Issues in Real EstateA Primer on How Municipalities Should Deal with Realtors

Terry LandonBroker of Record, Re/Max Cornwall Realty

Overview of Presentation

• A quick overview of Ontario’s Real Estate Industry

• The PROs and CONs of using a real estate professional to handle real estate transactions

• How to market municipal business parks and vacant buildings

Terry LandonChair, RECO Education Committee

Broker of RecordRe/Max Cornwall Realty Inc.

Ontario’s Real Estate Industry

• As of April 2011, Ontario had 62,964 registrants• 36,940 salespersons • 10,292 provisional salespeople• 11,112 brokers • 3,411 brokerages with 1,209 branch offices

• Since 2002, the number of registrants has increased by over 45%, and in the past couple of years, the number of brokers has increased by 25%

• A large percentage of salespersons have 2 years or less of experience

Ontario’s Real Estate Industry

• The majority of real estate professionals (but not all) belong to organized real estate Other

Registrants

Registrants Belonging to Organized Real Estate

(Boards, OREA, CREA)

Professional Organizations

• The Canadian Real Estate Association (CREA)• represents its members at the federal level of government • acts as a watchdog on national legislation that pertains to the real

estate industry • CREA owns the MLS® trademark and has a proprietary interest in

the REALTOR® trademark.

• Ontario Real Estate Association (OREA)• represents 45,000 brokers and salespeople who are members of

42 real estate boards• develops and publishes standard forms

RECO

• The Real Estate Council of Ontario (RECO) • regulates the activity of trading in real estate• a self-managed, not-for-profit corporation• Responsible for administering the Real Estate and Business Brokers

Act, 2002 (REBBA 2002)• Protects the public interest• Encourages professionalism

REBBA 2002

• Real Estate and Business Brokers Act, 2002• Administered by RECO• Ministry of Small Business and Consumer Services• Governs the trade of real estate in Ontario

» Who can sell in Ontario?» Advertising Standards

• Real estate professionals must follow a Code of Ethics• Penalty for breaking the rules is severe• Loss of registration• Public humiliation

Representation

• Buyer Representation• Seller Representation• Multiple Representation

• Represents both sides • Usually limits on permitted disclosure• Must declare & get consent or can’t act

• Customer Representation

Commission

• Commission rates cannot be set • A example commission would be 5%• Buyer’s rep usually gets 2.5%, Seller’s rep gets 2.5%• Leasing commissions usually paid on net rents are similar in rate• Fees can also be flat rate or hourly

• Rate can fluctuate due to a number of factors• Economy• Prior agreement (negotiation) long time clients• Scope of work

ICI (Commercial)

• ICI is a special part of the real estate industry• Stands for Industrial, Commercial, Investment• ICI Brokers are a breed apart

• Often higher level of Education• Often bigger commissions mean more is at stake• Results often takes more time than residential sales• Requires a more sophisticated knowledge set• Will spend more $$ on marketing• Will jealously guard clients• Not necessarily members of organized real estate• Good ones often have big egos

Big Town ICI Brokers

• More experienced, more connected• May not be as committed to your

community as you might think• Distance can cause problems may

arise in arranging or attending showings & access to building

• Less familiar with local rules & regs • Usually don’t know the local players• Foe? Likely not. • Friend? Likely not.

Small Town ICI Brokers

• Usually more committed to the property & community

• Likely more friend than foe• Less experienced, less connected• Easy to arrange personal showing &

direct access to the building• Usually more local knowledge

Zoning, Official Plans• More likely to know the local players

(EDOs, CBOs, politicians, lenders, surveyors, engineers, etc.)

Pros and Cons of Hiring Real Estate Broker

• Should the municipality hire a real estate professional to handle real estate transactions?

Pros Cons

• Property is listed on MLS• Marketing expertise• Save staff time and resources• Knowledgeable Professional• Arms length negotiations• Insured (Errors/Omissions)• Best possible price

• Cost• Need to manage buyer’s realtor• Less control of prospects• Local politics

Consultants

• Experienced real estate agents can be hired as consultants, to perform services outside of the normal real estate transaction

• Appraisals/Opinions of Value• Market Studies• Prepare, Review and Present Offers• Assist with Land-Use Planning

– Zoning By-Law Review– Official Plan Review

Real Estate Asset Management

• What the benefits of developing a municipal real estate asset management plan?

• Inventory of public lands• Forecast for future needs

– Landfill, Snowdump– Recreation– Road Widening– Employment lands

• Should the municipality keep land deemed to surplus?

Employment Lands

• How much employment lands does a municipality need?

• Different sectors have different needs• Manufacturing vs Logistics vs Service/Light Industrial

• Should the land be serviced?• Water/Sewer• Utilities / Road

• What are your competitors doing?• Cost• Supply• Development Charges

Case Study : Cornwall

• Over 350 acres sold in less than 5 years• Shoppers Drug Mart DC: 70 acres• Boundary Properties DC: 120 acres• Target DC : 160 acres• Many smaller sites in support of these DC’s

• Two other competing locations for Target• Both involved situations that required land assembly• Cornwall had all the land under one owner, the ability and

willingness to service on the Buyer’s timelines

Marketing Your Business Park

• What does Investment Ready mean?• Services• Utilities• Zoning• Reports• Site Plan Control

• Commercial Parks vs Industrial Parks?• Realtor Agreements?• Brownfield program?

Marketing Vacant Buildings

• Basic Information to Gather• Area, Ceiling Height, Dock-level doors, Service Capacities• Photos, including aerials/GIS mapping• Zoning, Site Plans

• Assessing the Property• Do you need a property value assessment?• Environmental Issues• Obsolescence

• Your Role, the Broker’s role• Site tours• Joint Venture Marketing

Marketing Opportunities

• Offline • Brochures• Classified Ads• Direct Mail• Signage

• Online• Broker website, MLS • Municipality Website• Ontario East website• Social media

Brochures

• Investors still ask for hard copies

• Good for trade shows

• Easy to make available online as PDFs

Video Brochures

• Videos are easier to produce than ever before

• Short 2 minute virtual building tour to showcase its features

• YouTube allows you to host the videos for free

Online Listings

• Most cost effective way to reach investors• Still some challenges with regards to database

integration

Realtor Websitewww.remax-cornwall.ca

Municipal Website(if available)

CREA Websitewww.icx.ca

Ontario Websitewww.InvestinOntario.co

m

Listings

Let the investor

choose what website they want to visit,

just make sure that all

data is available

Summary

• Using the skills and experience of a real estate professional can be beneficial

• Often both parties have the similar goals : to see the property change hands and to see new development

• Often the realtor is the first point of contact with the investor – take advantage of that!

Terry Landon• Terry Landon and Jamie Cameron founded RE/MAX Cornwall Realty Inc. in 1982, and

together they helped the office to become the preeminent real estate brokerage in the area. Terry specializes in commercial real estate.

• Terry is an advocate for the City of Cornwall and region, and has played a key role in several economic development initiatives. He helped to create Team Cornwall, and is currently the President of the Cornwall and Area Chamber of Commerce.

• Terry has also played a key role in the evolution of real estate practices. He is a two term Past President of the Cornwall and District Real Estate Board, and was a founding Director of the Real Estate Council of Ontario. He was elected chair of the Real Estate Council in 2004/2005. He continues to work with RECO and presently is the Chair of the Registrar's Education Committee.

• Mobile: 613-551-102• Office: 613-938-8100• E-mail: landon@remax-cornwall.ca