Q&A with Globe and Mail RE Reporter

Kathy Tomlinson is the reporter who wrote a recent article detailing the flipping of property in Vancouver which seems to have gotten some government attention.

Many Franks pointed out that she did an AMA over on reddit today.

There’s a comment from a Real Estate lawyer that points out this practice is not necessarily a driver of a hot market, but more a symptom of a hot market and it can go both ways:

First, without a clause disallowing it, any contract can be assigned. You can assign your cell phone contract to someone else. There’s nothing sneaky about this.

Second, the final purchase price is listed on the transfer document (Form A Transfer) and easily found through the Land Title registry. Just need the PID number, pay the search fee and it’s under s.2(b) of the transfer. Property transfer tax is paid on this amount since it’s a tax on the transfer. There’s no tax avoidance here.

Third, the seller. The seller signed off on the transfer agreeing to the sale price. If they thought they could sell for more, there’s no one forcing them to sell at the price they signed off on. I fail to see how the sellers in the article were taken advantage of.

Fourth, the middleman. Okay so a few things, if the middleman isn’t paying taxes on the lift (the difference between the original purchase price and the final sale price), then that’s tax evasion, and attracts criminal liabilities. And a stupid way of going about it too. Sure, it’s a private contract but if the CRA/police come inquiring there’s a massive paper trail.

Further, if the middleman signed the contract without having the intention to complete but just to flip, then they’re taking on the risk of not finding a final buyer. And if they don’t complete, then they’re liable to lose the deposit and get sued for damages if the seller can’t find a buyer at the same price.

I was around in 2008 during the housing crash when it went the other way, when buyers assigned their contract at a loss because their financing fell through when property values plummeted.

Garth is right basically, this is a symptom, not a driver of insane housing prices. Want to watch prices drop? Increase the interest rate. Have the rate go to 6-7%. I might have to go into foreclosure work.

Read the full AMA thread over at reddit for this and other viewpoints.

It’s interesting that this topic has blown up so much and spurred responses from government. There’s nothing inherently shady about purchasing something and reselling it for a higher price and if the government feels like getting some of their hands on this money all they have to do is tax each assignment transfer.

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GreenSalad
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GreenSalad

The revulsion quotient has finally risen high enough amongst the serfdom…..

Ulsterman
Member

Third, the seller. The seller signed off on the transfer agreeing to the sale price. If they thought they could sell for more, there’s no one forcing them to sell at the price they signed off on. I fail to see how the sellers in the article were taken advantage of.

I’m assuming the selling thought they were engaging a professional to get them the market would bear. They probably didn’t anticipate that the “professional” was rubbing their hands together with glee because the entire while they knew that they soon be able to sell/assign this deal for a lift of another 300k. Mmmm, i wonder why on earth the seller is a little pissed?

patriotz
Member

According to the article, it was the buyer’s agent who was involved in flipping the property. The job of the buyer’s agent is – surprise – to look after the interests of the buyer.

For reasons the Rappaports never quite grasped, they were no longer selling their property to the foreign businessman whose offer they had accepted. Instead, they were selling to his real estate agent, Wayne Du of Amex Broadway West Realty, who told the Rappaports that he and the businessman’s wife would be purchasing instead, as co-owners.

It’s the job of the listing agent to get the highest possible price for the seller. If the listing agent is not making an effort to get this, or worse is in collusion with the buyer or the buyer’s agent, then the sellers have grounds to sue for damages.

space889
Member
space889

Also, if the RE agent bought the house in a private deal as the article states, the agent may have never acted as the home owner’s listing / selling agent, but simply as a buyer. In that case, no fiduciary duty is owed to the home owner by the buying agent.

I think there is a rule now where the agent can’t buy their own listings anymore. So the agent can’t be both buyer and listing agent. Off course, there are ways around that. But given that the deals are supposedly done on the same day, I get the feeling the agent is in this case simply acting as a buyer and buying the property outright cuz s/he knows they can flip it easily.

yvr2zrh
Member
It’s been a while since I posted – still reading most days from over here in Switzerland. There are serious problems with the assignment process in that it creates huge gaps in taxation ability as well as creates huge openings for money laundering. There are so many ways that you can have money laundering but here’s one way. Homeowner is approached by a Realtor. Realtor is a front-man for an offshore buyer with dirty money. Realtor steps in to buy a house for some amount – it may be market – it may be less – – They say no conditions but need a long closing. Long closings are a problem in general because it gives the buyer a free call option. Realtor then flips an assignment to offshore buyer #1 – This transaction is not reported as a sale… Read more »
Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

yvr2zrh, vancouver market is going to go parabolic. r u ready for it?

it’s already sky high. soon it will be breaking orbit, and then exiting our dimension.

you guys think it’s crazy now? insanity has only begun.

patriotz
Member

“Make gains on CAnadian Real Estate contract assigments subject to the non-Resident reporting and withholding tax rules – such that this will be treated as a gain on Canadian Real Estate.”

