Advertising Words and Pictures

While a well-written ad can pack a tremendous amount of punch, certainly in print mediums, pictures and logos may overshadow any words used – no matter how well-written those words are.

The Real Estate Council of Alberta’s Advertising Guidelines include the requirement that Alberta industry professionals clearly indicate the brokerage with which they are registered. Clearly indicated is taken to mean that a reasonable consumer under normal circumstances could clearly distinguish the name of a brokerage in an advertisement for an industry member registered with that brokerage. The advertisement should be unambiguous in stating the full name of the brokerage; including a brokerage logo or website address is not clearly indicating the brokerage name. A reasonable consumer should be able to identify the brokerage based on the advertisement.

Industry professionals can include other identifiers (franchise names, team names, a “brand”) in their advertisements, but it can only be in addition to the name under which they’re licensed and the name of the brokerage with which they are registered. As the number of teams and “brands” has grown within Alberta’s real estate industry, so has the number of websites that do not abide by the advertising guidelines, particularly with respect to representations, visual or otherwise, of a team or personal brand. (For information specifically relating to social media advertising and profile pages, check out this blog post from August.)

Having a team or brand logo is perfectly acceptable and in fact, is likely more common than not. But, that logo or brand cannot overshadow your brokerage name. Remember that in any medium you advertise and on any website you create, your brokerage name must be clear to a consumer based on that ad or website alone. And with respect to websites, every page within the site needs to have the brokerage name clearly indicated.

If someone visits your website and your personal brand/team logo takes up 25 per cent of the screen space, but you need a magnifying glass to find any mention of your brokerage, it’s safe to say your brokerage isn’t clearly indicated and the website could be confusing for a consumer vis a vis your personal brand or team logo and your brokerage.

The ability of consumers and other industry professionals to easily identify an industry member’s brokerage remains extremely important to the notion of consumer protection.

Mortgage Fraud on the Rise

Mortgage fraud is once again in the news in Canada. Just today, Equifax announced that it has uncovered more than $400-million in mortgage fraud in Canada last year. Though $400-million value is still only a fraction of the $1 trillion in total residential mortgage credit currently outstanding in Canada, it’s a staggering number just the same and Equifax believes even that is only a small part of the fraud taking place in Canada’s real estate market.

Now the important questions. How can we stop the further growth of mortgage fraud? And, whose job is it to do so?

The Real Estate Council of Alberta (RECA) has, as part of its mandate, to protect against, investigate, detect and suppress mortgage fraud as it relates to the industry. But it’s naïve to think RECA can go it alone. The fact is, RECA doesn't have the authority to govern or regulate the behaviour, fraudulent or otherwise, of lawyers, bankers, members of the general public, and any other individual not licensed under the Real Estate Act. While RECA holds its licensed industry professionals to the highest standards – particularly when it comes to fraudulent behaviour – it can do nothing to stop mortgage fraud outside the scope of the Real Estate Act and Rules.

Every bank or mortgage lender in Canada has the ability to conduct its own due diligence before advancing mortgage funds. Are they doing so? I think it’s safe to assume – based on what Equifax has uncovered –the required due diligence is not always occurring.

Sometimes mortgage fraud is perpetrated as a means of furthering other criminal activity, for example, buying properties to open marijuana growing operations, to trade drugs and launder money. But, according to Equifax, the bulk of mortgage swindling still involves ordinary people lying to obtain mortgages larger than their income can support.

So, what can licensed industry professionals do? Well, the fact is, individuals working in Alberta’s real estate brokerage, mortgage brokerage and real estate appraisal industries are on the frontline when it comes to the suppression of mortgage fraud.  It is your responsibility as a licensed industry professional to ensure you do not become a participant – willing or otherwise – in any scheme to obtain mortgage funds through deceit.

Arm yourself with the knowledge and experience necessary to avoid, even unknowingly, participation in mortgage fraud. A good first step is to check out these lists of Mortgage Fraud Red Flags that RECA has put together (Mortgage Brokerage Professionals, Real Estate Appraisal Professionals, Real Estate Brokerage Professionals). If in your work as a licensed industry professional you come across information that you suspect is false or misleading, contact the lender and advise them of your findings. If the people involved are other licensed industry professionals, report the results of your review to RECA. If you suspect fraudulent and/or other illegal behaviour, take it one step further and contact your local police and/or the RCMP.

Who do you think is most at fault for the current level of mortgage fraud in Canada?

