople by which Act? |
REBBA 2002 |
|
|
What are the three types of insurance every broker and salesperson must have? |
-consumer deposit -errors and omissions -commision protection |
|
|
What is Consumer Deposit Protection for? |
to protect the consumer from loss of deposit in case of brokerage fraud, misappropriation of funds or insolency |
|
|
What is errors and omissions? |
protection for registrants for errors and omissions committed in the course of their professional services |
|
|
What are the policy limits of Consumer Deposit? |
$100,000 per claim $1,000,000 per occurrence no deductible |
|
|
What are the policy limits of Errors and Omissions? |
$1,000,000 per claim $3,000,000 annual aggregate $2,500 deductible (would apply to a claim settlement plus, if applicable, 2,500 for each additional claim reported after Sept 1 2009 that resulted in a claim settlement |
|
|
What is Commission Protection? |
Insurance to protect registrants from loss of commission caused by RE broker fraud, misappropriation of funds or insolvency |
|
|
what is capitalisation? |
Capitalisation is the process of converting income of a property into a capital value and, more specifically, the estimatingof the present worth ofa serires of futureperiodic cash flows through the application of an appropriate rate or factorr referred to as a capitalisation (cap) rate. |
|
|
Policy coverage is on a claims made basis. What does that mean? |
The policy requires that the claim made against the registrant be reported to the insurer duriing the policy period. |
|
|
How long is the registration cycle? |
2 years |
|
|
What happens if a registrant does not pay for their annual inurance? |
Their license is suspended |
|
|
When making making a complaint or reporting a "circumstance", with who is it filed? |
RECO |
|
|
What does RCI Process stand for? |
Registrar`s Complaint and Inquiries Process |
|
|
what is the RCI Process? |
It is a uniform method of addressing complaints, while having sufficient flexibility to acknowledge unique characteristics of any particular complaint. The process sets out appropriate steps to make inquiries and arrive at a fair course of action. |
|
|
What outcome options are available to the registrar after a RCI Process? |
-Acknowledgment and Undertaking -Consent to Conditions -Attend a Meeting -Mediating or Resolving a Compplaint -Written warning -Educational Courses -Referral to Discipline Committee -Immediate Suspension -Registrar`s Proposal -Director`s Action -Provincial Offences Prosecution |
|
|
What are the different types of inspection RECO can carry out on registrants? |
Aside from one-on-one contact between RECO inspectors and the broker of records, the inspectors can conduct: -routine inspections -complaint initiated inspections -courtesy inspections -reconciliation inspections |
|
|
Who is CRG? |
Canadian Real Estate Reglator's Group. A group which RECO participates with in regulatory-related activities and consists of senior staff reps from the RE regulatory bodies in various Canadian jurisdictions. CRg provides information and regulatory harmony between jurisdictions |
|
|
Who is ARELLO? |
The Association of Real Estate License Law Officials: An internal organisation that facilitates the exchange of information and co-operation among regulators and policy makers in RE |
|
|
What determines prices and associated value within our market driven economy? |
Consumer choice |
|
|
Why is a sloid grasp pof economics important to RE agent? |
To understand the impact economics has on the market and value and negotiaitions and listing/selling procces |
|
|
What are the four factors of production that all economies require to produce goods and services? |
- Land - Labour - Capital -Entrepreneurial skills |
|
|
The goverment has a huge impact on how effective an economi is. what are 10 things the government uses to manipulate the economy |
- Monetary controls -trade policies -labour laws -taxes -incentives -tariffs -regulations -consumer products -use capital -provision of services |
|
|
Canada's economy is best described as what kind? |
a mixed economy |
|
|
What is a mixed economy? |
A mixed ecoonomy is an economy that is made up of both private units (individuals, families and corporations) and government participation |
|
|
What are three factors in the cyclical flow of the economy? |
-resource markets (land, labour, capital, entrepreneurial skills) -business (supply) -consumers (demand) |
|
|
What is GNP? |
Gross national product is a measure of production by canadian citizens in and outside of Canada |
|
|
What is GDP? |
gross domestic product is a measure of production of goods and services within Canada by domestic and foreign citizens |
|
|
What is CPI (re: economy)? |
Consumer Price Index measures the price of a basket of 600 Goods and services |
|
|
why is CPI an important indicator? |
CPI: -quantifies family expenditures -provides imput on price trends -reflects current inflationary trends |
|
|
explain what an index is? |
A tool used by economistis to show the changes of a particular indicator over time by using a base year for that comodity and comparing subsequent years to it. |
|
|
Why would economists use seasonal adjustments? |
Seasonal adjustmets are made when they want to take the peaks and valleys caused by seasonal variation in production of out data thus revealing other trends. |
