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Module 4: Factors Impacting Residential Real Estate Negotiations

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 Module 4: Factors Impacting Residential Real Estate Negotiations

As a salesperson, you will have to accurately assess the needs of sellers and buyers to match your services to
their requirements. In this module, you will learn about your obligations relating to the disclosure of material
facts and how your obligations differ based on a client or customer relationship. You will review information on
how to identify a patent defect and a latent defect, and which should be disclosed. You will also learn to identify
how different market conditions can require various negotiation skills and strategies.

This module gives focus to understanding:

• How to identify requirements and best interests of a seller client

• How to identify material facts for a seller
• How to identify requirements and best interests of a buyer client
• How to identify material facts for a buyer
• How to identify strategies for sellers and buyers under different market conditions

In this module, you will have opportunities to review different examples that demonstrate how these topics are
integrated as factors that affect real estate negotiations. This module also describes your duties and obligations
during the listing and selling process.

©2019 Real Estate Council of Ontario

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 Menu: Factors Impacting Residential Real Estate Negotiations

Number of Lessons 5 Lessons

Lesson Number Lesson Name

Lesson 1 Needs, Material Facts, and Best Interests of a Seller
Lesson 2 Needs, Material Facts, and Best Interests of a Buyer
Lesson 3 Impact of Market Conditions on Negotiation Strategies
Lesson 4 Summary Practice Activities
Module Summary

©2019 Real Estate Council of Ontario

Lesson 1 | Page 1 of 32

Lesson 1: Needs, Material Facts, and Best Interests of a Seller

This lesson describes the importance of assessing a seller’s needs during the listing and selling process. It also
outlines how the salesperson can leverage tools like demographics and technology to meet those needs when
providing services. It also describes a salesperson’s obligations regarding material facts, distinguishing between
those owed to customers and those to clients, as well as the legal obligation to act in the client’s best interest. This
unit introduces two types of defects and the seller’s legal obligations related to disclosing known latent defects.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 2 of 32

To build your career in real estate, you will need to get to know your sellers and understand the different levels of
obligations you will owe to them.

In this lesson, you will explore how to identify a seller’s requirements when listing their property for sale, review
your obligations relating to material facts, to deal fairly and honestly with all parties, and to promote and protect the
best interests of a seller client. You will need to make every effort to acquire complete and accurate information
regarding the property to be listed, and depending on the relationship established, be ready to provide support and
advice that is relevant to the seller’s needs.

In all situations, you will need to ensure you fulfill all your obligations under the Code of Ethics. Leading practices
include documenting all decisions and directions provided by a seller during the course of the trade.

Upon completion of this lesson, you will be able to:

• Recognize the importance of assessing a seller’s needs

• Describe the regulatory requirements of a salesperson regarding material facts for a seller
• Describe the regulatory requirements of a salesperson regarding the promotion and protection of the seller
client’s best interests
• Identify a seller's legal obligation for disclosure of known latent defects

Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 3 of 32

Residential transactions involve extensive work with clients and customers, and their potentially evolving needs and
wants. A typical seller may be listing their family home because of changes in employment, to their finances, or
within the family. You will need to keep in mind that selling a home can be an emotional time for sellers as they
have likely created many memories there.

As a salesperson, you will need to show sensitivity and understanding when first meeting with the seller and asking
questions about their reasons to list the property. Spending time with the seller is one of the best ways to
understand and assess their needs.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 4 of 32

Understanding Seller Needs: Asking Appropriate Questions

Asking a seller the right questions at the right time will help you to understand their needs and motivations, and to
obtain accurate and complete information on the property. If you do not ask questions to identify their
requirements and document the answers, you could misunderstand what is important to the seller, waste their
time, and frustrate them.

Typically, a salesperson asks questions like this while visiting a seller at their property. It is most effective when the
questions flow naturally into the conversation. You will need to listen to what the seller is telling you and recognize
opportunities to follow up with additional questions. Be sure that you are equipped to take notes that you can refer
to after the meeting is over. Keeping detailed notes throughout the transaction will help you track the seller’s needs
and avoid adding inaccurate or incomplete information in listing and advertising materials.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 5 of 32

Understanding Seller Needs: Sample Questions

When you begin working at a brokerage, it is likely that they will provide you with a custom list of questions as part
of their in-house training. Some questions a salesperson may ask are designed to explore a seller’s needs and
motivations. The given questions are not a comprehensive list of possible questions, your questions may vary. You
may also choose to create your own questionnaire by customizing questions.

• Why do you want to sell the property?

• What are your plans once you sell?
• When do you hope to have the home on the market? What is your ideal closing date?
• Do you have a list price in mind for the property for sale?
• Is there a minimum selling price or net amount you are expecting in the sale of the property?
• Is there a definite time period in which the property must be sold, and the transaction closed?
• Have you already purchased another property?
• What improvements have you made to the property? When were the improvements made?
• How long have you owned the property?
• Are there any current issues with the property?
• Who will be making decisions on the sale of this property?

While navigating through the online module, click the KMS button in the Module Resources for tools and
information on this topic.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 6 of 32

Demographics and the Seller

Demographics is the study of statistical information about a particular population using measurable data, such as
average age, income, educational background, ethnic origin, and language. It can be a useful tool in helping to
analyze a seller’s needs and motivations.

Some sources of demographical information that a salesperson may access include: real estate boards,
subscription-based databases (e.g., Geowarehouse®), and Canada Mortgage and Housing Corporation (CMHC).
Combining demographics with current knowledge of local news and events affecting the housing market in the
neighbourhoods of your trading area can help you create marketing and advertising strategies that show the
value of your services by attracting likely buyers to your seller’s property.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 7 of 32

Evolution of the Neighbourhood

The value of doing research (including reviews of demographical data and keeping up-to-date with current events in
the neighbourhoods of your trading area) cannot be overstated. You will want to ensure you are aware of economic,
political, and cultural trends that can influence the decision to sell and buy property in your area.

As a salesperson, you should be aware of businesses that are opening and closing, legislation or disbursement of
funds to support housing development, or a new wave of immigrants moving into the area. For example, if a large
company opens a new office in your area, it could mean existing employees will be moving there as well. This could
mean a major influx of buyers. Similarly, if the company employees fit a specific demographic, you may find demand
for certain types of properties is higher than for others. This may influence the community’s development and
culture. The reverse may also be true; if a well-established business in the area goes out of business or decides to
move offices elsewhere, the loss of jobs may mean that there is more inventory in the area than usual. This could

©2019 Real Estate Council of Ontario

create challenges in selling a property or attracting prospective buyers who will offer a price that the seller feels will
reflect fair-market value.

You will need to be aware of how changes in the community can change the market. Then you can inform your
sellers about possible outcomes and plan to address such trends in your recommendations for marketing and
negotiation strategies. Being knowledgeable and prepared will demonstrate your expertise and value to the seller.
Developing sound foundational knowledge and remaining current will not only put you in the best position to
provide quality service to sellers (by increasing the likelihood of attracting the right buyer to their property), it will
also provide you with the opportunity to promote your reputation and grow your personal professional brand, and
reflect well on your brokerage.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 8 of 32

Community Development

As a salesperson, you will also want to be aware of the Official Plan in your trading area since government long-
range planning must be in place to ensure that adequate serviced land is available for development. You should also
be familiar with any future plans by local development groups that can affect selling and buying property trends.
Development of a new school, church, or other amenity can influence or alter a community because of the buyers
they attract, as can the influx of new residents that could be attracted to a neighbourhood by a major development,
such as a new subdivision.

Tracking progress of new housing developments and when they will be available to the market may help you to
better counsel an individual seller on when they should put their property up for sale. For example, a development
with 100 new homes could create unplanned-for competition in the market for a seller if they become available at
the same time; conversely, a major development of this kind could spark interest in the area, bringing more buyers

©2019 Real Estate Council of Ontario

to the community who may not have considered it before, and may prefer, in the end, to buy a resale property from
one of your sellers. A delay in a planned development could also put an individual seller with a property on the
market at an advantage if a buyer who has been waiting for units to be released decides they do not want to wait.

Housing developers do research in their project planning stages so that when they commit to a project, it has every
chance of being successful. They may consider demographics in an effort to ensure they will reach the right buyers.
The type of the development can also give an indication of the demographic that they are trying to attract. If they
are building high-rise condominiums for example, they are likely targeting the first-time buyer market; if they are
developing bungalows, they may have planned to sell homes to those looking to retire or downsize.

You will want to share your research with sellers, to help inform their decisions during the listing and selling process,
reminding them that though demographics and trends are good indicators, they should not be considered
definitive.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 9 of 32

Demographics and the Seller: Spotlight on Downsizing

Statistics that illustrate the weighting of different age groups or income levels within an area can signal changes in
community lifecycle. For example, many neighbourhoods are experiencing an emerging trend toward downsizing.

For example, if statistics indicate:

• An increase in the proportion of seniors

• An increase in the proportion of people in the later stages of their careers
• A decrease in average income levels

©2019 Real Estate Council of Ontario

If a salesperson considers this data, they can anticipate that many of these people may be ready to sell their existing
homes to downsize to a smaller home. Their motivations for downsizing could include:

• Reducing monthly expenses and carrying costs as their income has decreased from pre-retirement levels
• Reducing their monthly expenses to fund different lifestyle choices, such as extensive travel
• Reducing the amount of maintenance and upkeep required at their property or shifting the responsibility to
someone else
• Addressing mobility issues by finding a home with ramps, elevators, or fewer stairs

Researching demographic information applicable to local trends and your seller’s situation will help you gain a
deeper understanding of the composition of the neighbourhood to identify prospective buyers. You will also be
better equipped to create appropriate listing and marketing materials, and provide support and referrals to relevant
third-party services.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 10 of 32

Understanding Seller Communication Preferences

With the shift toward new communication technologies, people across all demographics are using email and texting
more than ever. As a society, we are leaving behind traditional mail and telephone services.

Though some people are still more comfortable using a fax machine, others are not quite sure what a fax machine is
or how it would be used. The preferred method(s) of interaction between a salesperson and sellers will vary. Some
sellers may prefer telephone or in-person contact, while others may prefer to rely on email or text. Sellers with
limited English skills may need family members, friends, or translation services to facilitate a transaction.

Those who have limited experience with newer technologies may still wish to use them and may require additional
support (e.g., when providing electronic signatures). In fact, as you learned previously, every aspect of the real estate
transaction can now be completed electronically, but it is not mandatory to do so. Both parties must agree to using
electronic signatures during the offer process and for communications regarding the offer.

As a salesperson, you will need to ask sellers for their preferences when creating a communication strategy, and you
will have to respect those preferences. You will also need to comply with privacy requirements and other legislation
for use of their contact information.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 11 of 32

A salesperson meets with a young couple who want to list their home. Their property has
two bedrooms and one bathroom on the second floor, and an open concept kitchen, a
living room, a dining room, and a family room on the main floor. The salesperson notices
the family room seems to be an addition to the original floor plan. When the salesperson
asks why the couple wants to sell, they mention that they need a bigger house as they
just found out they are expecting their third child. However, they can’t afford larger
mortgage payments as they’re already finding it difficult to make ends meet.
Which of the given questions are appropriate for the salesperson to build into discussion
with the couple to understand their needs and motivations?
There are four options. There are multiple correct answers.

1 Do you have a list price in mind?

2 What do you think has caused your financial challenges?
3 When do you think you’ll be ready to put your home on the market?
4 Are there any current problems with the property?

©2019 Real Estate Council of Ontario

Lesson 1 | Page 12 of 32

Material Facts and the Seller

The answers that a seller provides to your questions about their needs and wants may also prompt them to provide
insight into what they might consider to be a material fact. You will need to discuss material facts with the seller
before they offer their home for sale.