Taking Ownership

Imagine a world where business leaders and companies didn’t wait around for the government to help make the economy more productive. Imagine businesses being left to their own creative and innovative devices to improve their own businesses, their practices and their relative success. Imagine creative business models that allowed businesses to shine and prosper despite periods of economic downturn.

That is essentially what Todd Hirsch, Senior Economist with ATB Financial, asked us to consider as part of the February 10, 2012 Weekly Economic Bulletin (page 5/6 ), which was also published in the Calgary Herald on February 10, 2012. Don’t let complacency be your – and your business’s downfall. Don’t be a frog tossed into a pot of cool water that simply stays put when the heat is turned up. Get out of the pot.

How can we relate this principle to the self-regulation of Alberta’s real estate industry? The Real Estate Council of Alberta remains the governing, standards-setting body for the industry and will always be there to step in as a regulator when necessary. However, especially over the past few months during RECA’s self-regulation consultation, RECA is making it crystal clear that we expect each individual industry professional to step up to the plate. Just as businesses cannot expect government or governing bodies to make them successful, Alberta real estate industry professionals should not expect RECA to bear complete responsibility for the maintenance of high standards within the industry. Sound policies and legislation help, but individual industry members have an active role to play.

As professionals within Alberta’s real estate industry, you have a vested interested in ensuring it maintains a positive reputation and that requires personal accountability and responsibility, and a commitment to high standards and professionalism. As part of a self-regulated industry, industry professionals must take it upon themselves to be involved in the regulation of their industry as a whole; that is, in fact, what self-regulation is all about.

Being known as an industry or a profession with a sound regulatory structure and appropriately high standards improves the overall reputation and brings with it the potential for continued – and even greater – success.  As consumers come to expect more from Alberta’s real estate industry professionals – and the industry as a whole – it is as if the heat is being turned up on that proverbial pot of water.

How do you take ownership in Alberta’s real estate industry as one that is self-regulated?

Top 5 Inquiries to RECA

Have you ever wondered what questions other people are asking the Real Estate Council of Alberta (RECA)?

Here are the top five telephone call and email topics RECA information officers respond to:

1. Certified Criminal Record Checks: All industry members must obtain a Certified Criminal Record Check (CCRC) prior to becoming authorized by RECA. RECA gets thousands of calls each year from individuals wanting to know if RECA has received their CCRC from the Royal Canadian Mounted Police in Ottawa. The most efficient way to find out if RECA has received your CCRC is to email info@reca.ca, and include full name and birth date and your question.
2. Licensing Reciprocity: Last year, RECA authorized more than 70 industry members from other jurisdictions. The majority of those individuals came to Alberta from Ontario and British Columbia, but we have also authorized qualified individuals from Manitoba, New Brunswick, Nova Scotia, Saskatchewan and the United States. For more information on licensing reciprocity, click here.
3. AKA requests: Anyone wishing to use an also known as (AKA) name in their work as a real estate, mortgage brokerage or real estate appraisal professional, must first have that AKA name approved by RECA. RECA often fields calls from industry members wanting to immediately begin using an AKA name. The proper process is to put the request in writing and email it to RECA at info@reca.ca. You will get a response from RECA via email much quicker than by telephone on such AKA requests – just make sure you wait for confirmation from RECA that your AKA name has been approved before beginning to use it.
4. Reinstatement: RECA information officers receive thousands of calls and emails every year regarding re-instatement in the industry. Many of the calls and emails come from individuals wanting to know when they were last authorized and what they have to do in order to re-instate in the industry. Re-instatement information is available on the RECA website for real estate brokerage, mortgage brokerage and property management. To find out the specifics for your personal situation, your best bet is to send an email to info@reca.ca with your full name and date of birth, and any questions you have about returning to the industry.
5. Re-Licensing Education Program (REP) requirements: REP topics and course frequency is determined by RECA based on its experience administering the Real Estate Act and the feedback it receives from its advisory committees and industry associations. REP courses reflect consumer protection issues and other issues affecting the business of industry members. To find out if there are any REP requirements for your industry sector, review the current REP information on RECA’s website, here.

Alternative Business Models and You

A headline earlier this week on the Calgary Herald website read: “Commission-free real estate brokerage opening in Alberta.”