|
|
Why would an economist use three month moving averaging? |
To minimise monthly fluctuations in data. (three month moving averaging should not be confused with quater to quater changes) |
|
|
Two graphs with the same information can appear radically different. what factor can change its appearance most dramatically? |
The increnmental value on the vertical axis (ref p 87) |
|
|
Supply: |
as the price increase the quantity decreases |
|
|
Demand: |
As quantity increases the price decreases |
|
|
what is market equilibrium? |
When both supply and demand are perfectly balanced. (this is nearly impossible) |
|
|
What is a makret bubble? |
The over expansion of amarket due primarily to excessive buyer confidence resulting in inflated values. RE bubbles, when a burst occurs, can have a significant impact on the economy as a whole. |
|
|
what are the steps in the business cycle? |
Prosperity (peak) Recession (trough) recovery |
|
|
The government may intervene in the economy directly by using different available methods. What are they? |
- spending policies - crown corporations -taxation -statutes/ regulations |
|
|
What are the distinctive qualities of the RE market grouped under six main headlines that make the RE market unique? |
- no standard product (no two houses are identical) - Local RE market(most transactions happen locally) -fixed location(consumer must go to house) -market not standardised (to complex to completely standardise -slow supply/demand adjustment (not considered liquid assets) -private transactions (transactions are not made public) |
|
|
What factors influence the RE market? |
-demographic changes -employment conditions and wage levels -mortgage volume and interest rates -building activity |
|
|
What are the three types of markets? |
-seller's market -buyer's market -balanced market |
|
|
What is RE markets "long cycle" mostly driven by? |
-demographics -transportation patterns -macro economic growth cycles -long term government policies |
|
|
what is Re markets "short cycle" mainly driven by? |
-interest rate -consumer confidence -general local economic conditions |
|
|
what is market correction? |
A market readjustment, usually occuring following a period of a recession or prosperity, but typically associated with a downturn in demand and increasing supply |
|
|
what are the three measures of central tendency (re: market trends)? |
Median, mean and mode |
|
|
How is the "mean" market trend found? |
same as averaging |
|
|
How is the "median" market trend found? |
the very middle figure from a list of many e.g. -100 -102 -*104* -105 -107 if there is no exact middle figure then the two middle figures are averaged |
|
|
How is the "mode" market trend found? |
most frequently appearing number in an array of numbers |
|
|
RE is a valuable commodity and everyday thousands of Ontario professionals work with property value. How do insurance brokers work with/use property value? |
Insurance brokers concentrate on replacement cost to provide adequate house/contents coverage |
|
|
RE is a valuable commodity and everyday thousands of Ontario professionals work with property value. How do tax assessors work with/use property value?
|
Tax assessors routinely establish assessed value leading to tax notices |
|
|
what are three things that are keeping the RE market heakthy in Ontario despite the economic downturn? |
-Consumer confidence -job growth -low mortgage rates |
|
|
What is Ontario's real GDP range over the past 20 years |
2%-4% |
|
|
Ontario's workforce makes up what percentage of the Canadain workforce? |
40% |
|
|
Ontario's economy makes up what percentage of Canada's overall economy? |
40% |
|
|
How does an increase in interest rates affect GDP? |
negatively. It makes borrowing money more expensive |
|
|
What prcentage of Ontario's export move to the U.S.? |
90% |
|
|
What is the population of Ontario? |
13million |
|
|
Over the past 20 years, Ontario has seen annual growth in population by how much%? |
1.5% |
|
|
How often as a census conducted by the Canadian Government? |
every ten years |
|
|
What is the approximate population of the GTA? |
5.58 million |
|
|
What is Urban Economics? |
it is the cross between economics and geography by looking at the questions of spply/demand and the interplay of human activity on a geographic dimension e.g. how are cities formed? what forces have impact on landuse within regions and cities? what affects locational decision making/urban planning? etc. |
|
|
What is the concentric circle theory? |
Urban economists (notably sociologist Ernest Burgess) posit that urban growth eminates from a central business core outwards: 1 central business district 2 transition/light industrial 3 working class homes 4 middle and higher income homes 5 suburban |
|
|
what is axial theory? |
A theory that works with the concentric circle model but allows for effecient transportation system, meaning growth happens along "trade" routes i.e. highways, commuter rail lines, arterial roads etc |
|
|
What is the sector theory? |
Homer Hoyt ( a RE broker from Chicago) posited that developments flow outwards in sectors from the central business district due to transportation and other factors and income/social class. Easy access to Business center for upper class homes but a layer of lower class homes between light industrial.