As you learned earlier, the Code of Ethics, Subsection 1(1) defines a material fact as “a fact that would affect a
reasonable person’s decision to acquire or dispose of” an interest in real estate.

Generally speaking, a material fact could be something that happened in the home, something that is about to, or
has happened in the area, the intended use of the property, or anything that may:

©2019 Real Estate Council of Ontario

 • Affect the decision to sell or purchase the property
• Influence the listing price
• Influence what conditions are included in an offer

When working with sellers, as a salesperson, you will consider material facts for disclosure from two perspectives:

1) Those you must disclose that may impact a seller’s decision-making process with respect to the bullet points
on the previous screen.
2) Those which are known latent defects that a seller must disclose that may affect a potential buyer’s decision-
making process.

As a salesperson, you will need to explain the concept of material facts at the outset of your relationship. The seller
will need to understand what material facts are, and why they may need to make disclosures. Starting this
conversation right from the beginning may provide you with early insight into the types of information the seller
may consider to be material to their decision-making process.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 13 of 32

Material Facts: Specific and Personal

Regardless of whether the seller has prior knowledge of facts material to the sale of their property, your obligation
to disclose them to your client or customer still exists. When working with a seller client, you will take additional
steps to confirm any material facts. For virtually all material facts, the “reasonable steps” required for determining
those facts will go beyond simply accepting the seller’s verbal representations. Some research and obtaining
supporting documentation will be necessary.

Since the definition of a material fact only requires that the fact itself influences a reasonable person’s decision to
acquire or dispose of an interest in real estate, it can have broad application. Material facts are subjective and
personal to the parties involved in a real estate transaction. One seller may deem a fact to be of material
importance so that they change their listing price or their decision to sell their property while another seller or
buyer who is presented with that same fact might not consider it material, and it will not alter their decision-making
process. Through your conversations with the seller, you will learn what is material to them.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 14 of 32

Material Facts for a Seller: Examples

Since material facts can be personal, examples are provided only to demonstrate how material facts may impact a
transaction and illustrate how disclosures might be made.

The following seven sections contain examples of how some material facts might impact individual sellers and
their decision to sell.

Credit report

Example:

A seller is presented with an offer, and one of the

terms requires the seller to hold a second mortgage.
The salesperson representing the buyer provides a
copy of the buyer’s recent credit report that indicates a
high credit score. The credit report is a material fact
that would help the seller in deciding whether to
accept the offer.

©2019 Real Estate Council of Ontario

 Zoning designation

Example 1:

A salesperson learns that a change in zoning bylaws

has been approved in their seller’s neighbourhood.
This will allow high-density buildings to be built in the
area. The salesperson anticipates this may potentially
negatively affect the market value of single-family
residences in the neighbourhood. The salesperson
discloses the change in bylaws to the seller since this
information might alter their decision to sell.

Example 2:

A seller is basing their listing price on a private

property sale that occurred in the recent past. The
salesperson is aware that the property had a different
zoning designation on it, which allowed for the
property to be redeveloped for another use. As such,
the selling price was higher than the market value of
the seller’s property. The salesperson discloses this
information to the seller to help them arrive at a
suitable listing price.

©2019 Real Estate Council of Ontario

Proximity to schools or other public activities

Example:

A salesperson learns that a new school is opening in

the seller’s neighbourhood. It will be an educationally
progressive French immersion school with strong
academics and a Spanish-language program.

The salesperson anticipates the school will attract

buyers to the neighbourhood and increase demand for
single family homes. The salesperson advises the seller
of the news and potential implications. The seller
decides to delay the sale of their home as they believe
they will be able to fetch a higher sale price once the
school is established.

Dwelling measurements

Example:

Before taking a listing, the salesperson asks if the seller

can provide a copy of plans for the irregularly shaped
deck that was an addition to the property. The deck is
elaborate and has several special design features,
including a fire pit, pergola, and privacy screens. The
seller shares the plans provided by their contractor
from when the deck was built. The salesperson thinks
that the area on the plans does not align with the
finished deck and advises that the seller may want to
hire a measurement specialist to confirm its size.

©2019 Real Estate Council of Ontario

 The measurement specialist confirms that the
measurements are inaccurate and that the deck is
smaller than the seller thought. The salesperson
revises the draft listing based on the corrected area
measurement and explains to the seller that they may
want to reduce their price. Despite the measurement
discrepancy, the seller resolves to stay with the price
originally discussed because they feel sure the deck’s
features will attract buyers.

Recent neighbourhood property sales

Example:

A seller receives an offer that is slightly below their list

price. The salesperson learns that another home has
just come on the market in the seller’s neighbourhood
that is very similar to their home, but the price is
significantly higher. The salesperson informs their
seller client of the new listing while advising them
about their options. The seller decides to counter offer
at list price rather than accept the original offer.

©2019 Real Estate Council of Ontario

 Right-of-way easement

Example:

A seller who recently inherited a vacation home tells

their salesperson that it is a family tradition to allow
the neighbours to use their path by the lake. The
salesperson’s verification of what is registered on title
for the property reveals there is an easement that was
put in place by the current owner’s grandmother that
allows seven neighbouring properties to enjoy a right-
of-way.

The salesperson informs the seller that it is not just a

family tradition but a limitation that has been attached
to the property. They also explain to the seller they will
have to disclose the easement in the listing and that it
could influence both the decision to buy and the
quality of the offers. The seller decides to follow the
salesperson’s recommendation and reduce the listing
price.

©2019 Real Estate Council of Ontario

 New developments

Example:

A salesperson who is about to list a rural home goes to

the local municipal office to find out if there are any
new developments scheduled near the property. The
salesperson discovers that permits have been
approved for the installation of wind turbines on a
neighbouring property in the upcoming year. As this
plan will affect the value of properties near the wind
turbines, and the number of offers, the salesperson
discloses it to the seller right away. The salesperson
explains that with this new information, they
recommend a revised listing price to the seller. The
seller chooses to change the price as recommended.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 15 of 32

The Salesperson’s Obligation to Discover and

Disclose Material Facts to Seller Clients

As discussed earlier, as a salesperson, you will need to disclose material facts to all sellers, but there is a higher level
of obligation to the seller client. You must first make an effort to determine what material facts are for the seller
client, per Subsection 21(1) of the Code. To fulfill your obligations, you will need to take reasonable steps on their
behalf to research and discover any material facts prior to making disclosures. You will need to make certain that
you promptly disclose those facts so that your client is in possession of all relevant information that might influence
their decisions in the listing and selling process as soon as is practical.

Depending on the type of material fact, you may advise your client to speak to a third-party professional to learn
more about the possible impact that material fact could have on the value of their property, their listing price, or on
determining conditions they will accept or use to counter an offer. You may also suggest speaking with a lawyer if
they need advice about making a disclosure.

While navigating through the online module, click the KMS button in the Module Resources for tools and
information on this topic.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 16 of 32

The Salesperson’s Obligation to Disclose Material Facts to Seller Customers

To fulfill your obligation to customers regarding material facts as described in Subsection 21(2) of the Code, you will
be required to disclose material facts that are known or ought to be known by a salesperson.

This means you will disclose material facts to customers based on your existing knowledge or based on information
that could be considered material learned through the course of your day-to-day activities. This means you are not
obligated to conduct any research to discover material facts for the customer seller that you would for a seller client,
as was discussed earlier. Customers are required to make their own inquiries to determine if there are any facts
affecting a property that would be material to them.

As a salesperson, your obligation to disclose material facts will supersede any direction otherwise given by a seller
client or customer. Making appropriate disclosures will protect you from disciplinary action and may also protect
both you and your sellers from potential litigation.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 17 of 32

The Salesperson’s Obligations to a Seller Client versus

Seller Customer Regarding Material Facts

These two examples are related to the same material fact and illustrate the differences in the salesperson’s
obligations regarding material facts to seller clients and seller customers.

Discovery and Disclosure: Seller Client

While doing a visual walkthrough of their seller clients’ property prior to listing, a salesperson notices what looks like
the beginnings of a termite mud trail. After doing some further research on potential infestations and how to
remediate them, the salesperson points it out to the sellers and advises them to consult an exterminator to provide
an opinion on the severity of the infestation. They may also recommend that it would be better for the sellers to
address the issue prior to putting the property on the market. If it is a termite trail, it could impact the marketability
or the value of the property. The sellers ask for a referral, and the salesperson provides the names of three pest
control companies.

©2019 Real Estate Council of Ontario

Disclosure: Seller Customer

A property is being sold privately. The sellers have signed a customer service agreement with a salesperson’s
brokerage that states that if they accept an offer from a buyer the salesperson introduces to the property, they will
pay the salesperson’s brokerage remuneration. While doing a visual walkthrough of the property before bringing
any buyers to see it, the salesperson notices what looks like the beginnings of a termite mud trail. The salesperson
points it out to the sellers and suggests they may want to hire an exterminator to investigate.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 18 of 32

Common Material Facts for a Seller

As a salesperson, you will need to familiarize yourself with a seller’s property so that you will be able to disclose any
material facts to them, and to ensure you provide accurate information when preparing their listing.

You will need to ask the seller questions to help discover material facts. They may have not revealed these facts
when you inquired about their needs and wants, or even realize they could be a potential issue. They may also have
known about the issue at one time but have since forgotten. It is advisable to document the seller’s answers for your
records.

Here are some examples of common material facts that you may need to disclose to the seller:

• Structural conditions and results (e.g., age, maintenance issues like roof leaks, foundation damage, mechanical
or electrical deficiencies, basement water seepage, mould, or insect infestations)
• Outdated materials that can be personally or environmentally hazardous (e.g., asbestos insulation, knob-and-
tube wiring, lead or Kitec plumbing, or underground storage tanks)
• Building and/or dwelling measurements or lot size (e.g., discrepancies in measurements cited in listings or
specific measurements of a balcony)
• Previous use of a property (e.g., former illicit activity such as a grow-op, meth lab, or murder)
• Zoning (e.g., bylaws, land use, or fence height requirements)
• Government limitations (e.g., HST, property taxes, or any expropriation plans)
• Private limitations (e.g., easements or restrictive covenants)
• Alterations (e.g., renovations completed without permits or inspections, or demolitions)
• Existence of nearby businesses or facilities that may impact quality of life (such as an upcoming development,
or nearby industrial facility, airport, or railway line)
• Recent sales in the neighbourhood
• Proximity to schools, churches, or other public amenities

While navigating through the online module, click the KMS button in the Module Resources for tools and
information on this topic.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 19 of 32

Due Diligence in Determining Seller Material Facts

As a salesperson, you will need to make a reasonable attempt to determine all material facts and ensure they are
disclosed to your seller client as soon as possible. When working with a seller customer, you must ensure you
disclose any material facts that are known or ought to be known by a seller to potential buyers. These facts may be
material to their decision to sell or affect the price they wish to set for their property.

When interviewing a seller for the first time, you may supplement your questionnaire about the seller’s needs and
wants with questions designed to help uncover any material facts they may not have remembered or considered.
These questions could include:

• Has there been any water damage?

• Has the drinking water from the well been tested regularly?
• Are there any problems with the septic system?
• Have there been circumstances that may have resulted in soil contamination?
• Has there ever been an oil-heating system on the property? Are you aware of any buried oil tanks?
• Has there been any illegal activity on the property, such as a grow-op?
• Have there been any deaths on the property other than by natural causes?

