PHASE 1: THE FINE PRINT
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Care has been taken to trace and acknowledge ownership of copyright material contained in this publication. A general copyright acknowledgement is included under Acknowledgements, along with references inserted within appropriate text or placed in illustrations, as the need arises. OREA will gladly accept information that will rectify any reference or omission in subsequent editions. All references to proper names are fictional, and any similarity to actual persons living or deceased is entirely coincidental.

DISCLAIMER
The course content is summary in nature and not intended to replace direct research of original source documents and expert advice. Real estate practitioners and consumers should seek appropriate counsel in matters relating to real estate. At all times, diligence and prudence should be uppermost as all real estate transactions are unique. The course materials in this publication are strictly intended for educational purposes only.
The Ontario Real Estate a__ociation is not responsible for any deficiencies, defects, errors, omissions, completeness, suitability, accuracy, currency or applicability of any contents contained herein. Further, the Ontario Real Estate a__ociation disclaims any liability for loss or damage, whether direct or consequential, arising directly or indirectly from the utilization of any of the information, facts, clauses, forms, or any other items hereinafter set out. The a__ociation does not warrant and is not responsible in any way for the adequacy, sufficiency, applicability, accuracy, currency or suitability of materials provided by way of pre-printed forms, standard clauses, or procedural matters set out in this text. The Ontario Real Estate a__ociation disclaims all warranties of any kind, whether express or implied, including without limitation any warranties of merchantability or fitness for a particular purpose.
This disclaimer applies regardless of whether this text is made available to you in paper or electronic form. Where you access this text by means of the Internet or other electronic transmission, you expressly agree that The Ontario Real Estate a__ociation, its service providers and business partners are not responsible for any damage or loss of data that may result to you, your business or your computer system from your use of this text or your accessing any related web site or other means of electronic data transmission owned or operated by or on behalf of the a__ociation. The a__ociation makes no warranty or representation that any web site or other means of electronic data transmission will meet your requirements, will be uninterrupted, timely, secure or error-free or that defects, if any, will be corrected.
The Ontario Real Estate a__ociation reserves the right to change or revise text in this publication, and will not be liable for any loss or damage incurred by the student as a result of such changes or revisions.
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PREFACE

The Ontario Real Estate a__ociation takes great pleasure in offering this program. The course curriculum prepares individuals to enter the real estate profession with an acceptable level of technical knowledge, competence, and skills. OREA fulfills many of its responsibilities to the profession, the Real Estate Council of Ontario (RECO), and the citizens of Ontario by providing learning opportunities so that individuals, either contemplating registration or currently holding registration as a salesperson or broker, can receive appropriate and timely training.
The real estate profession makes a valuable contribution to the economy of Canada and the welfare of its people. Congratulations on taking the first step towards real estate registration in Ontario . The a__ociation hopes that successful completion of this Real Estate as a Professional Career program will inspire and motivate you to pursue advanced educational offerings throughout this new career.

ACKNOWLEDGEMENTS

A course of this scope is only possible with the a__istance of many dedicated professionals committed to the advancement of real estate skills and knowledge. A special note of thanks is owed to the Real Estate Council of Ontario and, more particularly, the Registrar and staff who a__isted in providing background information for this publication.
A further debt of gratitude is owed to various government departments and agencies who a__isted with information and published materials. A special thanks is also extended to other provincial a__ociations for sharing selected text materials in the interest of uniformity and consistency.
This learning design/system* meets and exceeds national standards as set out in the National Code of Real Estate Education, advances the labour mobility provisions contained in the Agreement on Internal Trade for reduction to barriers to education certification throughout Canada, aligns with curriculum standards established by the Alliance for Canadian Real Estate Education, and is approved by the Real Estate Council of Ontario.
The terms REALTOR(r) and MLS(r) are identified as design marks in the introduction to this publication. No attempt has been made to designate all words or terms in which proprietary rights might exist. The inclusion, definition, or description of a word or term is provided for general information purposes only and is not intended to affect any legal status a__ociated with the word or term as a trademark, service mark, or proprietary item.
RECO
The Registrar, Real Estate and Business Brokers has approved this course pursuant to Section 14 of Ontario Regulation 986 made under the Real Estate and Business Brokers Act.

MODULE I:
THE REAL ESTATE PROFESSION

Today was like any other day for most Ontario residents and certainly Torontonians. Commuters dutifully trekked b__per-to-b__per down the 404 toward the Parkway. Near Bathurst, a fender bender was forcing anxious drivers to seek alternates on the westbound 401. The airport area was relatively quiet with traffic spotters reporting a quiet morning.
Eastbound 401 travellers had open roadat least by Toronto standards. The trip across the city was surprisingly uneventful. With visors strategically positioned, sun-glassed drivers exited at Leslie Street with near-military precision. Traffic lights, a sharp turn, the next left to Duncan Mill Road, and the OREA sign was in sight.

An 8:00 a.m. early-bird crowd was mingling, sipping coffee and exchanging pleasantries. New arrivals chatted briefly, gazing expectantly at the soon-to-be unlocked main doors. Unmistakable excitement, mixed with caution, was in the air. Real estate classes would begin shortly.

Phase 1 Real Estate as a Professional Career
Module I. The Profession Session 1 of 3 A Career in Real Estate

A CAREER IN REAL ESTATE

The development of real estate brokerage in Canada parallels the growth of the nation. Brokers, acting for the English at Annapolis Royal in Nova Scotia in 1604-05, then the French at Quebec City and Montreal, were the first to apportion land for permanent holdings in Canada. Early colonial governments of both Upper and Lower Canada appointed brokers for the distribution of land for permanent settlement. The Hudson Bay Company employed qualified persons in what today could be identified as real estate transactions.
As Canada grew, so did real estate ownership and the brokerage tradition. Territorial governments of what are now the prairie provinces named brokers in the late 1800s. Soon, real estate brokers and salespersons were pursuing their livelihood throughout the nation. Today, as in past centuries, real estate property holdings and development are vital to the growth and prosperity of this country. Real estate practitioners in Ontario have, and continue to make, an important contribution to that process.
Phase 1 Real Estate as a Professional Career
Module I. The Profession Session 1 of 3 Session Guide

