HOME INSPECTIONS AND LICENSING/INSURANCE SCHEME

Janice Mucalov, LL.B.
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When representing home buyers, REALTORS® may well be asked about home inspections and perhaps also to recommend a home inspector. So REALTORS® should be aware of a 2009 court decision on home inspector liability and of the recent system for regulating home inspections in BC, which introduced licensing and insurance requirements to better protect buyers.

First, the court case. In November, 2009, a home inspector was found liable in negligence and ordered to pay substantial remedial costs to a couple who bought a home in North Vancouver.

The couple bought the house in 2006 for almost $1.1 million. The purchase was conditional on an inspection report. At the recommendation of their real estate agent, they hired an architect and his home inspection business to do an inspection and provide a report. He spent about 30 minutes inspecting the roof and exterior of the house in addition to inspecting the inside. He was paid $450 for his services.

 

The inspector filled in a good part of his printed report form before meeting with the buyers to discuss his findings. He noted some problems with two structural timber beams on the house’s west side and also some settlement of the house, but he didn’t inspect any other western beams or the eastern beams. He gave the buyers an estimate of about $20,000 to fix the rotten west side structural beams and stabilize the house. The buyers asked him whether they should go ahead with the purchase in light of his findings, and were told it was okay to do so.

After the couple moved in, they discovered that the structural and settlement problems were far worse than they thought and they hired an engineer. The actual restoration costs were tagged at almost $213,000. They sued the sellers, their real estate agent, the inspector and the District of North Vancouver. Before trial, they settled with the sellers and discontinued their lawsuit against everyone else except the home inspector.

 

In court, the inspector pointed out that his contract with the buyers wasn’t a guarantee and limited his liability to the $450 cost of the home inspection report. But the buyers didn’t read the contract before signing and he didn’t draw their attention to these clauses. Also, the main purpose of hiring the inspector was to rely on his advice, decided the court, and if the buyers couldn’t rely on his report and what he said, they wouldn’t have hired him.

 

The judge ultimately decided the home inspector was negligent for not inspecting all the structural beams, many of which were rotten, and because he didn’t tell the buyers they should hire a geotechnical engineer to examine the beams. His repair estimate was “woefully inadequate” and led the buyers to believe the house problems were relatively minor. He was liable to pay damages to the buyers of almost $193,000 (the agreed repair cost less his estimate).

 

Now, the new home inspection scheme. In March, 2009, BC home inspectors were mandated to undergo licensing and carry insurance in case of lawsuits from clients. It isn’t clear whether the home inspector in this court case was insured and whether the buyers there were able to recover on their judgment in full. But if buyers now hire a licensed and insured home inspector (which they should in most cases), they should now have the added protection of such insurance. This should help avoid the risk of a home inspector being unable to pay a judgment (making the decision a mere “paper judgment” without meaningful recovery) – at least for up to $1 million, which is the minimum insurance inspectors must maintain.

There are a couple of things worth highlighting for REALTORS® when acting for a buyer. You should make the buyers aware of the licensing and insurance scheme and recommend that they make sure any inspector they hire is properly licensed and insured. And if asked for a recommendation, REALTORS® should try to only recommend a reputable and experienced inspector (or inspectors), who REALTORS® know to be properly licensed and insured. These steps will help protect you if things go wrong (as happened in the 2009 court case) and there is a lawsuit, which could quite possibly include a claim against you as the buyers’ agent, suggesting negligence on the REALTORS® part.

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Glen Korstrom
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The cost of two-storey homes and detached bungalows in Vancouver has risen considerably over the past year, but prices of standard condominiums remained flat, according to a Royal LePage survey.

Standard two-storey homes rose in price 9.1% to $1,182,250 in the first quarter of 2012 compared with the same quarter a year ago. Detached bungalows posted a similar 9% jump to $1,068,500 during the same period.

Standard condominiums, however, rose a modest 0.5% year-over-year to $510,000 in the first quarter of 2012.

News of the sluggish price increases for condos come as insiders forecast that prices for pre-sale condominiums will fall 10% in 2012.

MPC Intelligence and Strategics recently produced a 416-page Condominium Market Opportunities Report on Metro Vancouver’s condo market that notes highrise, pre-sale condominium prices were close to $586,000 in late 2011. It projects that average prices in 2012 will be close to $530,000. (See this week’s Business in Vancouver “Condominium glut to drive prices lower in 2012” – issue 1172; April 10-16.)

If average prices in 2012 wind up being higher than $530,000, sales will likely be unexpectedly slow, the report said.

MPC’s senior manager Jeff Hancock told Business in Vancouver that the projected price dip is likely partly because of an “oversupply” of concrete units in 15 southeast False Creek developments – enough units for 23 months worth of sales. 

© 2012 Real Estate Weekly

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Five show condominiums open in Brooklyn

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The City of Richmond remains one of the strongest real estate markets in the Metro Vancouver region. An innovative and ambitious City Centre Area Plan, the arrival of the Canada Line rapid transit service and the Richmond Olympic Oval are among the catalysts fuelling billions of dollars of new growth in Richmond.