Remember that some of these questions may not be relevant to the seller’s property; for example, not all properties
have wells or septic tanks. It is advisable to customize your questions based on information you already have about
the property.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 20 of 32

Due Diligence in Determining Seller Material Facts

Engaging your seller clients by completing questionnaires with them is a good starting point to help you better
understand them and their property. The questionnaire should lead to open conversations with the seller about
material facts.

When representing a seller, you will want to have frank conversations to aid them in identifying any facts about their
property that could be considered material. This will enable you as a salesperson, to provide the best service and
support possible while at the same time helping ensure you have completed your due diligence. You should be
prepared to answer any questions they have. You must help them understand there are different types of material
facts (physical and non-physical issues that may sway a buyer’s decision to purchase property and require seller
disclosure) and also that material facts are personal: not only to them but to prospective buyers of their property.

©2019 Real Estate Council of Ontario

The last two questions on the previous slide, which ask about illegal activity or deaths on the property, are examples
of some concerns commonly referred to as stigmatizing issues. A stigma may elicit a psychological or emotional
response that could negatively influence a prospective buyer’s interest in a property. In terms of disclosures, you will
also inform sellers that while it may be best for them to do so, they are not required by law to disclose a potential
stigma on their property. Regardless, you will want to direct clients to seek legal advice if you believe that a
stigmatizing issue may become a factor in selling the property.

You will learn more later about types of stigmatizing issues and their significance, disclosure issues, and how your
obligations regarding the disclosure of stigmas will change in cases of multiple representation.

While navigating through the online module, click the KMS button in the Module Resources for tools and
information on this topic.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 21 of 32

Salesperson’s Due Diligence in Verifying Material Facts of a Seller Client

In addition to asking appropriate questions, there will be other ways you will verify material facts. For virtually all
material facts, the reasonable steps required for determining those facts will go beyond simply accepting the seller’s
verbal representations.

These steps can include: verifying what is registered on title for the property (such as confirming whether there are
any easements) by looking at the survey, deed, tax bill, or a subscription-based database, verifying seller-provided
information or documentation of permits, renovations, or water tests, conducting a web search for newsworthy
events on or near the property, determining if any contamination has been reported, and verifying zoning and
permitted uses at the local municipal office. As always, you will want to keep records of all documentation and share
anything you find with the seller that has not already been provided by them.

While navigating through the online module, click the KMS button in the Module Resources for tools and
information on this topic.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 22 of 32

A salesperson recommends a seller client list their property at $650,000, based on three
comparable sales over the past six months. They are quite disappointed by this
suggestion because they feel their property is worth much more. After several
discussions, the seller reluctantly agrees to list at $650,000. Within two weeks of listing
the home, two comparable properties sell for $610,000 and $595,000.
Which of the given actions should the salesperson take in this situation?
There are three options. There is only one correct answer.

1 Inform the seller about the recent sales and recommend they decrease their list price.
Delay sharing the information with the seller until the downward trend in pricing can be confirmed with
2
one or two more sales.
Don’t share the information with the seller as it will just further upset them and they’re not likely to take
3
any action anyway.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 23 of 32

Seller Client’s Best Interests

As we have seen, you will owe different levels of service to clients and customers when fulfilling your obligations
regarding material facts. When you are working as a salesperson, Section 4 of the Code of Ethics underscores an
additional obligation to the client. It states that salespersons shall promote and protect the best interests of their
clients.

As a salesperson, you will begin to demonstrate your intention to promote and protect the seller’s best interests
when you make inquiries into the full scope of the seller’s needs. You will continue to do so throughout the listing
and selling process until the transaction has closed. You will need to ensure that your personal interests never take
precedence over the client’s interests.

Example:

A salesperson is advising a seller client about two competing offers. One was obtained by the salesperson while the
other was obtained by the co-operating brokerage. The seller needs advice on which is the best offer. While the
offer prices are similar, the terms in the offer from the co-operating brokerage have distinct advantages for the
client. The salesperson reviews both offers with the seller without regard for personal interest, such as a lesser
remuneration if the co-operating brokerage’s offer is accepted.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 24 of 32

Due Diligence to Protect Seller’s Best Interests

When preparing to list a property for sale, you have an obligation to carry out due diligence in investigating the
property and the circumstances of the sale. To protect and promote the best interests of a seller client, you will
need to take several steps including:

• Inspecting the property and asking the seller questions that would reveal defects and material facts that
should be disclosed
• Documenting information shared with and by the seller with back-up copies stored in a second location
• Protecting the seller’s personal information and motivations for selling unless you have written consent to
share specific information
• Verifying that the information included in the listing or any advertising/promotional materials is accurate
• Excluding any detail about a home that you cannot verify from the listing or adding a qualifying statement or
disclaimer to the unverified information
• Ensuring that you fully explain the content of all documents that you ask the seller to sign, and making sure
that they have received copies in a timely fashion

If you are not able to provide the required level of advice and support, you will need to refer the client to someone
who can provide this necessary support, such as a lawyer or a tradesperson. At all times, you will need to protect
and promote the client’s best interests, but also be mindful of your obligations to treat every party to the transaction
fairly, honestly, and with integrity.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 25 of 32

Factors that Require Due Diligence

In learning more about a seller’s needs and wants, and keeping in mind your obligations to act in the seller client’s
best interests, you may identify other topics or factors which could require some discussion, such as HST, capital
gains, and tax considerations for non-resident sellers. As a salesperson, you will want to refer sellers to outside
professionals, such as accountants or lawyers, for expert advice.

HST may be applicable in certain situations beyond HST levied on remuneration, such as a property that is used
wholly or in part for commercial purposes, or new construction. HST can be included in addition to the purchase
price or can be treated as a separate item per the clauses in an offer. You will need to ensure that clients are aware
of HST charges relating to remuneration.

For HST and all taxation matters, you will need to advise your client to consult with an accountant or other tax
professional for advice and guidance regarding the applicability of a particular type of tax. Most of the time, HST

©2019 Real Estate Council of Ontario

does not apply to a residential resale property, but there can be exceptions. Sellers will need to be referred for
expert advice in those areas. The same would apply for capital gains tax and special circumstances of a non-resident
seller.

Example 1:

The salesperson determines during their due diligence investigation that a portion of the residential property has
been used for a commercial purpose, namely a private day-care centre. Since HST may be applicable to the sale as a
result of this commercial activity, the salesperson recommends to the homeowner that they speak with an
accountant for clarification.

Example 2:

A couple spends half the year at their recreational cottage and the other half in their urban home, which they are
considering selling. If the home is not their principal residence, then capital gains tax may apply to the proceeds of
the sale. The salesperson advises that they should consult with their accountant for advice on the matter.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 26 of 32

The seller clients want to sell their home for $850,000. They confide in the salesperson,
explaining that they really need to sell the house because they are in a tight financial
position. They would therefore accept less than the asking price. At an open house,
potential buyers approach the salesperson and indicate that they love the house but ask
if the sellers would accept less.
What should the salesperson do to act in the best interests of the seller?
There are three options. There is only one correct answer.

1 Tell the buyers that the sellers would accept less to increase the likelihood that they will make an offer.
2 Tell the buyers that the sellers will not accept less to increase the chances of a higher offer.
3 Tell the buyers that the only way to find out is to submit an offer for the sellers’ consideration.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 27 of 32

When discussing the seller’s property, you will want to ask the seller about any damages, repairs, or issues the
property currently has or previously had, if they have not already shared this information with you. Next, we will
learn about the two types of defects: patent and latent defects, and the most severe type of latent defect, described
as a material latent defect.

As a salesperson, you will also need to advise the seller about their legal obligation to disclose known latent defects,
and you will also need to be mindful of your own obligations.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 28 of 32

Types of Defects

As a salesperson, you will need to be able to identify the two types of property defects, patent and latent, the
differences between them, and if they require seller disclosures. You will continue to learn more detail about defects
later.

The following three sections contain information on the types of defects and illustrated examples.

While navigating through the online module, click the KMS button in the Module Resources for tools and
information on this topic.

Patent defect

A patent defect is readily visible upon reasonable

inspection. Since these are visible, seller disclosure is
not required. For patent defects, the principle of caveat
emptor (“buyer beware”) applies.

Examples of patent defects include:

• A missing railing
• Visible cracks in a foundation wall
• Broken stairs on a staircase
• A slanted floor or staircase
• Evidence of mould
• Water stains on the ceiling
• Shingles missing from the roof
• A broken window pane

©2019 Real Estate Council of Ontario

 Latent defect

A latent defect is not readily observable by the

untrained eye during the reasonable inspection of a
property.

This includes any hidden flaw, weakness, or

imperfection that a salesperson or buyer would not be
able to see when viewing the property. Some latent
defects may require the assistance of third-party
experts to be identified. The seller has an obligation to
disclose any known latent defects.

Examples of latent defects include:

• Hidden water damage behind shower or bathtub

surround
• Fence encroachment onto a neighbouring
property
• Vermiculite insulation
• Minor seasonal flooding in the basement

©2019 Real Estate Council of Ontario

 Material latent defect

The most severe type of latent defect is a material

latent defect. This defect poses a serious risk, which
can render the home unsafe, unhealthy, or otherwise
uninhabitable.

Like other latent defects, if the seller is aware of a

material latent defect, they are obligated to disclose it
to a buyer.

This type of defect is judged material to the enjoyment

of a property and would include defects that cause the
property to become:

• Dangerous or potentially dangerous for the

buyers (e.g., high indoor concentration of radon
gas which has reached hazardous levels
• Potentially unsafe (e.g., a substantial crack found
in the basement behind the drywall that can
affect the structural integrity of the house)
• Unfit for habitation (e.g., a property with a mould
infestation found during renovations that results
in seller disclosure of the building being
condemned)
• A concern to municipal authorities (e.g., a
property that has been identified as a grow
house that requires remediation)

©2019 Real Estate Council of Ontario

Lesson 1 | Page 29 of 32

Salesperson’s Role in Identifying Defects

To satisfy due diligence requirements, you will need to ask the seller questions to determine whether they are aware
of any latent defects. As discussed, known latent defects must be disclosed by the seller. When walking through the
property with the seller, you will have to look for any signs of potential defects and ask follow-up questions about
these indicators to determine if they are indicators of a latent defect that must be disclosed by the seller.

In addition to conducting a visual inspection, when verifying information about the property, you will also consider
information you gather from the seller and involve expert third-party professionals, if necessary, to address matters
that are beyond the scope of the salesperson’s role. Third-party professionals can include home inspectors,
surveyors, tradespeople, lawyers, and insurance professionals.

As a salesperson, while inspecting the subject property in preparation for creating a listing agreement you will need
to:

• Watch for alterations, additions, or works-in-progress that may indicate defects that require disclosure by the
seller. Ask questions about when the work was done, if a building permit was issued, and if there are any
additional changes that are not readily observable.
• Look for general deterioration, water stains, moisture, mould, sagging, and other signs of neglect and damage.
Query the seller accordingly, making recommendations for further investigation, repairs, and their disclosure
of mandatory items to prospective buyers.
• Seek information on and watch for any indications that the property may have been used as a grow house.
• Look for out-of-date systems, particularly involving wiring (e.g., knob-and-tube and aluminum wiring, 60-amp
service, or oil-burning appliances with tanks more than 10 years old).
• Watch for significant problem areas that warrant further analysis, and do not hesitate to seek appropriate help
and expertise as the need arises.
• Pay particular attention to environmental considerations including flood plains, flooding potential, any
environmental problems or soil contamination, and underground fuel tanks.

©2019 Real Estate Council of Ontario

 • When in doubt regarding any uncertain issues concerning a property, seek expert advice. (e.g., mould resulting
from flooding could require a professional to confirm the extent of any potential problems, or an electrician
may be employed to confirm the type of wiring and identify any potential problems).