SESSION GUIDE

THESE TOPICS ARE COVERED IN THIS SESSION:
REAL ESTATE: A VITAL PART OF OUR SOCIETY
An Ontario Portrait
Real Estate: A Prominent Role

THE CAREER OF A LIFETIME
Specialty Fields
Preparing for Today's Buyer

THE SALESPERSON'S ROLE
Legal Responsibilities
Defined Roles/Authorities

Salesperson/Broker Relationships
Listing/Marketing Activities
COMMISSION SALES & COMPENSATION

Commission
Commission Sharing: Distributions,

Allocations, and Splits
Compensation Terms

KNOWLEDGE INTEGRATION

LEARNING OUTCOMES

AT THE CONCLUSION OF THIS SESSION, STUDENTS WILL BE ABLE TO:

Briefly outline the importance of real estate activity from national and provincial perspectives.
Detail key career expectations, opportunities, and the specialty fields.
Outline the salesperson's legal responsibilities, status as an employee vs. independent contractor, and typical listing/marketing activities.
Perform selected commission calculations involving listing and selling commissions.
Detail prevalent commission calculation and commission sharing methods
involving one or two brokerages.

REAL ESTATE:
A VITAL PART OF OUR SOCIETY

Land ownership is of paramount economic, social and political importance in Canadian society. A real estate purchase is a significant lifestyle decision and constitutes the largest single element of most people's personal wealth. Corporate acquisitions reach into the billions, as companies acquire large retail commercial and industrial facilities, utility companies consume countless miles of rights-of-way, farming involves thousands of hectares, and residential developers routinely construct thousands of homes annually.
Real estate is also integral to social and political order. Civil law enshrines real property ownership rights, while federal and provincial statutes reaffirm and regulate such rights. Owners of real property enjoy advantages over the non-owner, e.g., credit is often more freely granted to those who own their own property. Most important of all, shelter is a necessity for all Canadians. How real estate is developed and what shape new communities take, directly affects the very fabric of society, the quality of life, and our livelihood. Within these dynamics, real estate salespersons and brokers prudently go about their business. Few things happen without real estate. Little wonder that many seek the opportunity to guide others in its purchase and sale.

AN ONTARIO PORTRAIT

Real estate is big business in Ontario. During the year 2000, for example, total dwelling units topped 4,300,000 with approximately 58% being single-family homes. According to Statistics Canada, Ontarians are big boosters of home ownership, with 64% being owned properties, as opposed to rental accommodation. Clearly, an ample market exists for anyone willing to work toward a successful real estate career.
Those seeking specialty fields will discover an expanding commercial and industrial marketplace. For example, the value of non-residential building permits increased 45% over the period 1997 - 2001. Commercial construction currently accounts for 50%, with industrial at slightly more than 20%. The balance consists of institutional and government sector activity. Opportunities continuously unfold for those who professionally service these market segments.
Ontario not only represents the backbone of Canadian economics, but is directly in step with the expanding high tech world. Over 64% of all households were connected to the Internet in 2002 (as opposed to 33% five years ago). In terms of venture capital (an indicator of the commercializing of new technologies and ideas), Ontario ranks highest in Canada both in total dollars invested and dollars per capita. Even more important, Ontario wage earners in 2001 led all provinces in exceeding the national average by a full 7% and its nearest rival by 4.2% (Alberta). Little wonder that real estate thrives in this expanding, productive environment.
ONTARIO BUILDING PERMITS: TOTAL VALUE
(Source: Statistics Canada, CANSIM II Table 026-0003)

MARKET MEMO

THE EXTENDED GOLDEN HORSESHOE

Over 6.4 million of Ontario's total residents now reside in the extended horseshoe reaching from Oshawa to Niagara Falls, including areas north to Richmond Hill and west to Kitchener- Waterloo. Twenty-two out of every 100 Canadians now live in the horseshoe. Almost one-half of all the population growth in Canada occurred there since the last census (1996). Little wonder that residential condominium developments are re-shaping the Toronto skyline, as young adults flock to metropolitan areas. But moving goes beyond the young. Ontarians are generally mobile, given that over 40% packed their bags and relocated during 1996 - 2001. Combine growth statistics with mobility and a dynamic real estate mosaic emerges... a patchwork of differing needs, households, and economic capabilities that must be continuously addressed by real estate professionals.
Source Statistics Canada, Census 2001 Summaries.

Module I. The Profession Session 1 of 3 A Prominent Role

REAL ESTATE:
A PROMINENT ROLE

Real estate is typically in the foreground when evaluating economic performance. Those in the know constantly track the ups and downs of building permit volumes, given their widely accepted status as key economic/market indicators. Rising numbers typically point to increased capital flowing to construction, reflecting economic growth and business confidence. Those same numbers also foretell of improving job prospects, heightened demand for services (including real estate salespersons and brokers), and broad community based economic benefits.

HOUSING FOCUS
THE RIPPLE EFFECT

Salesperson Lane meets Mr. and Mrs. Smith at the open house in Windfield Crossing, scant yards from framers, plumbers, and other trades busily completing new homes. Three months ago, pasture and neatly s___ed survey stakes were all that greeted passers-by. With a simple 'yes' and signing on the dotted line, the Smiths have unwittingly fired the economic engine, as so many others have done before. The ripple effect begins:
* Building tradespeople to construct the home.
* Future tax revenue for the municipality.
* Profits and return of capital for the developer.
* Profits and cash flow for the builder.
* Additional consumers for the local marketplace.
* Commissions owed to the real estate brokerage and salespeople.
* Fees for lawyers, mortgagees, and others involved in the sale/closing.
* Fees for other experts (inspectors, appraisers, and surveyors).

But the story doesn't end there. Research suggests that the housing sector accounts for a significant component of the national economy. New home buyers typically spend an additional 20 - 40 cents for every dollar invested in a home. For example, a new home selling for $200,000 in Windfield Crossing could generate an additional $40,000 - 80,000 in needed services (landscapers, decorating, draperies, outside improvements, appliances, etc.).