The article garnered some discussion on the Herald website, with some individuals weighing in that it’s about time Alberta had this sort of thing. What some of these readers didn’t take away from the article is that though this new brokerage says it’s commission-free, it is not working for free. There are still fees for the brokerage’s services. Also noteworthy is the fact this isn’t the first time a brokerage with such a business model has opened in Alberta and it likely won’t be the last.

Given the interest this news story generated and the fact the Real Estate Council of Alberta (RECA) received emails from industry members about the licensing of this brokerage, now seems like the perfect opportunity for a reminder that the RECA does not regulate or otherwise govern business models. Its concern is that authorized brokerages and industry members are acting in accordance with the Real Estate Act and Rules. It is not for RECA to decide if a brokerage is to operate in designated agency or under common law, nor does RECA concern itself with the commissions/fees charged by a brokerage (or real estate appraisers/candidates, as the case may be) unless they somehow breach the legislation (i.e. section 18 of the Act states, in part, that no industry member shall receive money in the course of carrying on business as an industry member unless, before receiving the money, the industry member has entered into a service agreement with the person who provides the money).

Do these alternative business models have a place in Alberta’s real estate industry? Based solely on comments on the Herald website, it appears some consumers believe they do. Whether or not they will be successful is an entirely different story altogether – and for that, only time will tell.

How do you feel about brokerages that operate with non-traditional business models?

Think Before You Tweet

In the world of SmartPhones and SuperPhones, many of us have done it. We’ve used our cell phone to take a picture of something or someone and immediately posted it on Twitter or Facebook for the world to see. Maybe it’s something that made us laugh. Maybe it was a parking job so horrible you just had to share it with the world. Maybe it was a hideous room or basement in a house you were showing to a potential purchaser.

Raise your hand if you’ve quickly taken to Twitter to post a photo of a house you just toured. You’ve never done that? Well, some real estate industry professionals have. Now the question is, should they?

Sure, you can argue that an individual who places their house for sale and opens it to potential purchasers realizes their home will have visitors poking around. But that doesn’t mean a seller should have to anticipate that those touring their home will take pictures of it and post them online for the purpose of mocking them publicly. Imagine a seller stumbling across that photo you Tweeted of their house, with a mocking caption.

Of course there is no rule saying a real estate industry member (or a member of the public who is out touring houses) cannot do this. You won’t find a mention of it in the Real Estate Act or the Rules. But just because it doesn’t say you can’t do it – doesn’t mean you should do it.

Do you agree – why or why not?

You Be the Judge

Recently RECA blogged about the factors when deciding sanctions against industry members.  With those factors in mind, consider this 2011 Ontario case, and You Be the Judge:

Facts:

1. A real estate industry member was licensed for 31 years without any disciplinary history.
2. In 9 or 10 transactions, and following a similar pattern, the real estate industry member assisted a consumer in buying properties at low prices, which were then “flipped” at substantially higher prices in a very short period of time.
3. The industry member knew the listing prices were a gross exaggeration of the actual value of the properties.
4. The industry member represented all parties in the transactions, prepared the paper work, including agreements for purchase and sale that did not represent the true value of the properties and which could be used to misrepresent their value to potential mortgage lenders, and took all his instructions from the consumer by telephone, fax or email.
5. The police investigated criminal fraud allegations against the consumer.  As part of the investigation, they spoke to the industry member but the industry member continued to assist the consumer in purchasing properties at low prices and flipping them at inflated prices.
6. The industry member was paid approximately $14,000 in commissions on the transactions.
7. The industry member properly documented every transaction and properly deposited and handled all monies paid to him in trust.
8. The industry member was co-operative during the police and regulatory investigations.

Would you?

• cancel this industry member’s licence;
• issue a conditional licence; or,
• sanction the industry member in some other way.

For your information:

The Ontario real estate regulator, Real Estate Council of Ontario (RECO), decided it would revoke (cancel) the licence of an industry member because “the past conduct of the industry member afforded reasonable grounds for believing the industry member would not carry on business in accordance with the law and with integrity and honesty.”

When a request was made by the industry member for another decision maker to consider the same facts, the Licence Appeal Tribunal concluded that the conduct, in its entirety, did “not provide sufficient grounds to conclude that the industry member will not carry on business with honesty and integrity and in accordance with the law,” but did make the following statements:

Decision Maker Statements re Industry Member Intent

1. The Licence Appeal Tribunal considered whether the industry member’s conduct provided reasonable grounds for belief that he would not carry on business in accordance with law and with integrity and honesty.
2. As an experienced industry member, he should have been suspicious.
3. The industry member ought to have known that this was unethical and should have been able to foresee the consequences of such transactions.
4. After being contacted by the police with respect to a fraud allegation against his client he should have had no doubt that continuing to deal with the consumer was a risk but the industry member chose to take the risk and ignore these warnings.
5. If the industry member was blind, it was willful blindness, motivated by the desire to continue to be paid commissions by the consumer to simply to do paperwork.
6. The industry member had early warnings that should have raised his suspicions but he chose to ignore them all.