You will learn more on the topics of visual inspections and defects later.

While navigating through the online module, click the KMS button in the Module Resources for tools and
information on this topic.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 30 of 32

Seller’s Obligation to Disclose Defects

As discussed earlier, the seller is only obligated to disclose known latent defects. To avoid any kind of
misunderstanding, you will want to clearly explain the differences in the types of defects. As a salesperson, you
should explain both the obligations of the salesperson and brokerage, as well as the seller’s obligations regarding
disclosures. This will need to be done when initially reviewing services and the terms of the types of agreements
prior to signing so this is clearly outlined for the seller.

You will also want to explain that if known latent defects are not disclosed to prospective buyers there could be legal
ramifications for the seller, and for you and your brokerage.

Example:

A seller knows about a problem with the well on their property. However, the seller does not want anyone to know,
maintaining the belief that the problem is seasonal and due to spring water runoff. During the summer, there is no
problem. The salesperson explains to the seller that a problem with the well is a material latent defect (a dangerous
or potentially dangerous situation) that must be disclosed to the buyer. If they do not disclose this defect and the
buyer’s family becomes ill because of the well water, the buyer may be entitled to take legal action against the seller.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 31 of 32

A salesperson is meeting a new seller client at their home to have a look at the property
and notices a few things to be repaired. The salesperson asks if they have completed any
renovations and the seller does not admit to any. The salesperson recommends a home
inspection. The home inspection reveals a few defects.
Which of the given should be disclosed by the seller to potential buyers?
There are three options. There is only one correct answer.

1 The home inspector sees signs that the property may have been used as a grow-op.
2 The home inspector sees water stains on the ceiling which has a bathroom overhead.
The home inspector sees that there is hardwood under the wall-to-wall carpet but could not verify the
3
condition of the hardwood.

©2019 Real Estate Council of Ontario

Lesson 1 | Page 32 of 32

Congratulations, you have completed the lesson!

There are five sections on this page with a summary of the key topics that were discussed in this lesson.

Assessing • Ask appropriate questions to accurately assess a seller’s needs.

• Consider the demographic factors that may influence seller needs and motivations.
seller needs
• Respect the wishes of the seller regarding the mode of interaction they prefer for
regular communication.
Disclosure of • Disclose known material facts to both clients and customers, per Section 21 of the
Code of Ethics.
material facts
• For clients, take reasonable steps to determine and disclose material facts.
• For customers, the obligation is to disclose only those material facts that are known
or ought to be known by a salesperson.
Stigmatizing • Stigma can be created by events on the property, such as a death or illegal activities.
• Advise the seller to seek legal advice regarding their rights and obligations related to
issues
the issue.
• Explain that your obligations regarding the disclosure of stigmas will change in cases of
multiple representation.
Best interest of • Always work in the best interests of the client and actively protect and promote that
interest, per Section 4 of the Code.
a seller
• Ensure that your personal interests never take precedence over the client’s interests.
Disclosure of • The given are two types of defects: patent and latent; the most severe form of a latent
defect is known as a material latent defect.
known latent
• A material latent defect is considered to be a subcategory of a latent defect.
defects • Identifying defects is a due diligence obligation of a salesperson.
• A seller must disclose known latent defects to the salesperson, and you will need to
exercise due diligence to disclose these defects while listing the property.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 1 of 21

Lesson 2: Needs, Material Facts, and Best Interests of a Buyer

This lesson describes the importance of assessing a buyer’s needs during the buying process. It also outlines how
the salesperson can leverage tools like demographics and technology to meet those needs when providing
services. It also describes a salesperson’s obligations regarding material facts. Distinguishes between those owed
to customers and those to client. The lesson also explains a salesperson’s legal obligation to protect a buyer
client’s best interests and indicates when they should recommend third-party services be obtained.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 2 of 21

You have learned about working with sellers and the importance of building your relationships with them by asking
questions, doing research, and considering demographics when providing services while meeting your obligations
under the Code of Ethics. In this lesson, the focus will be on learning how to develop relationships with buyers.

You will need to ask appropriate questions to help you understand buyer needs and wants, their financing
capability, and document their answers. You need to fulfill obligations under the same sections of the Code of Ethics
as you do for sellers, but there will be slight differences in your approach to working with buyers.

You will need to take appropriate actions to disclose material facts to both clients and customers. You will need to
do research and verify material facts for and act in the best interests of a buyer client. Failing to do so can result in a
number of consequences, the least of which is damaging a relationship that you are trying to build. If concerns are
directed to RECO, these could lead to the possible investigation of complaints and penalties imposed by RECO’s
Disciplinary committee, or to civil liabilities.

Upon completion of this lesson, you will be able to:

• Recognize the importance of assessing a buyer’s needs

• Describe the regulatory requirements of a salesperson regarding material facts of a buyer
• Describe the regulatory requirements of a salesperson regarding the best interests of a buyer client

Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 3 of 21

As a salesperson, when working with potential buyers, you will need to ask them appropriate questions to
understand their needs and motivations in their search for a property, and the type of property that will best suit
them. You will want to be patient and take time to discover the interests and sensitivities of the buyer.

By asking the right questions that clearly identify the buyer’s needs and wants, you will be better prepared to
provide services and target your property search effectively. This will reduce the risk of recommending properties
that are not of interest or completely not to their taste, which can frustrate the buyer.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 4 of 21

Assessing Buyer Needs: Asking Appropriate Questions

When you begin working at a brokerage, they may provide you with a custom list of questions as part of their in-
house training. No matter where you get your list of questions, you will want to document your buyer’s answers. The
given questions are not a comprehensive list of possible questions; your questions may vary. You may also choose
to customize your questions and create your own questionnaire.

• Why are you interested in purchasing a property? (e.g., job change, marriage, upgrading to a bigger house, and
so on)
• What is your timeline for purchasing a property?
• Do you own a property already?
• Do you need to market/sell your existing property first before purchasing the new property?

©2019 Real Estate Council of Ontario

 • How are you planning to finance the purchase?
• How much money are you planning for the down payment and the closing cost?
• Have you been pre-qualified for financing?
• Are you open to looking at different types of properties (such as a house or a condo)?
o How many bedrooms do you need?
o Do you want an eat-in kitchen?
o Do you want a main floor family room?
o Would you like a dining room?
o Do you need a garage? If so, for one car or two?
o Do you have any specific requirements (such as no stairs, ramps, or accessibility requirements)?
o Is there a specific area that you prefer?
o Do you need proximity to schools, medical services, public transportation, or any other location-specific
public amenity?

While navigating through the online module, click the KMS button in the Module Resources for tools and
information on this topic.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 5 of 21

Qualifying a Buyer

Asking questions like the ones you have just reviewed will help you as a salesperson, determine a buyer’s needs and
wants but will also help you assess their financial readiness. This process is commonly known as qualification.

Confirming a buyer’s financial qualifications to buy a property and comparing what you learn about their
requirements against the financial details they will share with you are key parts of this process. This includes
information about any pre-approved financing from mortgage brokers or banks, the amount they have budgeted
for the purchase, and what they want to spend.

The scope of activities involved in the qualifying process depends on whether the brokerage is representing the
buyer (working in the best interests of the client) or providing limited services to the buyer as a customer (not
representing that individual but providing information in an honest manner while exercising care and skill). You will

©2019 Real Estate Council of Ontario

need to fully disclose the level of services to both types of buyers to ensure that they understand what will or will
not be done during the process of qualifying and showing property, as well as in subsequent negotiations.

Qualifying the buyer will also help you select properties that meet their needs and their budget. This process can
also aid buyers by affirming their existing plan, or helping them to recognize the need to re-prioritize their criteria or
revise their budget and/or savings plan based on their financial readiness.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 6 of 21

Requalifying a Buyer

After the qualifying process, you will select a limited number of properties for the buyer to consider. You will need to
show the properties and provide accurate and complete information about them to the buyer.

If you show a buyer several properties based on their stated needs and they are not able to find one that suits them,
you will probably want to suggest revisiting and refining their criteria. You will periodically requalify buyers to
confirm whether you have understood their priorities correctly, or whether the buyer’s needs have evolved since
you initially discussed their criteria. Requalifying a buyer several times during this phase of the buying process will
be a common practice when you are working as a salesperson. You will have to be understanding and supportive
with buyers as they refine their criteria since, for many, this will be one of the biggest purchase of their lives.

©2019 Real Estate Council of Ontario

A buyer may rethink their needs after viewing properties and realize that they had forgotten something that is a real
priority to them. They may also decide, after seeing properties in their price range, that they need to reassess or
scale down their expectations and requirements. Your goal will be to clearly understand and refine the criteria to
narrow your search to properties that will be more appealing to them.

Example 1:

A young couple is attempting to locate a suitable home for their growing family. They signed a buyer representation
agreement and specified that the brokerage should seek out properties in the range of $450,000 to $550,000 within
an area close to their extended family. The salesperson identifies two properties that meet the buyers’ criteria. The
salesperson shows both properties to the buyers, but they are not to their liking. The buyers reassess their needs
and ask the salesperson to widen the geographic location they originally requested.

Example 2:

A salesperson is unable to find an accessible single-family home in the buyer’s price range and preferred location.
They decide to pursue another alternative: looking at bungalows with an entry at grade levels that they could
renovate to meet their requirements after closing the transaction. In subsequent discussions, the buyer indicates
that they are now willing to look at more modern condominium apartment properties with ramps and elevators in
that same neighbourhood. They decide against continuing to pursue properties that they could renovate to meet
their requirements.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 7 of 21

Buyers and Technology

New property technology (popularly known as “proptech”) is regularly introduced to the marketplace. When
engaging with buyers during the qualification process, you may hear a buyer enthusiastically announce that they
found amazing houses by searching property listings on the web. This is one way that technology has significantly
changed real estate because web research has become a common way to search property listings. There are many
public and private websites that feature a variety of real estate listings and information. Realtor.ca® is one such
public website, but there are many others that a buyer may use to research properties, such as non-broker
aggregator sites like Zillow®. Some of these sites may have virtual tours posted in addition to photographs.

Buyers may also be interested in using your brokerage’s website or your own personalized website, if you commit to
developing and maintaining one. The listings buyers view online may influence their list of requirements. Buyers
may also bring properties they discovered in their online research to you as potential homes they wish to view. You
may also consider leveraging content on your own personal website or creating social media profiles on popular

©2019 Real Estate Council of Ontario

platforms. You will want to take steps to ensure you comply with your requirements under REBBA and that you
consult the RECO’s Guide to Social Media and Advertising Guidelines found on the RECO website, so that you will be
confident you are conducting your business in compliance with the Act.

Technology is also changing the way a salesperson engages with the public. Some salespersons add bar codes (QR
codes) to “For Sale” signs so buyers can access information about the property on their cell phone. Salespersons
also add code numbers to their signs that prospective buyers can text to connect to auto-responders that provide
more information on the property and give salespersons access to the individual who made the inquiry.

Buyers are now exposed to more information about market conditions and the availability of properties than ever
before. As a salesperson, you will still play an integral role in separating fact from fiction by providing real insight
into information that the buyer has gathered from the internet, which might not be accurate (or relevant to this
province), and of course, in representing the buyer in a transaction to ensure that the buyer’s best interests are
protected.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 8 of 21

Demographics and the Buyer

A buyer’s needs and motivations may be impacted by changing demographics, such as growth, size, distribution,
and composition of population.

The following five sections contain information on demographics and its impact on a buyer’s needs and
motivations.