The ripple extends even further. Ongoing maintenance is an economic fact of life. That same property will necessitate ongoing home related services over the years, as it forms part of the resale housing stock. The most popular include carpet cleaning, painting, plumbers, electricians, cleaning services, and roof repairs.
Real estate salespersons help make the economy happen. Just a simple signature starts the ripple effect that lasts for years and years.

Phase 1 Real Estate as a Professional Career Module I. The Profession Session 1 of 3 Career Of A Lifetime

THE CAREER OF A LIFETIME

Personal determination and commitment are vital in an increasingly refined and complex consumer marketplace. Both challenges and rewards await those who enter this profession. Personal sacrifices are a reality in a business well known for long hours. Real estate is a 24/7 event driven by consumers and the unending ebb and flow of market negotiations.

Today's professional is more tech-savvy than his/her counterparts of the last decade. Sophisticated property databases, electronic transactions, and the power of the Internet have enveloped the marketplace.

Successful real estate salespersons are people-oriented and their impact is far reaching, i.e., from families seeking the ideal neighbourhood to investors uncovering hidden cash flow opportunities. Effort typically brings financial rewards, but caution is emphasized. Money management is key as earnings can vary dramatically.

Information is power in today's marketplace. Successful salespeople keep in step with the newest ideas and techniques, the latest market data, and the most up to date information on changing trends, legislation, and marketplace dynamics. In Ontario, real estate is a happening that never ends.

While residential sales constitutes the bulk of Ontario real estate activity, many fields provide abundant challenges and opportunities. Eight popular specialities are highlighted. However, the demand for expert knowledge goes well beyond these to government services/consulting (ministries, agencies, and municipalities) large corporations (banks, trust companies, insurance companies, and utilities), developers with extensive land holdings, real estate franchises, investment syndicates, real estate investment trusts, and multi-residential and commercial landlords.

MARKET MEMO
MATCHING YOUR SKILLS
PREPARING FOR TODAY'S BUYER

Where do listings and sales come from? For new salespersons, a sphere of influence is key. Research suggests that more than 50% of sellers select a salesperson based on prior contact with that individual or a referral to that person from a friend, acquaintance, or relative who was highly satisfied with service provided.

Becoming known and respected are long term goals of every successful salesperson. Advertising is also an essential component. For sale signs, newspaper advertising, and the Internet are the most widely used marketing tools.

Expect long hours, as most buyers want to inspect various houses prior to making a decision. Obviously, time spent searching is usually dictated by market dynamics. The more available properties; the more time to point of decision. Conversely, strong seller markets and limited listings make for motivated buyers and shortened decision making.

CURIOSITY
INSIGHTS FOR YOUR NEW CAREER

What do the typical buyers do these days? The National a__ociation of REALTORS (USA) conducts periodic buyer/seller surveys. Here's a few facts to consider:
* Forty-two percent of homebuyers purchased their first home in 2001.
* Buyers typically took seven weeks and visited 10 homes prior to making the buying decision.
* Forty-one percent of homebuyers used the Internet as an information source.
* Over 50% of homesellers selected a salesperson based on previous contact with that individual or upon a referral from a friend, relative, or another broker.

STUDY LINKS

ENC
* Residential Resales
Residential Resales
The residential resale specialty involves extensive work with consumers and their changing needs and wants in the marketplace. Typical clients are sellers who are selling the family home due to employment, monetary, or family changes. Typical prospects are buyers relocating due to the same motivating factors as those of sellers. In both cases, emotional issues are involved and people skills become paramount. Residential resale work also calls for irregular hours, since most activities are dictated by the availability of both sellers and buyers. Open houses are routinely scheduled on weekends to maximize market exposure. Offer presentations and showings often involve very late hours. Phone calls at home at all hours are the norm for residential salespersons and very seldom is it possible to totally get away from the job.
Application
To appreciate the type of work involved, the progress of a typical residential transaction (if in fact any transaction can be classified as typical) is detailed.
- The Listing
- The Agency Obligation
- Prospecting
- Qualifying and Showing
- Obtaining the Offer
- Presentation, Acceptance, and Delivery

* New Home Sales
New Home Sales
Activities of a new home sales specialist differ markedly from resale activities. Also, under selected provincial real estate acts, builders or developers may employ their own sales staff without enlisting the a__istance of a real estate brokerage. Procedures regarding employed sales staff will vary by province. For example, in some provinces builders are permitted to employ sales staff and not be registered under the Act. In others, the builder must be registered. In either instance, such sales staff normally have to limit themselves to selling only the properties owned by their employer, and would be in violation of the law if they handled any other sales or accepted any form of compensation related to sales of other properties. This is noteworthy, since many buyers of new homes already possess properties that must be sold to facilitate the new home purchase.

Application
Unlike resale homes, salespeople have little direct involvement with the listing function, or in the offer presentation. The function resembles a retailing situation involving qualifying the buyers and closing the sale. Typically, fixed hours of floor duty time are established during which a salesperson will be on site in a model home, or other site office. Showing may consist of furnishing information, demonstrating diagrams and plans (if no models are yet constructed), providing specifics, and answering buyers' questions.
Salespeople qualify buyers both financially and in terms of needs and desires. Prepackaged financing is usually available. Ultimately, counselling and discussions centre on the preparation of an agreement/contract. Details of possession date, financial terms, conditions, and such matters as colours and upgrades of materials have to be determined.
At present, no universally accepted standard agreements/contracts exist for new homes, either under construction or fully completed. Practitioners sometimes use standard agreements/contracts designed for resale homes, however, substantial amendments and additional schedules are required, as several issues unique to new home construction must be addressed.
Provincial
See applicable reference materials.

* Condominium
Condominium
Insurance requirements for condominiums consist of three separate groups.
* The condominium corporation requires insurance for the unit structures (excluding any improvements or betterments made by the owner), and common elements. In addition, the corporation is responsible for liability coverage, any bonding coverage required for employees and directors/officers, and director liability.
* The unit owner should insure any improvements (built-in items, carpeting, and personal belongings), and generally any risk not covered by the corporation (including the owner's liability).
* Renters should ensure that all personal belongings are insured and appropriate legal liability coverage is obtained.
Insurers typically provide owner policies for condominium owners structured on the same general basis as is the case for residential property. Tenant package policies are structured for both condominium tenancies as well as other rental accommodation. Real estate practitioners should note that the rental agreement for a condominium may specify that the tenant provides coverage for those items owned by the landlord on the premises, e.g., appliances and carpeting.