The strong interest in the Richmond real estate market was illustrated by an average 16.5 per cent increase in property assessments during 2011. The construction value of building permits issued in Richmond in 2010 and 2011 exceeded $1.2 billion.

Richmond’s population passed 200,000 in 2011 and is projected to grow dramatically over the next three decades, with much of that growth centered in Richmond’s City Centre. Richmond is also projecting a 33 per cent growth in the number of jobs in Richmond by 2041.

The current pace of growth is driven by new high density residential projects concentrated in Richmond’s City Centre. An example of this includes the River Green development near the Richmond Olympic Oval, which will transform 30 acres of riverfront land into a master planned community. Other major developments are planned for the Capstan Village area, near the north end of No. 3 Road. Preliminary approval has been given for the first of a potential 3,000 new residential units that would re-make the northern gateway of Richmond’s City Centre. New development in the Capstan Village will also fund a new Canada Line station to serve the new neighbourhood. The West Cambie area is another significant redevelopment in the City.

Richmond’s growth is not just fuelled by residential growth. Currently, there are proposals for many new hotels in Richmond under consideration. The largest project ever seen in Richmond, a four million square foot commercial-office space development, is being proposed for Duck Island, immediately west of the River Rock Casino.

Outside of the City Centre, YVR is planning significant new development on its lands on Sea Island. This includes Canada Post’s new regional sorting centre, which should bring over 1,200 jobs. Port Metro Vancouver also plans continued expansion in southeast Richmond, which will be supported by a newly-opened Highway 91 interchange that greatly enhances traffic access to those lands. With some of the last remaining large parcels of industrially-zoned lands with waterfront access in the region, Richmond’s port lands continue to be in high demand.

Richmond’s future is bright. To find out more about Richmond, visit our website at www.richmond.ca or contact our Economic Development Office at 604-276-4000.

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Commercial condos – sometimes known as “com condos’ – are taking hold across Metro Vancouver, according to Avison Young and other real estate professionals. In Richmond, strata sales dominated the industrial market last year, Avison Young reports, with most of the buyers being owner-occupiers looking for small, “next generation” space. Last year, 96 strata industrial sites were sold in Richmond, worth about $91.1 million. Meanwhile, buying office space as strata, rather than leasing, is becoming a major market push in Surrey – where office vacancy rates are at six-year high – led by the success of a new 65,000-square-foot office tower in South Surrey. Realtors close to the action say strata office space increasingly makes good sense to developers, lenders and owner-occupiers. Investors, not so much. “We have the Grandview Business Centre 95 per cent sold out of strata office space,” said Gord MacPherson, senior vice-president of Re/Max Commercial Advantage, referring to the Elkay Developments Ltd. project in South Surrey.  The strata space at Grandview is selling for around $350 per square foot, and the typical office unit is 3,000 square feet, according to MacPherson. As of press time, there was only one unit left unsold. All of the strata buyers have been owner-occupiers, not investors. MacPherson said one key reason is the availability of low mortgage rates. “Banks are willing to lend at rates under 4 per cent for five-year terms for businesses buying their space,” with some highly qualified owners even allowed 100 per cent financing. Selling space rather than pre-leasing can prove a boon to developers, he explained, since developers need to have up to 30 per cent of space pre-leased before they can achieve construction financing. But Grandview Centre had one-third of the space pre-sold quickly, which gave lenders a “level of comfort,” MacPherson explained. One floor of the Grandview Business Centre is leased to Royal Bank at $21.25 per square foot net, a rate that may make investors take note. But investing in strata space has limitations. First of all, lenders are reluctant to provide investor funding without substantial down payments, often as high as 35 per cent, MacPherson explained. Also, investors must then contend with finding and keeping tenants in Surrey, where office vacancy rates have risen to 8.8 per cent. MacPherson notes that Circadian Developments is now pre-selling strata office space in its Boulevard Tower, a 160,000 square foot building in Surrey City Centre.  “I can see the office strata trend growing,” said MacPherson, who will be starting pre-sales soon on a new 70,000 square foot Croyden Business Centre adjacent to Grandview Business Centre. “Owners expect to see future appreciation of the asset and they like the security of knowing what their long-term costs are.”

 

PETER MITHAM
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“Use mobile to close the gap between emotion and experience.”

That’s the message Rick Bakas of San Francisco-based Bakas Media delivers when addressing industry groups keen to leverage social media and the dramatic shift to mobile-phone use across North America for marketing and commerce.

With communications increasingly going mobile and tablets displacing desktop computers, Bakas urges companies to have a social media strategy even if it’s as simple as a page where people who use mobile devices can land and learn more about your winery.

In many ways, it’s not unlike 15 years ago when companies wondered whether or not a web page was important. As Bakas told a recent social media symposium in Vancouver: if consumers are there, companies should be there, too.