Demographics impact

You will encounter individuals of diverse age ranges,

and socio-economic and cultural backgrounds (with
widely different income levels, abilities, lifestyles, and
needs) when engaging with clients and customers in
the process of looking for a suitable property. It is
important to ask the buyer about their lifestyle so you
can identify an area that suits them.

Example:

A young, single buyer may wish to live in a

neighbourhood that is close to a bus route for an easy
commute to work and shopping. After viewing several
properties in the area, they realize that the
demographics are predominantly retired families who
have lived there since the area was first developed.
Based on this observation, the buyer may wish to look
in a different location, which appeals to a younger
generation.

©2019 Real Estate Council of Ontario

 Aging population

Interestingly, the aging population is not focused

entirely on traditional retirement living configurations.
Downtown condominium markets have proven
attractive as empty nesters and retirees seek the
convenience of urban centres. Retirement for many is
much more than scaling down house size.
Seniors may choose to buy into destination
communities that are self-contained complexes
complete with recreational and social amenities, as
well as support services. All kinds of real estate may be
of interest (e.g., bungalows, retirement homes,
assisted living complexes, or apartment units).
Housing developments, now and in the future, must
look at innovative structures, such as stairless
entryways and homes, structural provisions for
elevators, flexible configurations (to accommodate
multigeneration families and in-law suites), wider
hallways, walk-in bath enclosures, or tracking for lift
mechanisms.

Example:

One senior may be looking for a senior’s complex with

lots of recreational activities, so they can meet new
friends. Another senior may want to move into an in-
law suite in their favourite nephew’s home.

©2019 Real Estate Council of Ontario

Lifestyle choices and locations

There is no right or wrong location for a buyer based

on demographics. For example, you can’t be certain
that a young buyer would like to live in a downtown
condominium simply because it offers many
amenities. Location or proximity to places of
importance may be their primary focus. Some places
that might be drivers for lifestyle requirements include:

• Places of worship
• Parks
• Cultural centres
• Club facilities
• Fitness centres
• Golf courses
• Grocery stores
• Entertainment centres
• Sports facilities

Example 1:

A married couple wants to move to a downtown

condominium near the concert hall and theatre
district.

Example 2:

A young couple planning a family wants a bigger house

with a yard that is located near a Catholic school.

©2019 Real Estate Council of Ontario

 Culture and ethnicity

Ethnic and cultural origins, as well as settlement

patterns, can also influence real estate decisions. Some
consumers may want to be located close to cultural
connections, in close proximity to ethnic food stores,
or near family and friends from a particular
background. Consider aspects such as ethnicity,
language, and shifting settlement patterns, as
appropriate.

Example:

A family who has recently immigrated to Canada with

limited English may want to purchase a property in an
area where their language is widely used in the
community.

©2019 Real Estate Council of Ontario

 Social trends

Social trends are another important component of

demographics. Some are the natural result of the
passing of time, such as the changing needs of an
aging population. Others are a response to economic
conditions or housing preferences.

Example:

A single person decides they want to buy a house in an

older, less affluent neighbourhood near their
workplace. They hope that recent trends of
redevelopment in the area means that if they purchase
a property there, it will eventually increase in value.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 9 of 21

During the qualifying process, a salesperson takes notes on the price range, financing,
and features the buyer describes, to search for properties that match their criteria. The
buyer also indicates a preference for a home located on a quiet street. The salesperson
finds five homes that meet most of the needs discussed. Two of them are on a street
that is quiet during the day but can get busy at rush hour. The pricing on all properties is
comparable.
What should the salesperson do in this situation?
There are three options. There is only one correct answer.

Inform the buyer about all the properties and allow them to make a selection as to which ones
1
they want to see.
Avoid telling the buyer about the two homes located on busier streets and show only the three other
2
homes.
3 Schedule appointments for all the homes that the salesperson selected and let the buyer decide.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 10 of 21

Material Facts and the Buyer Client

As you learned earlier in this module, the obligations differ between client and customer. If the buyer is a client, they
are entitled to a higher level of service because you will have obligations to them that are greater than those you are
required to provide to a buyer customer.

The Code specifies that you will have to make disclosures for the client promptly, but first, you will be required “to
make a reasonable attempt to determine all material facts” that might affect a buyer’s decision to purchase a
property. This involves following up with listing salespersons, reviewing brokerage resources, and doing research to
discover material facts on properties you intend to show the buyer. You will need to verify information you have
researched before you disclose it and only share information from a reliable source, like the ones listed in the page.
Other reliable sources could include a subscription-based database; or municipal, provincial, and federal
government websites.

Research into material facts can also result in recommending services, such as those of a home inspector or another
third-party professional (e.g., licensed TSSA technician, surveyor, lawyer, or accountant) where expert advice is
necessary.

While navigating through the online module, click the KMS button in the Module Resources for tools and
information on this topic.
©2019 Real Estate Council of Ontario
Lesson 2 | Page 11 of 21

Material Facts and the Buyer Customer

If the buyer is a customer, under Subsection 21(2) of the Code, you are required to disclose information to them that
is “known or ought to be known by the broker or salesperson” as soon as is possible to fulfill your obligation. You
will need to suggest a buyer customer obtain advice from a third-party service professional if you think they need
expert advice. Customers will need to do their own research to determine if any material fact affects a property.

Remember that if you are aware of something that could be considered a material fact to any buyer, either a client
or a customer, you will have to disclose it. Failure to do so can have significant consequences under REBBA

©2019 Real Estate Council of Ontario

Lesson 2 | Page 12 of 21

Material Facts and the Buyer

Example: Buyer as a client

A salesperson representing a buyer is showing a property. The buyer asks about the vacant land across the street
from the property. The salesperson tells the buyer that they will find out more about it and report back. After the
showing, the salesperson obtains the contact number from the sign posted on the vacant property. The salesperson
contacts the building department at the local municipality and determines that permits have been obtained to build
a high-rise condominium. There are plans to construct two buildings in the near future on the property. The
salesperson discloses this information to the buyer who decides that this is not the right property for them as the
new development will bring a lot more people, traffic, and noise to an already busy area. The buyer decides to look
for properties in a quieter, older neighbourhood.

©2019 Real Estate Council of Ontario

Example: Buyer as a customer

A salesperson is working with a buyer customer couple. They ask the salesperson to show them a property in an
older neighbourhood just north of the city. The couple has two young children. They are looking at this area as it is
close to the wife’s parents’ home and the local public school. Prior to the showing, the salesperson tells the couple
that they heard rumours that the local public school may be closing due to lack of registration and funding. The
salesperson also suggests that the couple contact the school or school board directly for further information
regarding the status of the school.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 13 of 21

Common Material Facts for Buyers

There are many issues that can be considered to be material facts for a buyer. When you are working at a
brokerage, they may provide their own list for you to use. Some of the most common are:

• Structural conditions and results (e.g., age or maintenance issues like roof leaks, foundation damage,
mechanical or electrical deficiencies, basement water seepage and mould or insect infestation)
• Outdated materials (e.g., knob-and-tube and aluminum wiring or Kitec plumbing), some of which may also be
personally or environmentally hazardous (e.g., asbestos insulation, lead or galvanized plumbing, or
underground storage tanks)
• Building and/or dwelling measurements or lot size (e.g., discrepancies in measurements cited in listings or
specific measurements of a balcony)
• Previous use of a property (e.g., former illicit activity such as a grow-op, meth lab, or murder)
• Zoning (e.g., bylaws, land use, or fence height requirements)
• Government limitations (e.g., HST, property taxes, or expropriation)
• Private limitations (e.g., easements or restrictive covenants)
• Alterations (e.g., renovations completed without permits or inspections, or demolitions)
• Existence of nearby businesses or facilities that may impact quality of life (e.g., an upcoming development or
industrial facility, airport, or railway line)
• Proximity to schools, churches, or other locations of interest

While navigating through the online module, click the KMS button in the Module Resources for tools and
information on this topic.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 14 of 21

A salesperson shows a property to a buyer client that has an underground oil tank. The
listing states that the buyer is responsible for the maintenance, repair, or removal of the
tank.
Which of the given texts are viable options for the salesperson to recommend to the buyer?
There are four options. There are multiple correct answers.

1 Do an internet search to find the cost of removing the tank and advise the buyer accordingly.
2 Advise the buyer they should just leave the tank on the property.
3 Suggest that the buyer consult with a licensed TSSA technician about the removal of the tank.
Suggest that a clause be inserted in the offer asking that the seller remove the tank and remediate any
4
contamination.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 15 of 21

Buyer Client’s Best Interests

As a salesperson, in addition to discovering and disclosing material facts for buyer clients, you will have other
obligations under the Code, such as the requirement to always protect the best interests of your clients and to
actively promote that interest. As you learned earlier, this is a fiduciary duty of a salesperson and has been outlined
in Section 4 of the Code of Ethics. You will need to ensure that your personal interests never take precedence over
the client’s interests. You will also need to treat customers and all other parties to a transaction fairly, honestly, and
with integrity. Remember that your buyer client will be putting their trust and confidence in you and your brokerage.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 16 of 21

Buyer Client’s Best Interests: Examples

There are many situations in which you will be required to actively promote and protect the interests of buyer
clients.

The following three sections contain examples of how a salesperson might protect the best interests of their
clients.

Example 1

The buyer client informs the salesperson in confidence

that they will offer $365,000 for a resale condominium
unit (which was listed through another brokerage for
$385,000) but admits that it is simply a starting point.
The buyer is quite prepared to pay the full listing price
if necessary and shares this with the salesperson as
they have trust and confidence in their relationship
with the salesperson.

The listing salesperson, when presented with the offer,

asks if the buyer will pay more as the seller is not
ready to accept the offer as presented. The
salesperson does not disclose that the buyer is anxious
to buy and will probably pay full list price. By doing so,
the salesperson protects the buyer client’s best
interest and complies with Section 4 of the Code of
Ethics.

©2019 Real Estate Council of Ontario

 Example 2

The buyer makes an offer of $462,000 on a property

listed at $488,900. The seller makes a counter offer for
$475,000. The buyer, in considering the counter offer,
wants to know if the amount countered is realistic.

The salesperson provides the buyer client details

about comparable properties that are for sale, have
been sold, or have expired (unsold) over the past two
months in that particular area. The salesperson also
updates the buyer on recent market trends and
generally ensures that the buyer client is well informed
prior to deciding about the seller’s counter offer.

Example 3

The buyer client asks the salesperson to prepare an

offer for a rural home. Once completed, the buyer
immediately takes the agreement and asks for a pen to
sign. The salesperson ensures that the buyer client
understands the nature of the document they are
about to sign. The salesperson summarizes and
explains the content of the offer before asking the
client to sign.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 17 of 21

Due Diligence to Protect Buyer Client’s Best Interests

When representing the buyer, due diligence is required throughout the buying process to ensure you are fulfilling
your obligations and acting in their best interests.

The following five sections contain information on requirements and strategies that help ensure you are protecting
the best interests of your buyer client.

Show properties that meet the buyer’s criteria

As you learned earlier in this module, it is important to

qualify your buyer’s needs and wants in order to show
the buyer properties that meet their requirements.

It is also important to take reasonable steps to

determine and disclose to the buyer any material facts
that may affect their decision to view a specific
property.

According to Section 19 of the Code, you are required

to inform a buyer client about any property meeting
the client’s criteria regardless of the amount of
remuneration being offered to the brokerage. This is
to ensure the salesperson and brokerage are
promoting the best interest of the client.