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* Rural, Recreational, and Agricultural Sales
Rural, Recreational, and Agricultural Sales
Specializing in one or more areas encompassing the broad category of rural, recreational, and agricultural sales is an enormous challenge. In some areas of Canada, depending on local economics and prevalent land uses, real estate practitioners may be able to specialize solely in recreational properties or sales of farms. In other locales, a mixture of rural residential, recreational, and agricultural sales is required to build a worthwhile career. Consequently, it is virtually impossible to identify areas of specialization.

In the western provinces, prime agricultural land and its significant contribution to the provincial economy provides an excellent basis for agricultural sales specialities. In Manitoba, for example, wheat and barley crops account for up to one-half of the harvested crop area. Agricultural and related industries contribute an average of 5 percent to the provincial gross domestic product. Practitioners must have knowledge of farmland tenure and ownership, farm operating agreements, and land leasing arrangements, e.g., crop share lease, cash rent lease, and flexible cash lease.Many other issues come into play including land survey systems, the quality of soils (e.g., texture, fertility, and soil capability), the operation of farm marketing boards and agencies, quotas and special crop contracts, and various statutes impacting the ownership and operation of farms. Agriculture can also be very diversified with special crops such as sugar beets, dry beans, potatoes, flaxseed, soy, sunflower seeds, buckwheat, and field peas. The livestock industry of cattle, hogs, dairy cows, sheep, and poultry also make significant contributions. The dairy industry represents another important dimension of agricultural production.

Practitioners in other areas of Canada may be involved in the sale of farmland not only for farming purposes but also for redevelopment and hobby/recreational uses. Although most workable land is used for agriculture, the demand for commercial, industrial, and residential development of this land is increasing, especially in heavily populated areas of the country.

Selling land for redevelopment can be lucrative, but requires considerable knowledge. Redevelopment of agricultural land usually takes place close to, or inside, the boundaries of urban centres. It is crucial to know the value of land and the permitted uses. To provide good service to clients, the sales representatives must be familiar with official plans and zoning by-laws. In addition, the sales representative would have to be aware of the saleability and demand for the product, whether that be residential building lots, high-density residential uses, or commercial and industrial uses.

Recreational properties represent a significant portion of activity for many practitioners located in vacation areas. Detailed knowledge of zoning by-laws and restrictions is critical for persons specializing in this field. Cottage and recreational properties fall under statutory requirements, ranging from regulations regarding the installation of wells and septic systems to required permits for construction of waterfront improvements, e.g., wharfs, docks, boathouses, and shoreline alterations. Further, many cottage properties are only accessible by private easements and a knowledge of limitations and potential problems arising from such access systems must be known.

Rural specialists are commonly involved in property types ranging from single-family residential to recreational businesses. In many Canadian areas, the rural economy requires knowledge of different types of business operations. The veteran urban salesperson can be bewildered by unique local customs and practices. Most have little experience in the marketing of worm farms, retreats, marinas, horse farms, and a host of other unique properties. An added difficulty is the sparse availability of comparables when establishing value for such enterprises. As well, distances are greater, access is sometimes limited, and weather conditions are a consideration.

* Property Management Specialty
Property Management Specialty
Property management offers great opportunities for real estate practitioners. The total value of buildings in Canada is probably the greatest single form of invested capital. Each year rent collected from these buildings represents a substantial portion of the national income. Thousands of people derive employment from the maintenance and servicing of these buildings, and governments derive significant tax payments from these properties. Yet few people realize the need for efficient and organized management of this vast investment.
Application
Property management is often mistakenly confused with the activities of rental agencies or even building superintendents. Under property management, the manager not only acts as administrator for the owner, but typically a__umes all executive functions necessary to carry out agreed objectives, thus relieving the owner of the burdens normally a__ociated with the operation of an income-producing property. Responsibilities and activities may vary, from contracting for labour and services necessary for property upkeep, to matters as extensive as major renovations or redevelopment projects and initial renting related thereto.
The duties of a property manager basically fall into four areas.
- Keeping the property leased;
- Collecting property income;
- Paying the property expenses; and
- Maintaining the physical integrity or soundness of the property.
Although many property managers or property management companies still manage all types of properties, in this age of specialization, an increasing number of specialists manage only specific kinds of properties.

Property management is a people business and requires better than average people skills. Property managers are frequently required to communicate at widely differing levels. Personnel management and the settling of disputes is a commonplace activity, as is the negotiation of contracts. With respect to residential properties, statutory requirements govern many aspects of landlord/tenant rights and the regulation of rents.
Property management has developed into a highly specialized branch of the real estate profession. As an organized profession, property management is of relatively recent origin, dating back to 1933 when the Institute of Real Estate Management was founded under the auspices of the National a__ociation of REALTORS in Chicago. In Canada, Certified Property Managers (CPM) are certified through the Real Estate Institute of Canada.
Provincial
See applicable reference materials for any property management licensing provisions.

* Appraisal Specialty
Appraisal Specialty
Real estate practitioners routinely face the challenges of estimating the value of property. Most information studied is understandably related to appraisals. The process of evaluating or appraising is complex due to many physical, political, economic, and social factors that affect the value of any parcel of real estate. Information such as estates in land, the rights of ownership, and limitations on those rights obviously affect value. In addition, knowledge of the improvements upon the land (e.g., main structure and outbuildings), and the variety of uses based on such improvements is vital to the process.