Such gains are Canadian business income and are already subject to the same reporting and withholding rules as any business income by a non-resident. The issue is enforcement.

emmi
Guest
emmi

The money laundering angle is getting far too little attention. It’s the perfect setup for it.

Whistler or bust?
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Whistler or bust?

vyr2zrh – Great post thanks.

And thanks to you BBB for sharing again just how immature and ridiculous you are.

southseacompany
Member
southseacompany

“Janet Yellen tells Congress to expect further rate hikes despite market turmoil”, The Guardian

http://www.theguardian.com/business/2016/feb/09/interest-rates-markets-janet-yellen-briefs-congress

“Federal Reserve chair Janet Yellen continued to forecast gradual increases in interest rates on Wednesday despite the global tumult in stock markets that followed the Fed’s first rate rise since the recession.”

space889
Member
space889

Cuz raising rates while everyone is going NIRP is going to look like the best policy to a CB?? Just because you want the US rates to go up doesn’t mean it will. You don’t tell Janet Yellen what you wish and expect her to do it for you. At this rate, rates are more likely to go negative than up.

space889
Member
space889

To be clear, I don’t think NIRP is the right way to go. I think raising rates to at least inflation rate and letting bankrupt/zombie firms fails, and debt be discharged is probably the best long term solution with unfortunately sharp short term pain. But then when do people ever choose pain upfront willingly?

Yunak
Member
Yunak

David Fine: Vancouver Housing Market Is Insane, But Not Addressing It Is Crazier

http://www.huffingtonpost.ca/davidfine2/vancouver-real-estate_b_9201620.html

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

lol. it took 15 years for HAM to even be acknowledged by the mainstream. how much longer until they take a single action? after they take a single action how long until they take effective action?

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

vancouver real estate is about to hit light speed. then it will hit warp speed. everything is going to go up: houses, townhouses, condos, offices, industrial.

https://cosplaycalamity.files.wordpress.com/2014/09/jean-luc-picard-engage.jpg

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!
space889
Member
space889

K Pop girl bands are hot, hot, hot. Those girls work hard and sacrifice to be absolutely beautiful and sexy.

Best place on meth
Member
Best place on meth

Yet another asinine comparison by this real estate lawyer.

Comparing houses to cell phones? Really?

He’s trying to draw a comparison between something in unlimited supply which nobody needs to have vs housing which is scarce and needed by everyone?

The stupidity out there is mind boggling as is the attitude by some people that all this flipping and speculation is just find and dandy, it’s the free market at work and there’s nothing to be concerned about.

Any kind of speculation in such a scarce and needed resource should be strongly discouraged by government through taxation and regulation.

Shut It Down Already
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Shut It Down Already

“He’s trying to draw a comparison between something in unlimited supply which nobody needs to have vs housing which is scarce and needed by everyone?”

No, he’s just using another type of contract that people are familiar with. And let us not forget it was only yesterday that you compared flipping to slavery.

space889
Member
space889
So gov’t intervention holding prices down is good, but supporting higher prices is absolutely evil?! Sounds hypocritical to me. The best thing gov’t can do to ensure sufficient supply is increase supply. Artificially holding down supply via various policies and NIBYism while trying to hold down prices simply isn’t going to work. I think it’s pretty much proven that price controls rarely works. You can tax all you want, but if there are 30 potential buyers for every SFH/Duplex, 10 for every good sized 1500 sq ft+ TH, prices aren’t going to come down. Sure gov’t coffers will be full with all the extra taxes but prices you pay ain’t going to come down. Frankly, it will encourage even more black market / gray market / side deals as the sellers can choose who they sell to and if they… Read more »
Tiger
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Tiger

Don’t be fooled by Clark’s smiling face and empty election promises, we know she will never put the families of this province first. She does not deserve anther chance at being premier of this province and quite frankly B.C. can’t take another four years of her or the Liberals.

http://www.huffingtonpost.ca/sarah-miller2/christy-clark_b_9162966.html

Best place on meth
Member
Best place on meth

She does put families first.

They’re not BC families though.

Chabar
Member
Chabar
space889
Member
space889

Good luck given the voters just love the Liberals and scared of the NDP boogeyman, even though NDP did much better in their decade of governing than Libs. Oh well, people never learns.

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!
space889
Member
space889

They are still together?? Wonder how long they will last when he loses the next election and can’t get provincial NDP party leadership and have to go back to running a juice shop. Can’t imagine her staying with him when she can still easily bag someone 10x richer than him.

Best place on meth
Member
Best place on meth

Dear god, what is that hideous thing attached to Moonbeam?

The man has no taste whatsoever.