©2019 Real Estate Council of Ontario

Accurately prepare offers

As a salesperson, you will be accountable for the

accuracy of the terms of any document you prepare on
behalf of a consumer and for the content of any
agreements you advise on. You must act to protect
your client’s interests.

If a buyer’s offer is prepared without attention to

accuracy, it could put the buyer client in the
undesirable position of being bound to terms and
obligations that they did not originally want or ever
intend to accept.

Assist in negotiations

As a salesperson, you will need to assist with buyer

negotiations, developing strategies or options to
advance the client’s interests. In addition, you will be
required to negotiate for the buyer client to obtain the
lowest price and best possible terms.

You will need to negotiate effectively, otherwise a

buyer might pay too much for the property.

©2019 Real Estate Council of Ontario

Assist with third-party professionals

As a salesperson, you will need to recommend that the

buyer seek expert advice from mortgage lenders,
home inspectors, and other third-party professionals
as required.

If you do not refer the buyer to third-party

professionals when needed, you will be in violation of
Section 8 of the Code of Ethics. You will also put your
buyer at risk of incurring unplanned expenses.

Assist with documentation

As a salesperson, you will need to review or assist the

buyer (as appropriate) with reviewing reports received
and other documentation involved in the property
buying process.

You will need to ensure that the buyer thoroughly

understands the contents of all documents during the
buying process, and if you cannot properly explain the
contents, you will need to refer them to someone who
can, such as a lawyer.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 18 of 21

Salesperson’s Due Diligence: Other Factors

There are other factors that may require due diligence, such as HST and foreign buyers’ tax. As a salesperson, you
will perform your due diligence by outlining HST and foreign buyers’ tax, in situations where they could impact a
buyer, prior to submitting an offer. You would also ensure you advise the buyer to consult their lawyer, accountant,
or another qualified professional for definitive advice on taxation matters, as these are beyond your area of
expertise.

The following three sections contain information on the HST and tax liabilities a buyer may face.

HST

A buyer could face HST obligations if the property was

being used for a commercial purpose, or for a fully
renovated home. In addition, HST could be applicable
on the purchase of a new home and all services
associated with the transaction, such as legal fees and
moving costs. HST liability would also be dependent on
how an offer is constructed.

As a salesperson, you will need to ensure the buyer

clearly understands if the HST is included in the
purchase price or if it is in addition to the purchase
price.

©2019 Real Estate Council of Ontario

Tax liabilities of non-residents

A buyer needs to be concerned about the capital gains

tax incurred by a non-resident seller. Section 116 of
the Income Tax Act gives the buyer an opportunity to
protect themselves from tax liability if the non-resident
seller leaves the country without paying the tax.

The buyer will need to see evidence that the non-

resident seller has paid the tax, or the buyer will have
to withhold a portion of the purchase price to satisfy
the non-resident seller’s tax obligation. A pre-printed
clause in the agreement of purchase and sale
addresses this provision.

If the buyer is a non-resident of Canada and is

purchasing a property in the Greater Golden
Horseshoe area of southern Ontario, the foreign
buyers’ tax would apply.

©2019 Real Estate Council of Ontario

 Other applicable taxes

As a salesperson, for all taxation matters, you will

advise the buyer to consult with an accountant or
other tax professional for advice and guidance
regarding the applicability of a particular type of tax.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 19 of 21

Obtaining Services from Third-Party Professionals

As a salesperson, another obligation you will need to meet under the Code of Ethics requires that you demonstrate
your education and growing experience as a salesperson. However, you will not be expected to know everything
there is to know about related fields like construction, appraisal, or real estate law simply because you trade in real
estate. As a salesperson, to fulfill your obligations under Section 8 of the Code. You will need to advise clients and
customers to seek services from others whenever they require expert advice beyond the scope of your knowledge.

Section 8 of the Code requires that you advise a client or customer to obtain services from other better-qualified
professionals, and under no circumstances, discourage clients or customers from seeking such services. It is always
a good idea to recommend that the buyer gets an opinion from a qualified service professional, such as a home
inspector, experienced general contractor, or a structural engineer as needed. These professionals can give the
buyer an accurate assessment of a home’s key components, including roofing, floors and walls, doors and windows,

©2019 Real Estate Council of Ontario

foundation, plumbing, electrical, heating, ventilation, and air conditioning. They can tell the buyer if the wiring is up-
to-date or if a crack in the wall is anything to worry about. A leading practice in making referrals when requested is
to always provide three names of third-party professionals.

Example 1:

A buyer has looked at several properties and thinks they want to put in an offer on an older home needing some
repairs. The buyer feels confident that financing will be readily available at an attractive rate of interest. The
salesperson explains that the amount of mortgage and interest rate charged might be affected given the age,
location, and general condition of the property. After discussion and the buyer’s approval, the salesperson inserts
an appropriate condition in the offer and then refers the buyer to three mortgage brokers they can contact to
secure acceptable financing.

Example 2:

A buyer hires a home inspector who is also a friend. The home inspector observes that the furnace in the house is
about 15 years old and appears to be in good condition. But when asked about the interior of the furnace, the
inspector reveals they are not a licensed TSSA technician and cannot inspect the interior of the furnace. The client
asks the salesperson if the furnace needs to be replaced in the near future. The salesperson recommends the buyer
get the furnace fully inspected by a licensed TSSA technician and offers to make a referral, if needed.

©2019 Real Estate Council of Ontario

Lesson 2 | Page 20 of 21

A buyer client is seriously considering an older duplex with out-dated wiring and a
deteriorating chimney but is concerned about insurance coverage. They ask their
salesperson if an insurance company would be willing to insure the home in its present
condition, and if so, at what cost.
What should the salesperson do to act in the buyer’s best interest?
There are four options. There are multiple correct answers.

1 Explain that the insurance coverage is easily available, and the buyer has no reason to be concerned.
2 Suggest the names of two or three insurance companies who specialize in these types of properties.
3 Add a condition in the offer allowing the buyer to complete a home inspection.
Add a condition in the offer allowing the buyer to confirm that insurance can be obtained at a price
4
acceptable to the buyer.

©2019 Real Estate Council of Ontario

 Lesson 2 | Page 21 of 21

Congratulations, you have completed the lesson!

There are three sections on this page with a summary of the key topics that were discussed in this lesson.

Assessing buyer needs • Ask appropriate questions to accurately assess a buyer’s needs.
• Asses the buyer’s financial readiness and qualify them to select properties that
meet their needs and their budget Buyers have to make decisions quickly.
• If needed, revisit and refine the buyer’s criteria and requalify them to confirm
their needs and priorities. This will help in identifying the best suited
properties for them.
• Consider the demographic factors that may influence the buyer’s needs and
motivations to select or buy a property.

Disclosure of material
facts • Disclose material facts to both clients and customers, per Section 21 of the
Code of Ethics.
• For buyer clients, take reasonable steps to determine and disclose material
facts.
• With customers, disclose only those material facts that are known or ought to
be known by a salesperson.

©2019 Real Estate Council of Ontario

Best interest of a buyer
• Always work in the best interest of the client and actively promote that
interest, per Section 4 of the Code.
• Be careful not to overstep your abilities when providing services and advise
clients or customers to seek advice from third-party professionals when
needed, per Section 8 of the Code.
• Show properties that meet buyer’s criteria without regard for remuneration,
per Section 19 of the Code.
• Accurately and professionally prepare and convey offers on behalf of the
buyers.
• Negotiate for the buyer client to obtain best price for the property.
• Assist the buyer client with documentation.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 1 of 15

Lesson 3: Impact of Market Conditions on Negotiation Strategies

This lesson describes the characteristics of a seller’s market, a buyer’s market, and a balanced market. It describes
different market conditions and highlights how these influence negotiations and strategies used during the offer
process.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 2 of 15

This lesson outlines the various market conditions that a salesperson can encounter. You will be introduced to
market types known as a “seller’s market”, a “buyer’s market”, and a “balanced market”. Different market conditions,
demographics, consumer vulnerabilities, and other factors can impact the strategies a salesperson will suggest to
sellers and buyers during a real estate transaction.

Upon completion of this lesson, the learner will be able to:

• Describe the characteristics of a seller's market, buyer's market, and balanced market
• Identify the strategies for addressing consumer vulnerabilities under different market conditions

Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 3 of 15

Seller’s Market

In a seller’s market, the number of buyers wanting properties exceeds the supply. This type of market is
characterized by properties that sell quickly, rising prices, and minimal inventory available for sale. Often, sellers
have the luxury of considering several offers and counter-offers for higher prices.

These characteristics have implications for buyers. They do not have the liberty of looking around at various
properties for any considerable amount of time and have to make decisions quickly. In addition, the buyer may have
to offer more than the listed price, be ready with financing, and may want to consider submitting an unconditional
offer even if they are uncomfortable with the risks that may entail. Conditional offers are frequently rejected by
sellers in a seller’s market as the seller can often demand a firm offer for their property.

©2019 Real Estate Council of Ontario

How will you advise clients when drafting an offer in a seller’s market? Should they submit the best offer or
hold back hoping for give and take with the seller? While there is no single strategy, you will need to consider
these factors:

• If you inform the seller that the offer is your buyer client’s best offer, then it should be. However, if the right
house is slipping away, the buyer might change their mind. The only thing at stake when making such
statements is your credibility.
• The "best-offer-first” strategy is associated with strong seller markets where demand for housing is high. Going
in with the best offer may be the only opportunity to catch the seller’s attention amidst competing offers. But
you must prepare the buyer as their best may not be good enough.
• Buyers are often tempted to delete conditions in order to make their offers more competitive in a seller’s
market. For example, buyers may remove a home inspection and assume the associated risk. You will need to
advise caution in such cases. You should obtain the buyer’s acknowledgement in writing that you advised the
buyer to get a home inspection, and the buyer has decided to forgo it.

You can provide advice to a buyer client, but you must not make decisions for them, regardless of market
conditions. Sellers and buyers must decide on the price that they should accept or offer.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 4 of 15

Buyer’s Market

In a buyer’s market, the supply of properties on the market exceeds the demand. Characteristics of this market
include longer selling periods for properties on the market, fewer buyers compared to properties available, higher
inventory, and stabilized or declining prices. The implications for buyers in this type of market are more favourable.
They have the negotiating leverage, more choice, and the luxury of additional time in searching for the right
property.

How will you advise clients when drafting an offer in a buyer’s market? As with the seller’s market, there is no single
strategy, but there are a few factors you will need to consider. Since sellers are anxiously looking for willing buyers
in a strong buyer’s market, buyers may state, “this is my only offer” as a tactic. Positioning an offer as an ultimatum
is a powerful negotiating tool. Remember, the individual having the least motivation has the most negotiating
power. Conversely, the seller may be insulted by the offer and elect not to consider it further. Re-establishing
negotiations after a rejection can be challenging.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 5 of 15

Balanced Market

In a balanced market, the number of properties on the market equals the demand. The characteristics of this
market include properties selling within a reasonable period, sellers accepting reasonable offers, and prices
generally stabilized. The atmosphere is usually more relaxed.

In a balanced market, the strategy would be a less pressured approach to negotiations as neither the seller or
buyer is in a superior position. Sellers and buyers compromise and negotiate to reach an agreement. Balanced
markets rarely exist, and if they do, they are usually short lived.

©2019 Real Estate Council of Ontario

 Lesson 3 | Page 6 of 15

Factors Affecting Market Conditions

As a salesperson, you will need to understand that the real estate market is sensitive to changes in the balance of
economic, political, and social forces within our society, which in turn influence the supply and demand for real
estate, and otherwise contribute to changes in market conditions.

The following four sections contain information on some additional factors that affect market conditions.