In addition to listing and selling requirements, many owners of real property often require the services of an appraisal specialist. A true appraisal specialist is a professional who has dedicated years to study, has combined this knowledge with extensive practical experience, and is engaged full time in the practice of appraisal.
Application
A professional appraiser is a researcher who has mastered the techniques and procedures to be applied in the appraisal of different types of property. The most common appraisal approach for residential property involves the research and a___ysis of market data on previous sales of similar properties in order to arrive at a conclusion concerning the value of the subject property. In appraising income properties, the approach usually includes the a___ysis of financial statements, the reconstruction of an operating statement, and the capitalization of a potential income stream into a value for the property. Lastly, the cost approach estimates the value of land based on market data, the reproduction or replacement cost of the improvements less depreciation, and adding these two components to arrive at a final value.
Professional appraisers are often referred to as fee appraisers who market services on the basis of cost for time, expertise, and effort required to arrive at a value estimate. Other appraisers may work for large corporations engaged in the development of properties for various levels of government. Unlike real estate sales, the appraisal profession involves relatively set work hours for inspection of properties and preparation of reports. Many professional appraisers have earned some form of designation from a creditable institution. A professional who estimates value and possesses the necessary qualifications, ability, and experience to execute or direct the appraisal of real and/or personal property.

* Mortgage Financing - Specialty Field
Mortgage Financing-Specialty Field
Historically, the lending business was relatively limited and rigidly structured. Banks, trust companies, insurance companies, and credit unions each controlled their own segments of the mortgage market, with a limited variety of financing alternatives. Times have changed. Alternative lenders have entered the marketplace and competition has increased. Each institution is now offering a wide range of alternatives. The fixed-term five-year mortgage, with payments amortized over 25 years, which was the mainstay of residential financing, is no longer the norm.

Given the wide variety of alternatives, and the fact that financing tends to be a technically demanding part of a real estate purchase for most consumers, a great need for mortgage financing expertise exists. Unquestionably, every real estate salesperson must understand the basic legal, conceptual, and mathematical information related to mortgage financing, even if he/she will not be arranging a mortgage as part of the sale.

In any sales field, one of the basic procedures before attempting a sale is to qualify buyers as to their needs and capabilities. Part of this process involves qualifying the buyer financially in terms of downpayment and debt service. Financing capabilities are limited, not only by what the buyers personally think they can afford, but also by policies and guidelines that lenders apply to safeguard themselves. Only through continuous updating and familiarity with the policies and procedures of lenders, along with financing alternatives, can a real estate salesperson begin to qualify buyers properly and establish the range of properties to be viewed.

Financing is also important when drafting agreements/contracts that involve the a__umption or discharge of existing financing, arranging new financing, or seller participation by way of a take back mortgage.

Aside from arranging financing as a normal function of real estate sales, specializing in mortgage financing as a full-time profession is possible, whether as a representative of a lending institution, or as a mortgage broker (dealer) or representative of a mortgage broker. Persons acting as mortgage brokers are usually registered under a provincial statute. Some specialize in arranging interim financing for large projects, industrial or commercial lending, the sale of mortgages as investment vehicles, and the placement of mortgages for the residential market.

Mortgage brokers (dealers) fulfill several functions by:
* Providing up-to-date information on policies and requirements of lending institutions and private lenders;
* a__isting borrowers by arranging financing to suit specific needs;
* Completing documentation as required to a__ist both borrower and lender in the financing process;
* Negotiating directly with parties in setting up specific financial packages; and
* Providing appraisal referrals and a__istance for lenders as may be required.
The mortgage broker (dealer), as an advisor, becomes involved in packaging financial arrangements, obtaining approvals, ensuring that the funds are available for closing and that instructions are carried through. Due to the integration of mortgage financing and real estate sales, a great deal of information regarding financing is provided in real estate licensing/registration courses.
Provincial
See applicable reference materials.

* Commercial Sales
Commercial Sales
The sale of retail, office, industrial, multi-residential, and similar types of properties. Traditionally, the term ICI (Industrial, Commercial, and Investment), referred to the sale of such properties, however the generic term commercial is now frequently used. Practitioners will encounter both terminologies in the marketplace.

PRM
* Condominium - Overview

Phase 1 Real Estate as a Professional Career Module I. The Profession Session 1 of 3 Salesperson's Role

THE SALESPERSON'S ROLE

Today's real estate brokerage represents the culmination of tried and true practices, combined with continuous innovations to better serve the buying and selling public. While common law has established the legal role, legislation has refined the responsibilities concerning real estate trading.

LEGAL RESPONSIBILITIES
Common Law
Common law represents principles, customs, and proce­dures recognized over many years by the courts. Agency flows from common law. An agent is authorized by a principal to represent that principal in business trans­actions with other parties. In doing so, an agency rela­tionship is established.
The agent (a broker, in the case of real estate), has various duties to the principal, referred to as fiduciary duties. Intricacies of agency relationships are detailed
Statutory Law
Many types of agents operate under common law prin­ciples. Most are regulated by way of specific provincial legislation. Agents trading in real estate must be regis­tered as brokers pursuant to the Real Estate and Business Brokers Act (REBBA). The Act sets out various requirements about registration and trading matters, including the right to delegate authority to registered salespersons.

DEFINED ROLES/AUTHORITIES
* A brokerage may be a corporation, partnership or sole proprietor (individual).
* Brokerage is not formally defined in the Act, but generally refers to the business, i.e., a corporation, partnership (few partnerships are registered under REBBA), or sole proprietorship operating as a broker. In the case of a corporation, the brokerage and the broker(s) operating that corporation must be registered.
* An a__ociate broker is also not formally defined in the Act, but is an individual who is registered as a broker, but employed by another broker in a salesperson capacity.
* A branch office manager may be a broker or a salesperson who meets specific criteria set out in the Act to perform in a management capacity.

SALESPERSON/BROKERAGE RELATIONSHIPS

A TYPICAL REAL ESTATE BROKERAGE

Relationships between the employing brokerage and salespersons/a__ociate brokers can involve employee or independent contractor status. With an employee, a contract of service exists.With an independent contractor, a contract for service is created. Independent contractor agreements are generally more lengthy documents given detailed contracted duties and
responsibilities.
Regardless of whether the salesperson is an employee or independent contractor for taxation and other regulatory considerations, he/she is only authorized to trade on behalf of a broker and is viewed as an employee for purposes of the Real Estate and Business Brokers Act as well as requirements set out by the Real Estate Council of Ontario.