Chabar
Member
Chabar

They look like some weird Siamese twins, Chang and Eng Bunker guys.

space889
Member
space889

And yet still hotter than anything you can get your dirty stinking hands on….unless you enjoy lard and/or old leather.

Whistler or bust?
Guest
Whistler or bust?

I am no fan of Moonbeam but he is the only political who will acknowledge there is a problem. A heck of a lot better than the “protecter of equity” Christy Clark.

OpenCourse
Guest
OpenCourse

she is referred to by some source as Mrs Mayor
https://www.youtube.com/watch?v=6ExKzBsfqe4

Vanco
Guest
Vanco

I suppose its ironic.
The hardened bears would feel at home in a communist country with their views. They would get a piece of land too since it’s owned by government and distributed equally to its citizens.

bestplaceonearth
Guest
bestplaceonearth

yeah, enjoy that piece of land until, for whatever reasons, the communist government wants it back. they send a bulldoze to crash your house and leave your homeless.

space889
Member
space889

Same with eminent domain powers around the world, or the squatters rights being champions here by the bears.

Most of the time, people get compensated, based on household numbers, etc. Granted there is always argument about what is a fair amount and forced movements. But when the powers want your land, doesn’t matter what country you are in, you wouldn’t be able to hold onto it. It’s only a matter of grace period and how nice they are initially.

btw, even those crappy compensations condos are now worth $500K+ CAD in the big cities in China, and the middle class that sold and came to Canada can seriously outbid most locals with that wad of cash.

space889
Member
space889

Hmmm….potentially big bond yield spike coming. To the negative side.

http://www.zerohedge.com/news/2016-02-10/jpms-striking-forecast-ecb-could-cut-rates-45-boj-345-fed-13

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!
space889
Member
space889
fosolo1
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fosolo1

After all these years I think the sharks are finally starting to circle the real estate waters and IMO it is going to get very bloody.
The final nail in the coffin is all the press from the G & M article. Why it was sanctioned by the brass at the Globe is up for debate but what better way than to unofficially pop the bubble.

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

who or what are the sharks and how will they impact the price of real estate? how will the globe article lead to price declines?

more importantly, if vague metaphors get up-votes why are all my hyperspace comments being downvoted?

Shut It Down Already
Guest
Shut It Down Already

People have been declaring the “final nail” since 2008. Remember that big post-Olympics crash?

Best place on meth
Member
Best place on meth
I think that all of this discussion about the technicalities of flipping misses the larger issue and people really fall into 2 main camps. On one side you have the decent people who believe that real estate should be properly regulated to encourage housing to be treated as was originally intended, to house people, and that speculation, greed and profit motive should be discouraged as much as possible. On the other side you have the lowlifes who pretend they’re free marketeers who claim that real estate should be a free-for-all, where all manner of greedy sleazebags can do as they please to make a buck. This includes flipping, money laundering, rampant speculation, hoarding of multiple properties, cabals attempting to corner the market, tax evasion, wholesale foreign ownership…. basically anything goes. Nothing wrong with turning the real estate market into one… Read more »
space889
Member
space889

And what are you? I don’t have mine, it’s so UNFAIR, wahhhhhh, poor me! You should sell your house to me at my price, even if you can sell for more. Gov’t should force people to sell to me at low price…wahhhhhhh….it’s so unfair!

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!
fosolo1
Member
fosolo1

National Bank Financial says hot foreign money could turn cold

“National Bank Financial is sounding the alarm over the hot foreign money that’s helping push Vancouver and Toronto home prices out of reach for many, warning a correction is coming for Canadian real estate.
Financial services analyst Peter Routledge has been cautious on Canadian housing for a while now. But his tone darkens in a note Wednesday on domestic banks, writing “unfortunately, we are bears when it comes to the Canadian household.”

http://www.bnn.ca/News/2016/2/10/National-Bank-says-hot-foreign-money-could-turn-cold.aspx

space889
Member
space889

I will believe it when it happens. Until then, trend is your friend.

Also, if hot money stops, what makes it guarantee it will fall? If all these hot money are corruption money and those corrupt people move here to live, why would they sell at 50% off??

fosolo1
Member
fosolo1

In other words , we are fecked. Totally .

“Routledge says he accepts the Bank of Canada’s estimate that housing is potentially overvalued by 10 to 30 percent. That implies “many Canadian households are over-leveraged and will ultimately default in order to reduce this leverage, at a magnitude underappreciated by the market.”
The “regime” in place for some time, he notes, has been rising home prices and growing home equity. But Routledge tells BNN a regime change is coming, meaning a correction for real estate prices – with Vancouver hit harder than the rest of the county.”

pricedoutfornow
Guest
pricedoutfornow

Good lord, how could anyone watch that video and not want to sell their house in Vancouver NOW? Rush to the exits! Not to mention all the media attention about people being fleeced (even foreigners) and just general comments about the real estate market being overvalued. Soft landing? (you’d better pray, Christy!)