|
|
|
What is multiple nucleii theory? |
That there are multiple Business centers in an amalgamating city such as GTA |
|
|
What are the RE implications of population distribution? |
More densly populated areas need to plan for traffic congestion, deteriorating water and air quality, and loss of natural resources. These plans must focus on environmentally- conscious land development, prudent land use, energy efficient housing, high densities which effects how RE is marketed in the future. |
|
|
What are the implications of popluation composition? |
Poplualtion composition refers to an aging population. Older citizens' needs are different from those of a younger professional population just starting families etc. Because there is a growing aging population developers are focusing on housing best suited to an older buyer e.g. one story bungalows, retirement villages |
|
|
Why is RE viewed as a good long-term investment? |
To hedge against inflation |
|
|
What is the difference between objctive value and subjective value? |
Objective value is the dorect cost of creating or cost of reproduction subjective value is the value that exists in the mind of the buyer or seller |
|
|
What is the difference between value in exchange vs. value in use |
Value in exchange is the probable price at which a commodity trades in a free, competitive and open market and is synonymos with market value value in use is the value attributed to a property by the owner who is using that property. |
|
|
Market price vs. market value? |
market price is the price paid for a specific property market value is an estimate of value arising from many sales of a similar property and under similar circumstances |
|
|
When seeking commercial properties someone is usually considering investment value. Investment value is very different from market value: Why? |
Investment value is impacted by cash flow, investment objectives and investor-specific criteria |
|
|
What are the 15 principles of value? |
-anticipation -balance -change -competition -conformity -consistent use -contribution -external factors -highest and best use -increasing/decreasing returns -progression -regression -substitution -supply and demand -surplus porductivity |
|
|
Which principle of value is described by :"Value may be defined as the present worth of all future benefits"? |
Anticipation |
|
|
Which principle of value is : "Value is created and maintained in proportion to the equilibrium attained in the amount and location of essential uses of RE" |
Balance |
|
|
What principle of value is: "Economic and social forces are constantly at work and changes caused by these forces affect real property"? |
change |
|
|
This principle of value states "excessive profits will tend to create ____ that, in turn, has a negative impact on profits" |
Competition |
|
|
What principle of value is: "land must be utilised to reasonab;y conform with the existing standards of the are to maintain maximum value"? |
conformity |
|
|
What principle of value is: "when improved land is in transition to another highest and best use, it cannot be appraised with one use allocated to the land and another to the building and improvements"? |
consistent use e.g. there is no point in renovating an older home if the are is slowly transitioning to commercial land |
|
|
What principle of value is: "the value of any component of a property is measured by how much it adds to the net income (or market value if the subject property is non-income producing;e.g. residential house), by reason of its presence, or detracts from the net income(or market value) by reason of its absence"?
|
contribution |
|
|
What principle of value is: "circumstances or situations near the property or more distant influences that nevertheless impact value"?
|
external factors |
|
|
What principle of value is: "that use which,. at the time of appraisal, is most likely to produce the greatest net return in money or amenities to the land over a given period"?
|
the highest and best use |
|
|
What principle of value is: "when successive increments of one or more factors of production are added to fixed amounts of the other factors, an initial enhancement of income dollars, benefits or amenities occurs, to a point of maximum return (the point of diminishing returns), followed by a relative decrease in incremental value in relation to the value of the added factor/s"?
|
increasing and decreasing returns |
|
|
What principle of value is: "a principle, as an extension of conformity, in the case of properties that are dissimilar, the value of the poorer property will be affected positively by the presence of the property of higher value"? |
progression |
|
|
What principle of value is: "an extension of the principle of conformity, between dissimilar properties, the value of the better property will be affected by the presence of properties of lower value"?
|
regression |
|
|
What principle of value is: "a prudent buyer will pay no more for real property then the cost of acquiring an equally desirable substitute in the marketplace"?