LISTING/MARKETING ACTIVITIES

Activities can be broadly grouped under seven components. Perspectives and duties vary based on the agency relationship (e.g., buyer, seller or dual agency), the broker/salesperson relationship (employee or independent contractor), and the specialty (residential or commercial).

THE RESIDENTIAL TRANSACTION

CAUTION

CANADA REVENUE AGENCY (CRA) GUIDELINES

Tests Leading to Individual Contractor Status

STUDY LINKS
ENC

Agent
Broker

Master/Servant

Independent Contractor
Listing/Marketing (Residential Property)

PRM
* Brokerage Management
* Employment Contractâ€"Salesperson

Forms
* Broker-Salesperson Employment Agreement
* Independent Contractor Salesperson's
* Agreement
* Guide to REBBA (2002)
Go to the A to Z Search (first tab) and look up:
* a__ociate Broker
* Branch Office
* Broker
* Brokerage
* Broker of Record
* Salesperson
* Trade

Phase 1 Real Estate as a Professional Career
Module I. The Profession Session 1 of 3 Commission Sales and Compensation

COMMISSION SALES & COMPENSATION

Real estate sales has many benefits, not the least of which is the potential for a worthwhile income.

COMMISSION

Most brokerages compensate salespersons by sharing commissions, typically involving a percentage of the sale price. Commission is most commonly a__ociated with listing and selling activity, but may also include non-selling activities, such as property management and appraisals, or buyer/seller referrals to other brokerages.

COMMISSION SHARING:
DISTRIBUTIONS, ALLOCATIONS, AND SPLITS

Commission sharing methods can vary significantly. Salaries or other compensation arrangements are possible, but rarely found today in Ontario. Typically, commission dollars received are allocated between listing and selling portions with a subsequent split between listing and selling salespersons. When two brokerages are involved, funds are distributed between listing and selling brokerages, who then subsequently split commission with their respective salespersons.

COMPENSATION TERMS

Commission splits can vary by employment or independent contractor agreement. Some offer a yearly plan with increasing salesperson splits as an incentive for higher levels of production. Others offer a high split (e.g., 90% or higher of total commission), but require a significant salesperson contribution toward brokerage expenses and/or a monthly desk fee paid by the salesperson. Still others require an equal commission sharing (i.e., 50/50) until a stipulated number of transactions or dollar volume is attained, with the balance for each year at a higher split (in favour of the salesperson). Differing compensation terms may be found among salespersons within the same brokerage. Regardless of the arrangement, salespersons are typically responsible for all personal expenses including automobile maintenance etc.

COMMISSION FOCUS
ONE BROKERAGE INVOLVED IN COMMISSION
Total commission is received by brokerage and allocated between listing and selling portions (e.g., 50/50). The applicable portions are then split with listing and selling salespersons according to contractual arrangements (e.g., listing salesperson contracted for a 50/50 split; selling salesperson for a 70/30 split).
TWO BROKERAGES INVOLVED IN COMMISSION
Total commission is received by listing brokerage and distributed between listing and selling brokerages. (Note: The term distributed is used to differentiate from allocation within a brokerage). The applicable portions are then split with their respective listing and selling salespersons according to contractual arrangements (e.g., in this instance, the listing salesperson contracted for a 60/40 split and the selling salesperson for a 90/10 split).
1/14/2008 7:22 PM
COMMISSION SCENARIOS (SIX OF MANY)

Brokerage
ABC Realty Inc.
XYZ Real Estate Ltd.

Salesperson
Lee
Garcia
Martin
Ward
1
Listing
Y

Selling
Y

2
Listing
Y

Selling

Y

3
Listing

Y

Selling
Y

4
Listing

Selling
Y

Y

5
Listing
Y

Y

Selling

6
Listing
Y

Y

Selling

STUDY LINKS
ENC
* Commission
* Commission Plans

Phase 1 Real Estate as a Professional Career Module I. The Profession Session 1 of 3 Knowledge Integration

KNOWLEDGE INTEGRATION
NOTABLES

* Real estate is a significant factor in both the Ontario and Canadian economies.
* Real estate development and construction has a ripple effect that flows through the local economy.
* Be prepared for long hours and considerable effort.
* Various market opportunities are available to those who want to pursue specialties.
* Both common and statutory law impact how agents conduct themselves in the marketplace.
* The Real Estate and Business Brokers Act sets out duties and responsibilities for brokers and salespersons registered under that Act.
* While a salesperson has the option of being an employee or an independent contractor, all salespersons under the Real Estate and Business Brokers Act are deemed to be employees for purposes of the Act.
* Commission arrangements vary both between and within real estate brokerages.
* Terminologies regarding commission calculations are not standardized, but generally involve a distribution of commission between listing and selling brokerages, the allocation between listing and selling components, and the splitting of commission between brokerage and salesperson.
* Compensation for salespersons typically arises from listing and selling activity by way of commissions, but can also be generated by non-selling activities and referrals.

GLOSSARY

WEB SCANS

Statistics Canada

Canada Mortgage and Housing Corporation

Greater Toronto Home Builders a__ociation

Provincial Government

Click on Accessing Your Government, then Ontario Ministries.
Canada Revenue Agency

Search Independent Contractor.
National a__ociation of REALTORS

STRATEGIC THINKING
17 of 132

1. What training do I need to become more tech-savvy?
2. What specific activities will a__ist in acquiring saleable listings once I am registered as a real estate salesperson in the Province of Ontario?
3. What specialty fields are appealing and is there sufficient activity in those fields to focus my activities within the local marketplace?
4. Based on information provided to this point in the course, my skills appear best focused on listing and/or selling activities.What additional activities should I undertake to improve those skills?
5. What compensation plans and other benefits/features are available with brokerages that operate in my local marketplace?

Module I. The Profession Session 1 of 3 Mini-Review

MINI-REVIEW

Phase 1 Real Estate as a Professional Career
Module I. The Profession Session 1 of 3 Review Topics
ï"¿

REVIEW QUESTIONS
This is a Self-a__essment; your answers will not be scored.
View the question, then click your mouse inside the text box and type in your answer. The "Solution" b___on will appear. When you have finished, click on the "Solution" b___on to compare your response to the model answer.