But closing the gap between emotion and experience means building relationships – not an easy task for companies selling real estate, typically a long-term investment rather than a consumable like wine, coffee or analgesics designed to soothe aging, aching joints. People may consider a neighbourhood a desirable place to be or to invest, but the choice isn’t something they consider every day; they just live with it, focusing instead on elements within the community.

Foursquare

Robyn Hanson, senior community manager at Think! Social Media in Yaletown, said Metro Vancouver is home to plenty of neighbourhood bloggers touting the attributes of their local communities. Many social media-savvy residents use Foursquare and other applications to let others know where they’re at, which services they’re using, and to leave tips and reviews for others. Real estate bloggers haven’t leveraged the power of these applications to become “neighbourhood ambassadors” (as Hanson calls them), however.

“No real estate agents are in there taking advantage of those opportunities. It’s mostly just other locals,” she said.

The absence reflects issues Hanson saw as a consultant two years ago, just as real estate agents began embracing social media. Hanson was often contracted to instruct companies how to use social media effectively.

“[Realtors] would be using, say, Twitter or a blog to advertise their listing or their open houses,” she explained. “They weren’t looking at it as an opportunity to showcase being a neighbourhood ambassador or an expert on a particular area, such as Vancouver. They were adding to the noise but they weren’t actually adding any value.”

Real estate agents needed to make the shift from traditional, one-way, broadcast communication channels to the polyphonous channels social media offered. Online relationship-building was becoming more sophisticated, too, in tandem with the effectiveness of spam filters and dropping effectiveness of banner ads. (Bakas points out that click-through rates have plummeted from upward of 70 per cent a decade ago to a mere 1 per cent to 3 per cent today. Some online experts say the click rates are now even lower than 1 per cent.)

Vancouver real estate agent Ian Watt, who regularly addressed real estate conferences three years ago regarding his groundbreaking video blog, is among agents that recognized and have taken steps to respond to the shift.

“I went gung-ho, and then I pulled back. People just have this block up regarding selling online,” he said. “Social media’s not dead but the use of it to sell a product or service is.”

Twitter was the turning point for Watt, who added the tool to his social media endeavours but then turned his back on it – and approximately 3,000 followers – a year ago.

“I felt like the novelty had worn off, and all those people were on Facebook anyway,” he said, saying Twitter has become “a big spam.”

Now if he has good information he puts a link out on Facebook, where ongoing relationships can be maintained and cultivated with a select group of people without the need for a steady stream of information or pitches that occurs on Twitter.

“My clients, who I always friend, will know I’m in real estate,” he said. “But I do not do it to sell anything. … [Social media] is peoples’ private areas, and you have to respect that. I tend to unfriend people now who just tend to shove crap down my throat – especially rental agents.”

Cultivating long-term relationships is more difficult for developers with relatively short horizons for marketing and selling projects. Sales windows might be 10 months – about the same amount of time it takes for a successful social media campaign to gain traction.

Payback

This is where MAC Marketing Solutions Inc. has sought to build a reputation for itself rather than individual projects, forging links with agents in the market so that any projects it takes on benefit from its own reputation.

“We’re focused on trying to build an audience that’s interested in listening to a voice that’s an authority on real estate,” said Cameron McNeill, principal of MAC. “The lifespan of a real estate project is finite and to develop an audience takes a lot of time. We find that we have an advantage, that it’s more of a corporate relationship than a project relationship.”

Defining the payback is something else, however. MAC has two people sharing responsibilities for what is effectively a single full-time position: overseeing the firm’s social media activities. Staff members directing efforts on each of the firm’s projects also feed content into the social media arena for each new development.

McNeill candidly admits that the actual payback on the efforts is difficult to track; he prefers to say the firm has simply responded to the changing environment and channelled its efforts into each new area.

“We’re touching our customers five to 10 times before they make a decision to purchase,” he said. “It does help create a groundswell, and it does help spread the word.”

Social media is best deployed as a tactical tool to cultivate interest and awareness of projects before sales actually begin, if David Allison’s experience is any indication.

A principal of Vancouver marketing firm Braun/Allison, Allison frequently hears developers tell him that social media isn’t working as well for them as they might like.

“But if we use these as tactics that actually have a strategy behind them then they start to get really, really interesting,” he said.

Some are confused as new services start up, such as Pinterest, a new online pinboard that is already ranked No. 62 in web traffic, but which most developers have likely never heard of.

It’s a similar story for the tide of smartphone apps laying the foundation for what Bakas and others anticipate will be a mobile commerce revolution in 2014. Half of all online activity is through mobile devices, from smartphones to tablets, which not only allow people to tell their social networks where they are and what they’re seeing but also to click QR codes – the mottled square codes that are growing in presence – to discover more about products and places.

“If you put a QR code on your [showroom] door it gives people a link on their phone that takes them to some photos and pricing and availability information,” Allison said, noting that it gives people something to explore even when staff members aren’t available.

“Perhaps you’ll do a better job of getting them to return, rather than having them just face a blank door.”

from Western Investor April 2012