|
substitution |
|
|
What principle of value is: "market value is determined by the intraction of supply and demand forces as of the date of appraisal"?
|
supply and demand |
|
|
What principle of value is: "net income remaining after all expenses necessary to the operation have been paid and the capital invested in improvements have been satisfied"?
|
surplus productivity |
|
|
what is payback? |
the amount of money recieved for the amount of money put in. Not all projects have the same amount of payback. |
|
|
what is psychographic? |
research concerning the study of consumer lifestyles based on investments, opinions, actions and activities |
|
|
What is market segmentation? |
the division of a market into submarkets in which consumer needs are generally similar |
|
|
What is Maslow's "hierarchy of needs" regarding the average consumer? |
1 self actulisation 2 ego 3 social 4 security 5 physiological |
|
|
What are 7 common consumer vulnerabilities? |
1 confusion regarding who represents who 2 caution when inspecting properties 3 due care when signing documents 4 lack of a cooling off period 5 failure to include conditions 6 not respecting deadlines 7 not getting finances in order |
|
|
what is a cooling off period? |
a time period, typically established by legislation, that provides the consumer with an opportunity to cancel whatever action has been taken |
|
|
What are a few Acts (in Ontario) that protect consumers' rights? |
-REBBA 2002 -CPA (consumer protection act) -The Competition Act |
|
|
What does the Human rights code have to do with RE? |
Essentially it prevents discrimination |
|
|
What does PIPEDA stand for? |
Personal Information Protection and Electronic Documents Act |
|
|
what is the difference between a home inspection and an inspection conducted by a municipal inspector? |
A home inspection focuses on the physical structure and mechanicle systems in a home, indcluding identifying items that need repair or replacement. A municipal building inspection focuses on minimum Ontario Building Code standards and related municipal requirements |
|
|
Lawyers in Ontario are governed by who? |
Law Society of Upper Canada |
|
|
When dealing with a client's personal information, salespeople and brokerages must comply with what? |
PIPEDA |
|
|
Federal Acts containing cost of borrowing regulations include the: |
- Bank Act - Insurance Companies Act -Trust and Loan Companies Act |
|
|
Lender compliance is overseen and monitored by whom? |
The Financial Consumer Agency of Canada |
|
|
Mortgage brokers are regulated by who? |
Financial Services Commission of Ontario |
|
|
What are the three stages of marketing? |
-research -analysis/feasibility -strategy/plan |
|
|
what are the four P's of marketing? |
-product -promotion -price -place |
|
|
what are some certain service features brokerages attempt to standardise? |
-uniform wording in representation agreements -guarantees of service -institutional advertising of brokerage services |
|
|
what are four challenges of service based marketing? |
- the seller or buyer can't see the listing or selling service before they agree to purchase - the service is typically customised to fit an individual's need - often the service is directly linked to a specific individual's credibility - consumers find it difficult to compare services offered and tend to rely on word of mouth |
|
|
what are some examples of value added services in RE advertising? |
-online distribution channels to promote the seller's property: e.g. local MLS, websites , newspapers etc |
|
|
What is the difference between marketing plan and marketing strategy? |
A marketing plan focuses on efforts and establishes the blueprint for action plans based on an overall strategy. |
|
|
what is the difference between advertising and promotion? |
Advertising is any message that influences people and generally consists of words, illustrations and design elements in print, electronic or other media. promotion is the sum of marketing-related communication delivered by specific advertising tools |
|
|
Where can you find guidelines for advertising standards |
-Code of Advertising Standards: Advertising Standards Canada -Regulatory requirements: REBBA 2002 enforced by RECO -federal statutes: the Competition Act -Office Policy Manuals: by brokerage -ethical standards: CREA Code of Ethics and Standards of Business Practice |
|
|
What is the AIDA formula? |
TheAIDA formula is used to create a strong ad campaign. -Attention: get prospects attention by creating a unique and interesting heading and related lead lines -Interest: continue to create Interest by outlining the property's features and benefits -Desire: Build desire for the prospect to live in that property or community by describing a way of life -Action: prompt the reader to take action by calling the officeq |