The Tribunal, however, did conclude that because of the industry member’s activities, conditions needed to be placed on his registration as follows:

1. The industry member shall register and attend the “Ethics and Business Practices” course, scheduled by the Ontario Real Estate Institute of Canada, within 6 months of the date of this Order and provide proof to the Registrar of successful completion of this course no later than August 16, 2010.
2. For a period of five (5) years from the date of this order the industry member shall have his activities in trading in real estate closely monitored by his Broker of Record. The industry member shall provide proof, satisfactory to the Registrar, that his Broker of Record is willing to comply with this condition.
3. For a period of five (5) years from the date of this Order the industry member will immediately notify the Registrar in writing of any complaints made against him by members of the public or other registrants under the Act, and he shall provide details of all such complaints and any documentation that the Registrar may require.
4. For a period of five (5) years from the date of this Order the industry member shall not apply for registration as a Broker of Record nor shall he be permitted to be designated as an alternate broker to exercise and perform the powers and duties of any broker of record in the absence of the broker of record of a brokerage.
5. For a period of five (5) years from the date of this Order the industry member shall not be a sole proprietor, partner, an officer or director or manager of a real estate brokerage.

The decision of the Tribunal was judicially reviewed and upheld: Baxter v. Registrar (REBBA), 2011 ONSC 2497.

If you were the decision maker in this case, what would you have done?

Professionals Beware - First Canadian Debt Solutions

Calgary real estate industry members have contacted the Real Estate Council of Alberta about emails they have received from a company called “First Canadian Debt Solutions.” The emails appear to be sent by a company employee located in Ontario who is looking to partner with Calgary real estate industry professionals who could provide “Letters of Opinion” for Calgary-area properties. Though “Letter of Opinion” is not a defined term in the Real Estate Act of Alberta, it is clear from the emails that First Canadian Debt Solutions is looking for Alberta real estate industry professionals to provide written value opinions of Calgary-area properties. The emails state that “For a letter of opinion: The initial house value needs to be a low ball equaling the same if not less than the letter of opinion.

This partnership request is problematic for a couple of reasons.

One, Alberta real estate industry professionals are not authorized to carry out this type of request. Alberta real estate industry professionals often provide a comparable market analysis or estimate of market value in the course of trading in real estate – but that activity may only be completed in relation to a trade or potential trade in real estate. The context of the emails from First Canadian Debt Solutions suggests it is not intending to engage the services of an Alberta real estate industry member for a trade or potential trade in real estate, but rather that it will be using the Letters of Opinion for financing decision making.

Two, individuals who are authorized as real estate appraisers are prohibited from accepting an appraisal assignment that is contingent on the result. First Canadian Debt Solutions, through these emails, is requesting that the Letters of Opinion provided be “low balls.” That could very well be why First Canadian Debt Solutions is sending these emails to real estate industry professionals as opposed to licensed appraisers because they know appraisers are prohibited from accepting such an assignment.

The only piece of advice RECA can give in relation to these emails is to hit “delete.”

[RECA would like to thank RE/MAX Real Estate (Mountain View) for bringing this scheme to its attention]

Have you received any such emails from First Canadian Debt Solutions or any other similar companies?

creb® Tradeshow Wrap-Up



As much as the Real Estate Council of Alberta is a tremendous supporter of social media and  new technology – there is nothing RECA enjoys more than meeting industry professionals IRL (in real life, for those who don’t know Twitter-speak). Two days ago, RECA staff – and a number of Council members – attended the creb® forecast and tradeshow. The creb® tradeshow is always a great opportunity to meet and talk to industry professionals face-to-face. The tradeshow as a whole was well-attended by individual industry professionals, representatives from many of the industry associations and related stakeholders, and the forecast breakfast drew 1,100 Calgary-area creb® members. RECA staff figure they chatted with a couple hundred Calgary-area real estate industry professionals during the span of the five-hour trade show.