There is only 1 question in this review.
Phase 1 Real Estate as a Professional Career
Module I. The Profession Session 1 of 3 Exercise Preparation

EXERCISE PREPARATION

Phase 1 Real Estate as a Professional Career Module I. The Profession Session 1 of 3 Exercise 1
QuickLinks cannot be displayed using compile for print.
Phase 1 Real Estate as a Professional Career

Module I. The Profession Session 2 of 3 a__ociations
PROFESSIONAL a__OCIATIONS

Professionalism is firmly rooted in real estate history. In 1912, an international gathering of real estate experts convened in Winnipeg, producing a Code of Ethics for practitioners in the United States and Canada. Portions of that original document remain entrenched with today's real estate a__ociations. That same meeting advanced the idea of licensing law for all jurisdictions, a concept that has stood the test of time. Regulators and professional organizations are now the foundation of our industry. This time-honoured bond is no better evidenced than in the strong working relationship between the Ontario Real Estate a__ociation (OREA), real estate boards, and the Real Estate Council of Ontario (RECO).

Phase 1 Real Estate as a Professional Career Module I. The Profession Session 2 of 3 Session Guide

SESSION GUIDE

THESE TOPICS ARE COVERED IN THIS SESSION:
ORGANIZED REAL ESTATE
* National Organization
* Ontario Beginnings
* New Directions
* The Three-Way Relationship

PROFESSIONAL a__OCIATIONS & BOARDS
* Ontario Real Estate a__ociation
* Real Estate Boards
* MLS Services

THE REAL ESTATE COUNCIL OF ONTARIO
* Other Professional Organizations

KNOWLEDGE INTEGRATION
SESSION 2:
LEARNING OUTCOMES

* Briefly describe the development of organized real estate, the three-way relationship between boards, the Ontario Real Estate a__ociation, and The Canadian Real Estate a__ociation (CREA).
* Outline the ongoing interrelated roles of CREA, OREA, and real estate boards along with international affiliations.
* Detail the governing structure of the Real Estate Council of Ontario with particular emphasis on vision, mission, and services.
* Differentiate between organized real estate and RECO concerning roles and services provided.
* Describe briefly selected professional organizations that offer expertise in selected specialty fields.

ORGANIZED REAL ESTATE
NATIONAL ORGANIZATION

On February 2, 1943, The Toronto Telegram proudly announced: Canada-Wide Real Estate Body Formed. Organized real estate, as we know it today, took on national stature with the creation of the Canadian a__ociation of Real Estate Boards (CAREB). In truth, the work began much earlier. The first real estate board appeared on March 4, 1888 in Vancouver. However,

that board disbanded for several years, leaving the Winnipeg Real Estate Board (formed in 1903 as the Winnipeg Real Estate Exchange) with the distinction of being the oldest, continuously operating board. Real estate boards provided the foundation for provincial/territorial and national organizations.
Sixteen boards formed CAREB's charter membership (reorganized into The Canadian Real Estate a__ociation (CREA) in 1971), which currently boasts 114 real estate boards across Canada and approximately 66,000 members. Many more boards formed with the post-war boom in real estate, as the role of real estate practitioners took on a focal position in
communities throughout the nation.

ONTARIO BEGINNINGS

The first real estate board was formed during 1918 in Ontario. Debate continues to this day as to whether the Thunder Bay Real Estate Board or the Windsor- Essex County Real Estate Board holds claim to that achievement. The Toronto Real Estate Board was formed in 1920, with the Ontario a__ociation of Real Estate Boards (OAREB) following two years later on Dec. 7, 1922. The a__ociation actively lobbied for the first Real Estate Brokers Act, which was passed in 1930. In the early 1950s, a regional structure (five regions in total) were set out as part of a major reorganization involving both the real estate boards and OREA.
By the early 1970s, the membership had swelled to 20,000, with OAREB renamed as the Ontario Real Estate a__ociation in 1972. Ten years later, OREA welcomed the 48th real estate board into organized real estate in Ontario. In 2003, OREA reported a total membership of over 31,000.

NEW DIRECTIONS

In 1997, a long-held OREA commitment to self-regulation was realized with the formation of the Real Estate Council of Ontario (RECO). RECO oversees all regulatory matters regarding the Real Estate and Business Brokers Act, as well as registration processes, professional standards enforcement, and consumer protection programs.

Another milestone was reached in 2003 with the formation of the OREA Real Estate College. The College is the latest innovation in OREA's continuing education role, which began with the introduction of formal real estate education courses in 1965.

THE THREE-WAY RELATIONSHIP

National a__ociation

The Canadian Real Estate a__ociation (CREA), provincial/ territorial a__ociations, and real estate boards make up the three-way relationship. CREA, located in Ottawa, concentrates on federal issues and a__ociated lobbying, as well as international representation. Often referred to as the voice of Canadian real estate, CREA is responsible for various trade marks and certification marks a__ociated with member services, the most notable of which are REALTOR and Multiple Listing Service (MLS).

Provincial/Territorial a__ociations

The Ontario Real Estate a__ociation is one of ten provincial a__ociations and one territorial a__ociation that serve members across the nation. Typically, as with OREA, provincial a__ociations provide education (registration and continuing education courses), and various member-related services.

Real Estate Boards

Real estate boards operate in defined jurisdictional areas offering MLS services and other member services. Members rely most directly on boards in their day-today activities. The scope of duties will vary based on overall provincial structure and the size of individual board memberships. Forty-three real estate boards are currently operating in the province, the largest in terms of membership being the Toronto Real Estate Board.

FOCUS

SPANNING THE GLOBE

NAR, the world's largest trade organization, has created an alliance network around the globe consisting of 54 national and regional co-operating a__ociations (including CREA). Further, its CIPS (Certified International Property Specialist) network, an outcropping of that initiative, has over 1,400 members focusing on international markets, a__istance to foreign investors, investment abroad, and the servicing of local ethnic niche markets.