|
|
What are three ways an Open House sign has proven to be an effective marketing tools? |
-exposes listed property to available buyers -helps build a portfolio of potential buyers -demonstrates to the sellers that the best efforts are being used to market and sell the property |
|
|
what is positioning? |
Positioning creates an identity within the consumer's mind and is a veery effective marketing strategy. |
|
|
Explaine value added service: |
Value added services are added to a basic service to make the consumer's task easier, more effecient, speedier, or more enjoyable
|
|
|
What is target market? |
Target markets are groups of potential clients e.g. investors, baby boomers etc |
|
|
Why are focus groups important? |
Because they provide "QUALITATIVE" (as opposed to quantitative) research |
|
|
what are three questions a presentation manual should address? |
-Why use this particular brokerage? -Why list through a brokerage? -Why select this specific salesperson? |
|
|
What are core competencies? |
Skills, assets and techniques that form the basis of an organisation's or individual's competitive capacity |
|
|
what does "specific advertising" focus on? |
Advertising property features and benefits is viewed as specific because it focuses on individual properties |
|
|
What does "institutional advertising" focus on? |
Promotion of SERVICES to the general public, as distinct from classifieds whic are viewed as specific forms of advertising. |
|
|
Who controls the size and placement of For Sale signs? |
municipalities |
|
|
Who establishes MLS rules and regulations? |
Real Estate Boards OREA CREA |
|
|
What are the main differences between RECO and OREA? |
RECO: is a regulator; registration is mandatory; serves to protect consumers on behalf of the government; administers REBBA; OREA: is an association; membership is voluntary; servers to protect realtors interests; participates in legislature. |
|
|
What are fractions most commonly used for? |
general measurements |
|
|
What are decimals used for? |
Commonly used in real estate calculations |
|
|
What are percentages used for? |
commonly used with RE price/trend analysis |
|
|
1 meter equals how many feet? |
3.281 |
|
|
1 inch equals how many centimeters? |
2.540 |
|
|
1 yard equals how many meters? |
0.9144 |
|
|
square meters to square feet multiply square meters by? |
10.76 |
|
|
1 hectares equals how many acres? |
2.471 |
|
|
1 kilometer equals how many miles? |
0.6214 |
|
|
what are some guidelines to follow when measureing building volume? |
A house with a flat roof is typically measured 6" from below the floor surface to the top of the roof. A house with a gable roof is typically measure 6" from below the floor surface to half way between the eaves and the ridge( roof peak). |
|
|
how do you convert cubic feet to cubic yards? |
divide by 27 |
|
|
what does ACRE stand for? |
Alliance for Canadian Real Estate Education |
|
|
What does ACRE do? |
Alliance for Canadian RE Education provides a recommended measurment procedure and partners with provincial and territorial RE associations to develope high quality education materials |
|
|
Define living are measurements |
A measurements method, endorsed by ACRE, setting out living are calculations for various styles of houses; e.g. one story, 1.5 storey , bi-level 2-storey. generally living area measurements refer to the total of habitable rooms, with differences being in how below-grade rooms, stairwells and other are measured. Due diligence is expected as local practices differ |
|
|
measuring condos' area |
usually to unfinished surfaces |
|
|
What is the BOMA Standard for? |
Building Owners and Managers Association developed the "Standard Method of Floor Measurement for Office Buildings" is a measurements method widely used in Canada to calculate commercial property measurements. |
|
|
What does BOMA stand for? |
Building Owners and Management Association |
|
|
Define usable area: |
Total are enclosed by the finished surfaces of a tenanted space within a commercial building, as more specifically definedby generally-accepted measurement/calculation methods; e.g., the BOMA standad for measurement. NOTE no deductions are made for columns or projections necessary to the overall building structure |
|
|
Define rentable area |
the usable area of a tenanted space plus an allocation for common areas; e.g., common lobby, maintenance rooms and washrooms. |
|
|
what is the R/U factor? |
Often reffered to as the "efficiency factor", Rentable space/Usable space is formula used by landlords with multilevel properties to help calculate rentable space when usable space is know. This method is not completely accurate. |