These shows are also a great demonstration of the strong desire for collaboration that exists within our industry. Just as an example, one of the afternoon sessions, a Leadership Panel, brought together representatives from the Canadian Real Estate Association, the Alberta Real Estate Association, creb®, RECA and the Real Estate Insurance Exchange. And though that hour-long panel was only a brief chance to bring a number of important issues to the forefront, it serves as an excellent means of highlighting the willingness within the industry to sit down and have these conversations.

For those of you in the mortgage sector, keep your eyes open for information about the CAAMP Regional Symposium and trade show, which will be held in Calgary on April 5, 2012. For the first time ever, this year, RECA will be an exhibitor at that trade show and looks forward to chatting with Alberta mortgage industry professionals.

Did you make it to the creb® show? Why do you personally attend trade shows?

Conditional Sales: Obey Thy Client

The Calgary Real Estate Board (creb®) recently changed their rules to leave the decision to report the conditional sale of a property up to the seller. In the past, creb® members were required to indicate when a selling client’s property was conditionally sold. This decision brings creb® rules in line with several other boards in Alberta that have had similar rules for years.

The Real Estate Council of Alberta (RECA) takes the position that this decision is in line with the Real Estate Act Rules, particularly section 57, which states:

57 The basic obligations of an industry member who is in a sole agency relationship with a seller are:
(a) to use best efforts to market the property and to promote the interests of the seller;
(d) to obey all lawful instructions of the seller;

Through this change, creb® members can now truly follow the lawful instructions of a seller with respect to the reporting of conditional sales. Previously, if a seller asked their real estate representative not to disclose a conditional sale, creb® members were left with no choice but to act counter to their seller’s lawful instructions in order to abide by creb® rules. There is nothing in the Real Estate Act and Rules that prohibit seller representatives from keeping this information confidential and RECA believes this creb® rule change better enables seller representatives to promote the interests of their seller clients.

RECA has participated in Twitter discussions with REALTORS® affected by this rule change in Calgary, and it appears buyers and sellers are already adapting. In conditional sale situations it becomes even more important for a real estate industry professional to discuss the advantages and disadvantages of each option (disclosure vs. non-disclosure) with your selling and buying clients. It speaks to the tremendous value that real estate industry members can provide to their selling and buying clients vis a vis their expert, professional advice. Real estate professionals help their clients make informed decisions by providing information and they must ensure their clients understand the implications of their decisions before asking them for their lawful instructions.

Whether representing a buyer or a seller, keep in mind it’s your client’s best interests that must always be put first. Know what your client wants, know what their areas of concern are and ensure you receive their timely and informed consent for everything you do on their behalf. And remember, there’s nothing preventing a buyer’s representative from asking a seller’s representative if a property is conditionally sold.

Do you agree with the creb® rule change regarding the disclosure of conditional sales? What has been your experience with it so far?

Join the Conversation: Self-Regulation and You

We’ve heard it time and time again. Industry professionals want to raise professionalism within Alberta’s real estate industry. The Real Estate Council of Alberta (RECA) has been talking about putting the “self” back in “self-regulation,” but in order to do so, we need an understanding of what self-regulation is, what it requires and why it is so critical to our industry.

To that end, the Real Estate Council of Alberta has drafted a Statement on Self-Regulation, which will form the basis for a one-day symposium on self-regulation in March 2012. Industry stakeholders from across Canada will come together at the symposium to talk about self-regulation, what it means in our industry and how we can continually strengthen and enhance it.

Before that, though, RECA wants to talk about self-regulation with Alberta industry professionals and will be hosting a Twitter chat to do so on Thursday, January 26, 2012 from 10-11 a.m. MST. To join the conversation, go to http://tweetchat.com/room/RECAchat. The hashtag for the discussion is #RECAchat and we encourage you to follow along and join the conversation.

To read the statement on self-regulation, which has been approved by Council in principle, click here.

Some other things to think about leading up to the Twitter chat:

• What does self-regulation mean to you and why is it important to you?
• What do you see as the major challenges and opportunities for RECA as it works towards even more effective self-regulation for Alberta’s real estate industry?
• What role do individual industry professionals, brokerages and industry associations have when it comes to self-regulation?
• What advice do you have for the Real Estate Council of Alberta regarding “right touch” regulation and effective self-regulation?

If you’re not available to take part in the Twitter chat, or if you want to provide additional feedback to Council, we encourage you to complete the online survey, which is available here.