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3. Duty to advise

Setting the market value of an immovable and the terms of sale

3.1 Inspection

3.1.1 Pre-sale inspection

3.1.2 Pre-purchase inspection

3.2 Setting the market value of an immovable and the terms of sale

3.2.1 Comparative analysis

3.2.2 Modifications of the price and terms of sale

3.3 The legal warranty of ownership and quality

3.3.1 The warranty of ownership

3.3.2 The warranty of quality

3.3.3 The exclusion of the legal warranty of quality

3.2 Setting the market value of an immovable and the terms of sale

One of the important tasks of the licensee is to advise the seller to establish the selling price of his  property.

His role is to guide and advise the seller in determining the market value of the property, in order to establish a fair selling price that takes into account market conditions and allows the seller to obtain the best price for his property according to his goals. A well-documented opinion based on the use of the appropriate method is one of the best ways for the licensee to help his client have realistic expectations of the price he can get for his property.

In fact, section 76 of RBR states that licensees:

“may express an opinion on the value of an immovable, an enterprise or the cost of a loan only if the opinion is based on and supported by generally accepted practice.”

The assessment of the value of an immovable or enterprise requires the licensee to take the following steps, including:

  1. Choose an assessment method
  2. Collect information on the various factors that may have a positive or negative effect on the property's selling price:
  • Site
  • Dimensions 
  • Year of construction
  • State of preservation of the property
  • Number and layout of rooms
  •  Materials used
  • Landscaping
  • Current market characteristics
  • Roof
  •  General condition of the building
  • Inclusions and exclusions
  • Applicability of taxes
  • Etc.
  1. Target recent comparable sales on information listing services
  2. Conduct a comparative market analysis using the comparable method, where possible
  3. Adjust the selling prices of comparables

The licensee must also take into account the seller's needs and situation to establish a fair selling price, for example, succession, separation, legal warranty of quality, etc.

The selling price must reflect reality. In addition, a licensee must not provide or advertise false, misleading or incomplete information, notably as to the selling price of a property.

Licensees must, at all times, ensure that the selling price appearing on transaction documents and forms is actually the price agreed upon between the seller and the buyer for the property. This selling price must not be artificially inflated to include in the loan amount the financing of the down payment, the financial fees requested by a lender or the amount that the seller promises to give the buyer in the form of a rebate after the signing of the notarial deed. Such a practice is prohibited and can be regarded as an artificial inflation of the price.

A price that is considerably lower than the market value and the comparables used, in order to generate a bidding war, is also prohibited.

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3.2.1 Comparative analysis

In residential matters, the most commonly used method for determining the market value of the property with relevant information that is easily understood by the client is the comparative analysis (or direct comparison approach). Based on the information available or the circumstances or the purpose of the estimate, the licensee may also use other methods, such as the cost or income techniques.

The cost technique can be used when there is too little or no data to make the comparisons required by using the direct comparison approach.

The income technique can be used in the case of multi-dwelling, commercial or office buildings.

The principle of the direct comparison approach is to compare the property being evaluated to recently sold properties with similar features. These properties can be compared. Comparisons are based on a variety of elements: the history of properties sold from the databases of the information listing services for brokers and agencies, knowledge of the market, the area and neighbourhood, information from the municipal assessment roll and the Land Register. The licensee must consider these elements by identifying them, valuing them, and using them as a factor for adjusting the value of the properties compared. If the licensee presents comparables to his client, he must ensure that he does not disclose the selling prices of properties until they are published in the Land Register. In addition, the description sheets of comparables cannot be given to clients unless the information that directly or indirectly identifies the sellers is redacted (photos, address, owner’s name, etc.).

At any event, the licensee must act in a proper way and within the limits of his skills and abilities. For example, if he is not familiar with the cost or income technique and that the best way to establish the value sought is to use one of these two methods, he must inform the client and call upon a colleague or a recognized expert, such as a certified appraiser or his agency executive officer.

In clause 4.1 of the brokerage contract, the licensee must indicate the total price requested in letters and numbers to avoid any ambiguity.

During the term of his brokerage contract, the  licensee must advise and inform the seller so that the seller can adjust the price of the property according to the changing market or even review it for any other reasons.

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3.2.2 Modification of price and terms of sale

If, during the term of the brokerage contract, the seller wishes to amend the asking price or any other condition of sale, the Amendments form must be completed and signed by the seller, who expressly provides for this possibility in clause M2.

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Last updated on: December 15, 2022
Numéro d'article: 264840