Demographic changes

As you learned earlier in this module, demographic changes

include immigration, migration from one part of the country to
another, increase or decrease in family size, and unemployment
rates. Of all these factors, an increase or decrease in family size
is one of the most significant.

Families are the primary consumers of housing. The family unit,

which may be comprised of two adults, who may or may not
have children, or one adult caring for at least one child, will
often want to establish an independent household. This is
known as the family formation rate. As more families are
created there may be a corresponding increase in demand for
housing.

A high family formation rate may predict a seller’s market in the

short term in a strong economy. If the demand remains
constant or increases, the marketplace subsequently will need
to make more housing units available for the market to
equalize.

©2019 Real Estate Council of Ontario

 Employment conditions

With increases in employment and economic

prosperity, the demand for housing also increases.
Earning good wages, a buyer will be better able to
afford a starter home; current homeowners and those
with growing families may also begin looking for a
larger home. Stable employment rates across the
labour force can sometimes predict a balanced
market.

In periods of economic hardship and higher than

normal unemployment rates, demand for real estate
drops. Some properties will be put up for sale because
the owners cannot afford to keep the property due to
personal financial hardship. Leasing property may be
considered an appealing, less risky alternative to home
ownership at such times.

Pensions and other social security programs, coupled

with an increase in life expectancy, may allow seniors
to continue as homeowners after retirement, although
they may buy a smaller home or apartment.
Regardless, economic downturns have typically
indicated a weakening real estate market.

©2019 Real Estate Council of Ontario

Interest rates and mortgage availability

Interest rates are a key motivator in determining the

demand for housing. When rates are high, the real
estate market tends to take a downturn as potential
consumers remain in their current housing rather than
taking on the risk of greater debt.

If interest rates are low, mortgages become more

affordable and consumers are more likely to consider
buying real estate. As lenders react to market
conditions, they may loosen or tighten up lending
criteria, which impacts the availability of financing.

Building activity

Substantial building activity normally indicates a strong

real estate market. However, overbuilding can increase
supply resulting in reduced real estate values.

Unless the increase in supply is coupled with a

corresponding increase in consumer demand, real
estate prices can experience a downward trend and
create a buyer’s market.

Conversely, a sudden increase in demand can indicate

an upward trend in real estate prices given the time it
takes to build additional inventory.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 7 of 15

Consider the following scenario, “Buyers are searching for a home to purchase. However,
it seems that every property they express interest in is promptly snatched up by
someone else for much more than the asking price.”
The above scenario describes a seller’s market.
There are two options. There is only one correct answer.

True False

Lesson 3 | Page 8 of 15

Consider the following scenario, “A young couple is expecting a baby in the fall. They’re
excited to look for their first home together at the same time as their friends. As the two
couples attend a series of open houses, they notice many homes are up for sale and are
glad they have many options to choose from.”
The above scenario describes a buyer’s market.
There are two options. There is only one correct answer.

True False

©2019 Real Estate Council of Ontario

Lesson 3 | Page 9 of 15

Consider the following scenario, “A buyer is in negotiations with a seller to purchase a

home. The buyer is confident that given the asking price and their generous offer, both
parties can eventually come to an agreement where they’re both happy. If not, the buyer
knows they have seen a few other homes in their price range.”
The above scenario describes a balanced market.
There are two options. There is only one correct answer.

True False

©2019 Real Estate Council of Ontario

Lesson 3 | Page 10 of 15

A salesperson is meeting with a seller who has accepted a company transfer that
requires them to relocate across the country. They want to ensure that the transaction
closes on time so that their children can enrol in their new school in time for the
beginning of the school year. The salesperson explains to the seller that they are
currently in a buyer’s market. The property is listed for sale and as the weeks pass, the
seller becomes nervous due to the limited number of showings being requested. They
notice that several homes in their neighbourhood are also up for sale. After several
weeks, the seller gets an offer, but the price is lower than what they were expecting.
What should the salesperson suggest to the seller regarding the offer?
There are three options. There is only one correct answer.

1 Suggest that the seller accept the offer.

2 Suggest that they discuss the advantages and disadvantages of the seller accepting the offer.
3 Suggest that the seller make a counter offer at the list price to show that they are serious.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 11 of 15

Best Advice Under Varying Market Conditions

The market type influences the recommendations you will make to sellers and buyers during the offer process.

The following six sections contain information on how a salesperson may best advise sellers and buyers under
varying market conditions.

Seller’s market: Advising the seller

In a seller’s market, you will need to be prepared to

offer advice to your seller client. You may recommend
that the seller:

• Seek a large deposit as a sign of the buyer’s

commitment
• Hold out for an unconditional offer and/or a
counter offer for terms in their favour
• Negotiate for a higher selling price, particularly
when multiple offers are received. The strategy to
delay offer presentations to attract multiple offers
may be commonplace in some areas but carries
its own risks. If this strategy is discussed, you will
want to make sure that the seller understands the
pros and cons of delaying offers

©2019 Real Estate Council of Ontario

Seller’s market: Advising the buyer

In a seller’s market, you will need to be prepared to

offer advice to your buyer client. You may recommend
that the buyer consider:
• Offering the highest price within the buyer’s
means and/or accompanying their offer by a
larger deposit than expected in current market
conditions, preferably in the form of a bank draft
or certified cheque on offer presentation so they
are taken more seriously by sellers
• Weighing the benefits and risks of submitting an
offer without conditions

There is also a higher risk that conditional offers will be

rejected since the sellers may have multiple offers that
do not include conditions. However, a buyer needs to
understand the risks if they do not include conditions
(such as those for home inspection and financing) in
their offer.

If they buy a property with undetermined defects, the

appraised value may fall below the purchase price
requiring a larger down payment. They may also have
to later make costly repairs that they did not budget
for.

You will also have to remember that advising a buyer

to convey any offer without conditions could be a risk
and could be seen as a failure to protect their best
interests. The salesperson should ensure that the

©2019 Real Estate Council of Ontario

 buyer understands the risks and obtains written
acknowledgment from the buyer that they were given
the opportunity to include various due diligence
conditions in their offer.

Buyer’s market: Advising the seller

In a buyer’s market, you will need to be prepared to

offer advice to your seller client. You may recommend
that the seller:

• Keep their home in good condition so that the

property’s potential is apparent
• Make the property available for as many viewings
as possible
• Expect to receive conditional offers, and be
aware of the risks of making counter offers when
there is a surplus of properties on the market
• Expect that they may receive offers at a lower
price point than desired with less interest in
negotiations

©2019 Real Estate Council of Ontario

Buyer’s market: Advising the buyer

In a buyer’s market, you will need to be prepared to

offer advice to your buyer client. You may recommend
that the buyer:

• Make informed choices that focus on their

priorities, and consider making offers on
properties that satisfy most (if not all) their wants
and needs
• Take their time in viewing properties and putting
together an offer
• Submit a conditional offer to protect their best
interests by including conditions (e.g., requiring a
home inspection or repairs be done)
• Make an offer that allows room for negotiation
rather than one that is based on their maximum
budget
• Consider adding a clause making the purchase
conditional upon the sale of their own property,
as applicable

©2019 Real Estate Council of Ontario

Balanced market: Advising sellers and buyers

In a balanced market, you will need to be prepared to

offer advice to both your seller and buyer clients. You
will usually recommend that the client:

• Be prepared to make conditional and/or counter

offers since these are commonplace in a
balanced market; neither party is at a distinct
advantage or disadvantage
• Be prepared to negotiate the selling price and
terms (e.g., closing dates and other matters
important to both parties)

©2019 Real Estate Council of Ontario

Conditions and clauses: Protecting interests of sellers and buyers

You will need to be prepared to advise on conditions

and clauses that can be added to protect and promote
the interests of your seller or buyer clients. You will
consider including conditions regarding:

• The buyer arranging financing

• Having a home inspection done
• Arranging insurance
• The seller making certain guarantees regarding
the condition of the property, chattels, and
fixtures, or major improvements (e.g., swimming
pools or garages)
• The seller agreeing to repair damages (e.g., fixing
a crack in a wall and repainting it)

Clauses could also be inserted that acknowledge

certain actions to be done or permissions being
granted to the parties (such as visits by the buyer to
the property prior to closing).

©2019 Real Estate Council of Ontario

Lesson 3 | Page 12 of 15

Competing Offers

In addition to bringing an understanding of market conditions to your relationship with your seller and buyer clients,
as a salesperson, you will need to identify strategies for addressing consumer vulnerabilities under the different
market conditions. In a competing offer situation, for example, you will need to provide certain pieces of
information to potential buyers when you are working for a seller. These are:

• The number of competing offers

• If a competing offer has been made by the listing salesperson
• If a competing offer has been made by a buyer representative within their brokerage
• If two buyer representatives from the same co-operating brokerage have submitted offers (as this may be a
multiple representation situation for the co-operating brokerage and consent needed)

©2019 Real Estate Council of Ontario

You will not provide information about the amounts of competing offers or any terms included. Typically, the seller
chooses to accept a buyer’s offer, reject it, or make a counter offer. Sometimes a seller will give one or more buyers
a chance to improve their offer, but they may only get one chance. All offers will need to be in writing and signed,
and you will need to work with your brokerage to keep a record of those offers on file for a year.

In a housing market where there are more buyers than sellers, it is understandable that buyers can become
frustrated—especially if they have submitted unsuccessful offers on several homes. In some cases, buyers may
question how many other offers the seller received.

In a competing offer situation, a buyer may have concerns that the offer process was not conducted fairly. When
you are representing the buyer, you might be asked to obtain evidence of how many offers the seller’s brokerage
received. If the seller’s brokerage cannot supply this information to your client’s satisfaction, you or the buyer may
need to inquire with the Real Estate Council of Ontario (RECO).

RECO will contact the seller’s brokerage to confirm the offer information. Be aware that RECO will only provide the
total number of offers and it may take some time for the request to be processed.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 13 of 15

A salesperson is showing a property to a buyer who currently owns a home. The buyer is
interested in making an offer but can only afford it if they sell their own home. The buyer
expects that their home, once listed, would sell within 30 days.
What advice should the salesperson give to the buyer if it is a buyer’s market?
There are three options. There is only one correct answer.

1 The buyer should submit an offer on the home only after they sell her current property.
2 The buyer should submit an unconditional offer as soon as possible.
The buyer should make an offer as soon as possible and include a condition that the purchase is
3
contingent upon the sale of their current property within 30 days.

Lesson 3 | Page 14 of 15

A salesperson presents an offer on a unit in a condominium to their seller on the first

day after it is listed. The offer is lower than the list price and is conditional upon the
buyer obtaining financing.
What advice should the salesperson give to the seller regarding the offer if this is a seller’s
market?
There are three options. There are multiple correct answers.

1 The seller could counter the offer for terms in their favour.
The seller could reject the offer and instruct the salesperson to delay all offer presentations for two days
2
in an effort to encourage multiple offers.
3 The seller could accept the offer and agree to the condition.

©2019 Real Estate Council of Ontario

Lesson 3 | Page 15 of 15

Congratulations, you have completed the lesson!

There are six sections on this page with a summary of the key topics that were discussed in this lesson.

Seller’s market In a seller’s market:

• The number of buyers wanting properties exceeds the supply.
characteristics
• Properties sell quickly, and prices are high with few or no conditions.
• Sellers can demand a firm sale on the property.
• Buyers have to make decisions quickly.
• Buyers should be ready with financing.
Buyer’s market In a buyer’s market:
• The supply of properties exceeds the demand.
characteristics
• The selling periods of properties are longer.
• The prices are stable and more affordable.
• Buyers have negotiating leverage.
• Buyers have time to search for the right property.
Balanced market In a balanced market:
• The number of properties on the market satisfies the demand.
characteristics
• Properties sell within a reasonable period of time.
• Prices are stable.
• Negotiations are less pressured.
Seller’s market: In a seller’s market:
• Sellers can seek high deposits, hold out for unconditional offers, and negotiate
Advice to sellers and
for a higher selling price.
buyers • Buyers should provide a significant deposit and consider all the risks
associated with submitting unconditional offers.