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!
Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

Deutsche Bank risks its own “keep dancing” moment

http://blogs.reuters.com/breakingviews/2016/01/28/deutsche-bank-risks-its-own-keep-dancing-moment/

if authorities think we are anywhere close to another lehman borthers moment they will jump on negative rates and start the helicopter printing press.

https://upload.wikimedia.org/wikipedia/commons/e/ef/Ksc-69pc-442.jpg

Chabar
Member
Chabar

While you are admired and considered high value expert at this blog perhaps you could stop turning this same site into circus with all these tacky images posted around? It is so 90’s.

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

“We should move quickly to a cashless economy so that we can introduce negative rates well below 1%” policy-maker -What I learned at Davos-

http://www.zerohedge.com/news/2016-02-10/something-very-disturbing-spotted-morgan-stanley-presentation-slide

space889
Member
space889

Bears have 2 hopes left – a big Chinese crash that causes all the SFH to be dumped on the market at 50% off, and/or US Fed interest rate increase of 1% that will just CRUSH, CRUSH, all those stupid moronic home buyers and force them to sell at 50% off.

Negative interest rate is like kicking them in the groin when they are already crying on the ground. It’s going to destroy their hope and that last barest thread of hope & sanity.

We have to be nice to bears on this blog cuz they are always so nice to other people, especially Chinese and home owners who they can’t wait to see getting financial crushed and ruined, so they can say “I told you SO!!!!” and dance in celebration of their misery.

Dr. Strangelove
Guest
Dr. Strangelove

After reading this article I can better understand the problem and your overall act. Perhaps you aren’t bad guy and you might have some lucid moments but it’s hard to control temper and not to get overexcited around certain things. Luckily you are in Canada now and could use numerous public services that will mitigate situation.

“How China Leaves Mental Health Problems Unaddressed”

According to a study by The Lancet, roughly 173 million Chinese suffer from a mental health disorder. One hundred fifty-eight million of those have never received professional help for their disease.

http://www.theglobalist.com/how-china-leaves-mental-health-problems-unaddressed/

Best place on meth
Member
Best place on meth

Wow, that’s kind of surprising.

I would have guessed at least 5 times that number.

specuskeptic
Member

Maybe failed insurance fraud is a cause… https://www.facebook.com/HorribleContent/videos/969265613165902/

Chabar
Member
Chabar

Those CRA probes are racist, they shouldn’t be done within our multicultural society.

http://bc.ctvnews.ca/are-house-flippers-all-paying-their-taxes-cra-probing-128-home-sales-1.2771284

Chabar
Member
Chabar

While they are at it maybe looking into this stuff would make sense too… it is all related, same shit.

Douglas Todd: Thousands of Metro Vancouver mansion owners avoiding taxes

http://www.vancouversun.com/opinion/douglas+todd+income+anomaly+depletes+metro+vancouver+base/11390940/story.html#sthash.MMARxrEn.dpuf

southseacompany
Member
southseacompany

“You couldn’t ask for a clearer chart showing that negative interest rates fuel property bubbles” Business Insider

http://uk.businessinsider.com/chart-sweden-negative-interest-rates-property-housing-bubble-2016-2

“You can’t find a clearer warning that ultra-low, zero, or negative interest rates fuel bubbles in the property market. Rates go down, house prices go up. Low interest rates let consumers borrow mortgage money at ultra-low rates. That increases the amount of debt those consumers hold, but because the money is in the form of mortgage loans it drives demand for houses and pushes property prices upward. “

Polozi Scheme
Guest
Polozi Scheme
Chabar
Member
Chabar
Best place on meth
Member
Best place on meth

Engaging in a free trade deal with china sounds about as appealing as engaging in unprotected sex with an AIDS riddled prostitute – or Christy Clark for that matter.
Now I have even more reason to support First Nations people in opposing any pipeline.

Best place on meth
Member
Best place on meth

Wait, scratch that.

I just realized how insulting that comment was to AIDS riddled prostitutes.

My apologies.

Oracle
Guest
Oracle

Things that need to be done:

1) Grandfather all existing ICBC plate holders. Any new car that wants to get a new plate buys from existing stock. Or maybe sell a limited amount annually at $1 million per licence plate. New immigrants would either take transit or shell out $$

2) grandfather all citizens and prioritize them for use of medical facilities. New arrivals should have to pay a facility access fee of maybe $1000 per use.

This is how our RE market works so why not other areas? RE is also a Ponzi scheme for those that got in early.

Best place on meth
Member
Best place on meth

But, before that new immigrant gets to buy a licence plate for $1 million dollars, Canadians get first dibs on purchase and the opportunity to flip the plate multiple times and sell it to him in the end for $3 million.
And yes, we should pay the income tax on the profit.

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