What We’re Hearing Lately

By Christina Crowe | July 30, 2024

RECA’s Regulatory Compliance Advisors (RCAs) are here to answer questions to ensure you are practicing within the Rules. Here’s what we’re hearing lately.

TRADING OUTSIDE NORMAL AREAS OF EXPERTISE

A concerning trend has emerged where we have heard that some licensees are making offers on properties in areas outside their typical markets and without viewing the properties. This practice not only compromises the quality of service but also exposes both the licensee and their clients to potential risks and liabilities. It is imperative for licensees to trade within their geographical areas of expertise and familiarity to ensure they can fulfill their fiduciary duties and provide competent service to their clients.

CHALLENGES WITH SALES ABOVE ASKING PRICE

The Alberta market has seen properties selling well above the asking price, only to later fail to appraise at the agreed value. This discrepancy can significantly impact the financing and closing of the deal as most lenders will not loan more than a property’s appraised value. Licensees must inform their clients of the benefits of including a financing condition, especially if they believe their offer price may be above a property’s appraised value. Licensees should inform their buyer clients about the potential need for additional cash to cover any differences between the property’s appraised value and the higher purchase price.

UNDERSTANDING RESIDENTIAL VS. COMMERCIAL LICENCE REQUIREMENTS

Confusion often arises regarding the type of licence required for different real estate transactions. Please remember that the nature and characteristics of both the property and the transaction dictate whether a residential or commercial licence is necessary. Licensees are advised to consult the Real Estate Act Rules (section 1(1)(g.01), to determine the appropriate license for each transaction they engage in. Please refer to RECA’s Information Bulletin for clarification on what is considered a trade in residential real estate. A commercial real estate licence is required for transactions that involve property that is primarily used for a business, and residential properties that contain more than four units on a single property. This Information Bulletin outlines when a commercial licence would be required. If there is any confusion about what licence is required, please discuss your specific circumstances with RECA’s RCAs to be sure you are properly licensed to trade.

DEPOSIT DROP-OFF LOCATIONS AND PROCEDURES

The absence of physical locations for deposit cheque drop-offs at some brokerages has created confusion and inconvenience. To avoid breaching contract terms, brokerages should establish a designated place for deposit deliveries, unless otherwise specified in writing. Clear communication regarding the deposit delivery method and deadline is crucial.

HANDLING DEPOSIT AMOUNTS AND TIMELINES

Issues have arisen where buyers have sent deposit amounts in multiple smaller transfers due to e-transfer limitations, leading to delays and discrepancies in deposit receipt and verification. Licensees should advise their buyer clients that, even if several small transactions are made, they need to adhere to the purchase contract terms by sending full deposit amounts on time. It’s a good idea to remind your clients that some financial institutions have daily transaction limits, and that they should start the process with enough time to spare prior to the deadline. Brokerages are responsible for confirming receipt and promptly notifying the seller’s licensee. RECA’s RCAs are available to answer any specific questions that may arise regarding a specific transaction.

LATE DEPOSITS AND CONTRACT VALIDITY

Late deposits can jeopardize the validity of a purchase contract. If a deposit is expected to be sent late, the brokerage must immediately inform the seller’s licensee and advise them of their rights and options. Sellers can choose to void the contract or accept the late deposit. It is essential to document any changes agreed to by both parties.

What's New?

Learn the latest on condominium management regulation consultation

Get information on course and course provider requirements

Avoid seller financing scams

RECA Videos