STUDY LINKS
ENC
* Canadian Real Estate a__ociation
* Organized Real Estate
* Provincial / Territorial Real Estate a__ociations
* Real Estate Board
* Multiple Listing Service
* REALTOR

PROFESSIONAL a__OCIATIONS & BOARDS

ONTARIO REAL ESTATE a__OCIATION

The Ontario Real Estate a__ociation (OREA), a well established member services organization, is best known for its focal role in education through the OREA Real Estate College, member publications, provincial lobbying, research, standard forms, and other products sought by members. OREA also provides expertise to real estate boards including arbitration services.

REAL ESTATE BOARDS

Real estate boards, while widely recognized for their role in managing the local MLS service, are also extensively involved in local public relations, grants and donations, promoting real estate ownership, continuing education programs, and supplies/services to their members.

ONTARIO REGIONS AND BOARDS

MLS SERVICES
The Multiple Listing Service (MLS) provides for the orderly co-ordination and dissemination of listing information. This powerful tool, operated by local boards in Ontario, has experienced tremendous growth since its inception as Photo Co-op over 50 years ago.Major benefits include wider property exposure, greater marketing access and selection, and centralized information.

The Commercial Listing Service (CLS) was launched to complement the residential-based MLS service in 2002.

CURIOSITY

TRACKING THE INTERNET CONSUMER
MLS services are expanding dramatically on the Internet, improving both practitioner and consumer access to real estate information. Residential and commercial systems offer immediate access to cross-Canada listings uploaded by the national network of real estate boards. CREA publishes updated statistical information on a regular basis, for example:
Over 14.8 million detailed feature sheets viewed in one month (Dec. 2002).
In one month, over 780,000 unique web site visitors (18 years and older) used the web site (Sept. 2002).

Source CREA & ComScore Media Metrix Canada

STUDY LINKS
ENC.

Provincial Reference Manual
OREA / RECO
* Ontario Real Estate a__ociation
* OREA - Historical Sketch

THE REAL ESTATE COUNCIL OF ONTARIO
The Real Estate Council of Ontario (RECO) is a not-for-profit organization, formed in 1997 to administer the Real Estate and Business Brokers Act on behalf of the Ontario government. Operating funds are derived from registration fees. All registered real estate brokers and salespersons are regulated by the Act. RECOtms mandate is to protect consumers through a fair, safe, and informed marketplace.

OTHER PROFESSIONAL ORGANIZATIONS

Various organizations focus on specialty areas on provincial, national, and international levels, ranging from buyer agency councils to shopping centre specialists. Many offer specialized training and real estate designations. Four a__ociations are highlighted given their longstanding relationship with organized real estate in Ontario.
Click on the website addresses below to view the areas of focus.

STUDY LINKS
Encyclopedia
* License Law
* Real Estate Institute of Canada
* Appraisal Institute of Canada
* CCIM Institute
* Society of Industrial and Office Relators
* Designations

Provincial Reference Manual
* OREA / RECO
* Real Estate Council of Ontario
* GUIDE TO REBBA (2002) A to Z Search:
* Registrar's Complaints and Inquiries (RCI) Process

KNOWLEDGE INTEGRATION

NOTABLES

* Organized real estate dates from the late 1800s with a national organization, now known as The Canadian Real Estate a__ociation, formed in 1943.
* The first Ontario board appeared in 1918; the provincial a__ociation was formed four years later.
* CREA, provincial a__ociations, and real estate boards operate by means of a a three-way relationship.
* MLS has grown since the 1950s into a powerful marketing system that offers numerous benefits to buyers, sellers, and real estate practitioners.
* Approximately 85% of all registrants in Ontario are members of local real estate boards, OREA and CREA.
* The Real Estate Council of Ontario oversees regulatory matters and other activities centred on registration, consumer protection, compliance, and professional standards.
* Organized real estate and RECO perform differing, but complementary roles, in relation to real estate registrants.
* Various national and international organizations offer products/services to specialty fields within the profession.

GLOSSARY

Canadian Real Estate a__ociation (CREA) Real Estate Board
License Law Real Estate Broker
Multiple Listing Service (MLS) Real Estate Council of Ontario (RECO)
Ontario Real Estate a__ociation (OREA) REALTOR
Organized Real Estate Three-Way Relationship

WEB SCANS

Appraisal Institute of Canada (Ontario a__ociation)

Canadian Real Estate a__ociation

Commercial Investment Real Estate Institute

CREA MLS sites

CREA REALTOR site (members only)

Ontario Real Estate a__ociation

OREA Real Estate College

Real Estate Boards

Real Estate Council of Ontario

Real Estate Institute of Canada

Society of Industrial and Office REALTORS

STRATEGIC THINKING

1. What steps must I take and when if I want to join organized real estate, once I am registered as a salesperson with the Real Estate Council of Ontario?
2. What real estate boards are of particular interest to me in my new career and what information is available from those organizations?
3. What advantages does organized real estate offer that will a__ist me and my clients in listing and selling residential and/or commercial properties?
4. What specialty organizations are best suited for the particular market niches that I want to pursue in residential or commercial sales, once registered as a salesperson?

MINI-REVIEW

REVIEW QUESTIONS

This is a Self-a__essment; your answers will not be scored.
View the question, then click your mouse inside the text box and type in your answer. The "Solution" b___on will appear. When you have finished, click on the "Solution" b___on to compare your response to the model answer.

Phase 1 Real Estate as a Professional Career
Module I. The Profession Session 2 of 3 Exercise Preparation

EXERCISE PREPARATION

REGULATORY
REQUI REMENTS & PROCEDURES

The Real Estate Council of Ontario fulfills duties regarding registration, consumer protection, compliance, and professional standards. RECO is actively involved in four programs: registration, insurance, mandatory continuing education, and inspections/investigations.
Registrants are regulated under the Real Estate and Business Brokers Act (REBBA) as well as governed by the Council.
Membership in RECO goes hand-in-hand with registration under REBBA. To be registered under the Act, the salesperson or broker must satisfy RECO's membership criteria. To be a member of RECO, the salesperson or broker must be registered under REBBA.

SESSION GUIDE

THESE TOPICS ARE COVERED IN THIS

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