©2019 Real Estate Council of Ontario

Buyer’s market: In a buyer’s market:
• Sellers should keep their homes in good condition, be open for viewings, and
Advice to sellers and
expect to receive conditional offers and lower prices.
buyers • Buyers can make informed choices, make conditional offers, and negotiate
for a better price.
Balanced market: In a balanced market:
• Conditional and counter offers are commonplace.
Advice to sellers and
• Sellers and buyers have room to negotiate a reasonable selling price.
buyers

©2019 Real Estate Council of Ontario

Lesson 4 | Page 1 of 11

Lesson 4: Summary Practice Activities

This lesson contains several review activities to test your knowledge on the entire module.

©2019 Real Estate Council of Ontario

Lesson 4 | Page 2 of 11

This lesson contains summary decision points that will test your knowledge regarding the factors impacting
residential real estate negotiations covered in this module.

Throughout this lesson, you will participate in decision points to test your knowledge on the topics presented.

©2019 Real Estate Council of Ontario

Lesson 4 | Page 3 of 11

A salesperson is inspecting a property prior to listing it. While in the basement, the
salesperson notices a number of rusty staples in the wall panelling and some
efflorescence on the concrete block wall. The seller states that there was some leakage
from a basement window a couple of years ago but assures the salesperson that it was
repaired by a contractor and has not leaked since.
What should the salesperson do in this situation?
There are four options. There are multiple correct answers.

Recommend that the seller get the problem inspected by a third-party professional before putting the
1
home on the market.
Since it was repaired, there is no need to disclose the problem as the seller has assured the salesperson
2
that it no longer leaks.
Make the seller aware that the presence of the rusty staples and efflorescence will likely be pointed out
3
by any salespersons who show the property to buyers.
4 Obtain documents from the seller regarding the repairs.

©2019 Real Estate Council of Ontario

Lesson 4 | Page 4 of 11

A listing salesperson is presenting two competing offers on their seller’s home which is
listed at $250,000. The first offer presented is from a buyer being represented by the
salesperson’s brokerage. It is for $240,000 and has a condition for three days on a home
inspection. The second offer presented is from a buyer being represented by another
brokerage and is for $240,000 with no conditions.
What should the listing salesperson do to promote and protect the seller’s best interests?
There are three options. There is only one correct answer.

Suggest that the seller accept the listing brokerage’s offer as it was presented first. The condition is
1
minor and is only for three days.
2 Suggest that the seller accept the offer from the other brokerage as it is unconditional.
3 Suggest that the seller counter offer both offers for $5,000 more and see which one is accepted.

©2019 Real Estate Council of Ontario

Lesson 4 | Page 5 of 11

In preparation for creating a listing agreement, a salesperson has the responsibility to

identify defects in a property.
Which of the given are the salesperson’s responsibilities during an inspection?
There are four options. There are multiple correct answers.

1 Look for signs of defects that may not be obvious

2 Use their experience to assess the extent of a defect
3 Watch for outdated electrical, plumbing and HVAC systems
4 Note any evidence of alterations and additions

©2019 Real Estate Council of Ontario

Lesson 4 | Page 6 of 11

A salesperson is meeting with buyer clients who have explained that they prefer a
specific neighbourhood but realize that a suitable property might not be available there.
Following the qualification process, the salesperson determines that they are looking for
a three-bedroom house with a pool in the $435,000 to $460,000 range. The salesperson
finds a property that meets their criteria in the neighbourhood they prefer. However,
when making the appointment to show, the listing brokerage tells the salesperson there
was a fire on the property two years ago that led to damages amounting to $50,000. The
brokerage also discloses that while making the repairs, an ensuite bathroom was added
to the master bedroom.
What actions should the salesperson take to fulfill the obligations to the buyers?
There are three options. There are multiple correct answers.

1 Obtain documentation regarding the repairs and additions from the listing salesperson.
Avoid this property and instead look for properties in other locations as the buyers are not particular
2
about the area.
3 Add a condition in the offer for a home inspection.

©2019 Real Estate Council of Ontario

Lesson 4 | Page 7 of 11

A salesperson, while showing an older cottage property to a buyer client, notices a crack
in the exterior wall and advises the buyer that the crack is only minor and they need not
be concerned. The salesperson assures them that this sort of thing is common in non-
winterized cottages as the perimeter foundation may move slightly, but things would
return to normal in the spring.
The action that the salesperson demonstrates is in the best interests of the buyer.
There are two options. There is only one correct answer.

True False

Lesson 4 | Page 8 of 11

A salesperson, while showing an older cottage property to a buyer client, notices water
stains above a window frame in the master bedroom that appears to have been recently
patched. The salesperson makes a point of discussing the potential leakage problem
with the buyer.
The action that the salesperson demonstrates is in the best interests of the buyer.
There are two options. There is only one correct answer.

True False

©2019 Real Estate Council of Ontario

Lesson 4 | Page 9 of 11

A salesperson, while showing an older cottage property to a buyer client, notices that the
floor in the kitchen slopes significantly towards the back of the home. The salesperson
advises the buyer that if they wish to submit an offer they should include a condition
permitting a home inspection and possibly an assessment by a structural engineer.
The action that the salesperson demonstrates is in the best interests of the buyer.
There are two options. There is only one correct answer.

True False

©2019 Real Estate Council of Ontario

Lesson 4 | Page 10 of 11

In a buyer’s market, a buyer asks a salesperson to put in an initial offer of $473,000 on a

property listed at $499,900. The salesperson presents the offer and receives a counter
offer for $489,000. The buyer has been pre-approved by a lender for a mortgage not
exceeding $440,000 and has $50,000 in the bank they can use as a down payment. They
ask the salesperson for advice regarding the counter offer.
What advice should the salesperson give to the buyer?
There are three options. There is only one correct answer.

The buyer should consider any recent comparable sales which may indicate that the amount of the
1
counter offer is appropriate.
The buyer should accept the counter offer as the value is within the range that was approved by the
2
mortgage specialist when they were pre-qualified.
The buyer should make a counter offer for $481,000 as that would be halfway between their first offer
3
and the seller’s counter offer.

©2019 Real Estate Council of Ontario

Lesson 4 | Page 11 of 11

Congratulations, you have completed the lesson!

©2019 Real Estate Council of Ontario

Module Summary | Page 1 of 4

Module Summary

This lesson contains a summary of the entire module and a list of helpful resources available in the Knowledge
Management System.

©2019 Real Estate Council of Ontario

Module Summary | Page 2 of 4

Congratulations, you have completed this module!

This lesson will present a summary of Learning Objectives and a list of helpful resources that you can search for in
the Knowledge Management System.

©2019 Real Estate Council of Ontario

Module Summary | Page 3 of 4

There are three sections on this page with a summary of the key topics that were discussed in this module.

Needs, Material facts, Residential resale transactions involve extensive work with sellers and buyers and
their changing needs and wants. To accurately assess a seller’s needs, you will ask
and Best Interests of
them questions that will help you in assessing their needs and motivations to get
a Seller accurate and complete information on the property.

You will need to take reasonable steps to determine and disclose material facts
relating to the purchase or sale of the property to seller clients, per Subsection 21(1)
of the Code of Ethics. You will always need to take care to work in the best interest
of the client and actively promote that interest, per Section 4 of the Code.

You will only need to disclose material facts that are known or ought to be known by
a salesperson when working with seller customers, per Subsection 21(2) of the Code
of Ethics.

You will have to perform due diligence to fulfill your obligation to identify defects,
which can be patent defects, latent defects, or the most severe type of latent defect,
material latent defects. You will also need to verify information the seller provides
related to defects. The seller is not obligated to disclose patent defects to potential
buyers.
However, the seller must disclose known latent defects. Non-disclosure of known
latent defects may result in civil liabilities.

Completion of this lesson has enabled you to:

• Recognize the importance of assessing a seller’s needs
• Describe the regulatory requirements of a salesperson regarding material
facts of a seller
• Describe the regulatory requirements of a salesperson regarding the best
interests of a client
• Identify a seller's legal obligation for disclosure of known defects

©2019 Real Estate Council of Ontario

Needs, Material Facts, To assess a buyer’s needs and determine the property that will best suit them, you
will take several steps, including asking appropriate questions of the buyer,
and Best Interests of
qualifying the buyer, revisiting the buyer’s criteria during the sale process, and
a Buyer understanding the impact of demographics on the buyer’s needs and motivations.
Subsection 21(1) of the Code will require you to determine and disclose material
facts about a property to buyer clients. You will always need to work in the best
interests of a buyer client and actively promote and protect that interest.
You will only need to disclose material facts that are known or ought to be known by
a salesperson when working with buyer customers, per Subsection 21(2) of the
Code of Ethics.
If situations arise that require knowledge and skills that exceed a salesperson’s area
of expertise, you will advise the client or customer to obtain services from third-
party professionals.
Completion of this module has enabled you to:
• Recognize the importance of assessing a buyer’s needs
• Describe the regulatory requirements of a salesperson regarding material
facts of a buyer
• Describe the regulatory requirements of a salesperson regarding the best
interests of a buyer client
Impact of Market The market type influences the recommendations you will make to sellers and
buyers during the offer process. There can be three market types: the seller’s
Conditions on
market, the buyer’s market, or the balanced market. You will need to ensure that
Negotiation Strategies seller and buyer clients understand the market conditions, prepare them for
negotiations, and give appropriate offer advice. However, you will never make
decisions on behalf of the client.
Completion of this module has enabled you to:
• Describe the characteristics of a seller's market, buyer's market, and balanced
market
• Identify the strategies for addressing consumer vulnerabilities under different
market conditions

©2019 Real Estate Council of Ontario

Module Summary | Page 4 of 4

Module Resources

There are five helpful resources related to this module that you can search for in the Knowledge Management
System.

1. Discovery Questions to Assist a Salesperson When Working with Sellers or Buyers: These tables contain lists of
sample questions used to assess a seller’s needs and wants, as well as questions used to qualify a buyer and to
assess their needs. This job aid can help a salesperson prepare to list a seller’s subject property or recommend
available properties to a buyer.
2. Identifying and Disclosing Material Facts: This job aid provides an overview of material facts, including the
definition and obligations under the Code. It also identifies sample questions a salesperson may ask a seller
about their property to assist in identifying material facts, and some examples of common property issues
related to material facts for both sellers and buyers. A salesperson can use this job aid to develop strategies to
discover material facts, and disclosure requirements for the salesperson and the seller.
3. Verifying Property Information: This table contains a list of sources that a salesperson may use when verifying
information about a property they are listing for sale. A salesperson can use this job aid to develop strategies
to verify property information while working with a seller or a buyer.
4. Types of Defects and Required Disclosures: This table differentiates between the two types of defects, reviews
disclosure requirements, and provides illustrative examples. This job aid can help a salesperson understand
how to identify defects.
5. Identifying Defects: This checklist contains a non-exhaustive list of actions that a salesperson may take to
identify defects in a property. This job aid can help a salesperson better assess the property and identify
aspects to research further, or aspects that may need to be disclosed by a seller to a buyer.

While navigating through the online module, click the KMS button for tools and information on this topic.

©2019 Real Estate Council of Ontario