All posts by VCI Admin

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.

Call for inquiry on Vancouver home contract flipping

The Globe and Mail recently published a story on contract flipping in Vancouver:

The probe reveals that homes are being flipped by assigning – selling – sales contracts before closing, for higher prices than what the original seller homeowner receives in the end. Assigning contracts like this is legal, but controversial.

Speculators who profit this way also don’t pay property transfer taxes, because technically the property doesn’t change hands until the deal closes.

Mr. Eby said he is hearing from upset constituents in his Point Grey riding, where many homes are demolished to make way for new investor-owned houses that sit empty, some resold several times.

There have been a number of reactions to this story, but most recently calls for an inquiry:

The technique, which brings profits for speculators but higher prices for buyers, has sparked a torrent of criticism in the province “The investigation needs to be independent because the government has already said it doesn’t think there is a problem,” said MLA David Eby.

Vancouver Mayor Gregor Robertson said after Saturday’s report that the province should impose a tax on speculators.

Read the full article here.

BC Premier Christy Clark has already said no to the province making any extra money off of sales to offshore buyers, but says now there will be a study on the impact of foreign buyers.  The government also proposes to raise the PTT exemption as a way to solve high housing costs without risking lower house prices for first time buyers.

It’s worth highlighting this comment from ‘shut it down already‘ who points out that this summary confuses the issue of offshore buyers and contract flipping which has the ‘racists running in circles’:

Rampant speculation generally resolves itself in the end. The other obvious contradiction is that we often hear people here saying that government intervention in the markets is the problem, yet now you want them to step in and intervene.

Don’t forget that the original sellers of an assigned property accepted a price that they were satisfied with. It’s only greed and jealousy that had them aghast that the buyer might resell for more than they paid.

Friday Free-for-all – February 5th 2016

It’s that time of the week again…

Friday Free-for-all time!

This is our regular end of the week news round up and open topic discussion thread for the weekend, here are a few recent links to kick off the chat:

Economic ghost town
Last chance to buy
First chance to Rolex
The inevitable drop?
The infinite job machine

So what are you seeing out there? Been to any open houses lately? Thinking about buying or moving away? Post your news links, thoughts and anecdotes here and have an excellent weekend!

10 reasons the top is in for Vancouver real estate

Whistler or bust? posted this list of reasons they think the top is in for the Vancouver real estate market. What do you think? 

10 Reasons why am I calling a top now

1. Vancouver Real Estate has finally gone parabolic. It has gone from years of above average price increase to massive never before appreciation. No asset class that I am aware of has ever gone parabolic or hockey stick on a chart and not had a major crash. Not tulips, oil or tech stocks. This is textbook classic top – Greed has replaced Fear and it’s different this time for ______ and _______ has replaced rational thinking.

2. Panic buying and large price increase have spread to the distant suburbs such as Maple Ridge, Places where there is plenty of buildable land and lots of new inventory. Places are going multiple bids in average neighborhoods. People genuinely think if they do not buy now they will be priced out forever.

3. Real Estate prices in the vast majority of BC are flat to down. Its as if the Lower Mainland is an island onto itself. These are areas not affected by HAM or DAM so it better reflects the current economic fundamentals of the real estate.

4. The Canadian and BC economy is weak. There is risk that the spill over of falling oil prices will spread to Vancouver. This can be in the form of layoffs at West Jet or the CIBC because they have to cut costs due to losses on loans to oil companies. This is a bigger thing than many people think.  Continue reading 10 reasons the top is in for Vancouver real estate

The $6 Million tear-down

What would you call a 20 year old 7300 Sq foot house with brand new hardwood floors and an indoor pool?

In Vancouver we call that a tear down.

Property records show that the 7,300-square-foot house was last sold in 2013 for just over $6 million — the assessment today is $7.44 million. According to the 2013 listing for the property, it boasted $350,000 in recent renovations including new hardwood floors, a water purification system and windows. The listing sheet shows the two-storey house on a corner lot has 19 rooms including seven bedrooms, a media room, office and 12-foot by Seven-foot walk-in closet off the master suite.

…Well, we certainly know how to keep bulldozer operators and city dump workers employed!

Read the full article here.