|
|
what are the three measurements methods measureing rentable are in commercial buildings commonly used in the US and Canada? |
-BOMA standards -General Service Administration -The New York Method |
|
|
what is a mortgage commitment? |
a letter of commitmemnt from the lender agreeing to make the loan subject to satisfactory title and other conditions. |
|
|
what are four things lenders require to lend for commercial buildings? |
-feasibility report -construction and site analysis -borrower information -estimated income/ operating expensses |
|
|
What is GDS ratio? |
GDS (should typically be between27%-32% but some lenders accept more) represents the borrower's gross income to be allocatde to principal, interest and tax payments (PIT) it also may include heating costs (PITH) and for condos this may include maintenance fees. |
|
|
what is TDS ratio? |
TDS ( should typically be between 37%-40% but some lenders accept more) ratio included charges for principal, interest and taxes plus other debts (car loan, credit, school etc) |
|
|
How do interest rates impact GDS and TDS? |
When interest rates are low people can afford to borrow more |
|
|
Simple interest formula |
i= PxRxT |
|
|
compound interest formula |
A=P(1+i)^n A= compound amount P=principal amount 1= a unit of value (without 1 the formula calculates interest only) i=interest rate n=number of periods (expressed as a power) |
|
|
Nominal vs effective interest rate |
nominal interest is the stated interest rate while effective interest takes compunding into account. |
|
|
What does the federal Interest Act state about paying interest and what are the requirements? |
when blended payments are made, mortgage interest must be calculated annually or semi-annually, not in advance. -the semi-annual effective rate cannot be more than one half of the stated annual rate -interest must be calculated as owing at the end of the compounding period -the two interest periods for the year must have equivalent interest rates -mortgage payments factors at the end of this chapter reflect requirements of the Interest Act |
|
|
fully vs partially amortized |
fully amortized loan is where the loan is paid in full by maturity date vs partially amortized loan where amortization exceeds the term leaving aa balloon payment at the end of the term. |
|
|
what is capitalisation? |
Capitalisation is the process of converting income of a property into a capital value and, more specifically, the estimatingof the present worth ofa serires of futureperiodic cash flows through the application of an appropriate rate or factorr referred to as a capitalisation (cap) rate. |
|
|
what two types of capitalisation are found in the commercial marketplace? |
direct capitalisationn and yeild capitalisation |
|
|
what are the differences between direct capitalisation and yeild capitalisation? |
direct capitalisation is based on a ssingle year's projected income and expenses in arriving at value. It is used for estimating market value and preferred by appraisers as it is market driven and has limited assumptions. More frequently associated with small income investment properties. *** yield capitalisation requires forecasted income and expenses over a projected investment period (typically based on three to five years) and involves four steps: -determination of a specified holding period -projected income and expenses over that period -selection of an appropriate discount rate -estimating present value based on that discount rate. Yield cap involving discounted cash flows is more complex, but favoured by commercial registrants in addressing individual investor goals and objectives in relation to detailed cash flow analysis. Most frequently used for larger investment-grade commercial projects and properties. |
|
|
what are direct and yeild capitalisation? |
They establish the present value of a future income stream for purposes of estimating value and also provide a basis for comparison of investment-grade property. |
|
|
what two rates make up the overall capitalisation rate used in direct capitalisation? |
discount rate: rate of return ON investment recapture rate: rate of return OF investment |
|
|
explaine recapture rate |
A rate providing for the recapture of capital invested. (a building has a remaining economic life of 40 years. funds invested should be returned over that time.)in appraisal, a term used to describe the rate of recovery of an investment in a wasting asset (i.e. a building deteriorates) . This rate is added to the discount rate to derive a capitalization rate in appraisal terminology. May be based on the straight-line, sinking fund, or annuity method.
|
|
|
Cap rate is... |
-sometimes referred to as a blended rate ( of both discount and recapture) -Is the ratio between NOI (Net operating Income) and property asset value. If a property is listed at $1,000,000 and generates an NOI of $100,000 then the cap rate is 10% value of property=NOI/overall capitalisation rate |
|
|
explaine discount rate |
A rate providing for interest ON the investment. It is similar to compund interest although it has to do with the loss of money, not growth. Iti si a rate representing the cost of a lost opportunity. In other words, an investor seeks a rate of return that represents what could have been obtained had another investment been made. |
|
|
Four steps of investor analysis |
1. establish return ON investment (discount rate) 2. establish return OF investment (recapture rate) 3. calculate recapture rate 4. determine overall capitalisation rate |
|
|
what are two methods of determining the overall cappitalisation rate? |
investor analysis and market research |
|
|
market research and investor analysis are two methods of determining what? |
the overall capitalisation rate |
|
|
explain market research method of determining overall cap rate |
cap rates can be obtained from the marketplace, often to confirm investor analysis. Net operating incomes are established (based on reconstructed operating (financial) statements for the properties involved) and a cap rate is calculated. |
|
|
how does one apply the overall cap rate? |
formula (IRV): NOI/CAP rate=value Net operating income is found in financial statements. You must know what a reasonable cap rate for your type of investment would be |
|
|
what is a reconstructed operating statement? |
A reconstructed operating statement is typically a one-year analysis of actual income and expenses according to the owner's statement for an investment property the adjusted to properly reflect typical income and expenses for that type of commercial property. Adjustments are made based on research on comparable properties |
|
|
what sort of information is on a reconstructed operating statement? |
-One year of actual income and expenses -extended cash flow forecasts typically for a five to ten year period |
|
|
How do you find the cap rate? |
NOI/value=cap rate An investor has an idea of what sort of cap rate they would like to see. A value must be assigned to both the land and building which would be the discount rate (return on investment) and a value must be assigned to the building ( a wasting asset) which would be your recapture rate (return of investment) and together they make up your overall cap rate AKA cap rate. You must also know what a reasonable cap rate would be for your type of investment or an area (toronto 12% london 8% etc). |
|
|
what are two income multipliers that are found in the commercial marketplace? |
Monthly Rental Factor (MRF) Gross Income Multiplier (GIM) |
|
|
how do you find GIM? |
Gross Income Multiplier=Sale Price / Effective gross income |
|
|
what are MRF and GIM |
Monthly Rental Factor and gross Income Multiplier are income multipliers grouped under the income approach to valuation and are used in the valuation of property when rents are known. They should be used on properties of a comparable nature (similar price range, location, size, type of income property e.g. apartment or office building etc) pros of using multipliers: speed and ease of application cons: do not provide for differences on properties and lack precision as many factors are not included. |
|
|
Explain GIM |
Gross Income Multiplier representsthe relationship (ratio) btween sales price (value) and income. It is based on Effective Gross Income used primarily by appraisers |
|
|
GIM and MRF's are considered rules of thumb and can be misleading. What are factors that need to be considered when using them. |
-gross rent may not be comparable as some include utilities while others don't -structural deterioration and repair needs can vary and affect value -rental control legislation varies and impacts rent increase differently |
|
|
when is land transfer tax determined and payable? |
when a deed is registered transferring ownership of the property from one party to another. Tax uses a sliding scale of percentages based on property value |
|
|
what is LTTA? |
Land Transfer Tax Act |
|
|
What is the land transfer rate? |
0.5% on the first $55,000, 1.0% on portion between $55,000-$250,000, 1.5% on balance over $250,000 If land falls under definition of single-family and duplex residences, an additional 0.5% applies to portion over $400,000 (in total that would be 0.5%+1.5%=2% because you must still include the 1.5% from the balance over $250,000) |
|
|
what is the date of completion? |
Commonly referred to as the sale transaction date, the date specified in the agreement of purchase and sale, when the buyer is to deliver the balance of money due and the seller is to deliver a duly executed deed and vacant possession of the property (unless otherwise agreed) |
|
|
Define adjustments |
the apportionment or other division of costs between buyer and seller as of the closing date. This would be things like rent, mortgage interest, realty tax,local improvement rates, unmetered public or private utility charges and non-metered cost of fuel. These would be the responsibility of the seller up to the day of completion. The day of completion itself is now the buyers responsibility. |
|
|
Who pays closing costs? |
buyer |
|
|
what are some things included included in closing costs? |
-adjustments for realty tax and fuel -legal expenses and disbursements, lawyers services and expenses -title search and registration of appropriate documents in the land registry or land titles office -title insurance (assuming buyer wants title insurance coverage) -mortgage expenses including interest on assumed mortgages (calculated as part of adjustments), any arranging costs and registration of a new mortgage in the land registry or land titles office -cost of survey, zoning memorandum, tax certificate and other related matters based on provincial requirements -house insurance for fire and other hazards, typically including liability coverage -HST, most purchases of new housing require payment of HST on the purchase price, however, this should be confirmed as there are exceptions, -land transfer tax -personal expenses, e.g. moving costs and purchase of household goods (this list is not exhaustive and costs can be higher than anticipated. Keep buyer aware of this but leave estimating costs to experts) |
|
|
what is the interest adjustment date (IAD)? |
it is a date set one month prior to the start of monthly payments in a blended mortgage. As interest is paid in arrears on mortgages pursuant to the Interest Act, interest begins accruing as of that date and is remitted the following regularly scheduled mortgage payment date. |
