Vancouver Condo Info

Vancouver Mayor Gregor Robertson said the move had to be made to salvage the city’s investment.

From the CBC:

City officials say they intend to halt plans to rent out the units and sell them instead. Officials say they are still owed $758 million for the failed Olympic Village project built by Millennium, and once they sell off all the units, they still expect to lose $40 million to $50 million in the deal.

The city also says that the lawsuit by current owners over complaints of poor heating and leaking sewage at the Olympic Village are ‘bogus’.

This post was submitted by Mansur al-Hallaj.

There are now 62 buyers at the Vancouver Olympic village who are suing the city of Vancouver for what they claim is poor design and construction. This could be exactly why the City set up a shell corporation with no assets to sell these units after the developer went bankrupt. Remember that lawyers warning in the news a while back?

From the CBC:

A total of 62 owners involved in the lawsuit said their condos at the development — renamed The Village on False Creek — have a variety of complaints, including a lack of heat for four months. Others claim they can’t fit standard sized beds into their bedrooms or have leaky windows and ceilings.

And from CTV:

..He says that instead of the “extraordinary levels of luxury” promised in marketing for the Village, the owners discovered their suites aren’t much better than rental apartments.

In some cases, doors will slam into each other if they’re opened at the same time. In others, residents aren’t able to open their closet doors if anything larger than a double bed is placed in the master bedroom.

“Not being able to fit a queen-sized bed in a master bedroom is a major design flaw,” McMillan said.

Other residents have had problems with persistent leaky ceilings and faulty heating. A video released by the owners shows water dripping from light fixtures and smoke alarms.

“One guy’s had his entire ceiling ripped out because they can’t figure out why his heating system doesn’t work,” McMillan said.

Not much better than rental suites eh? Yeah I guess not. I made sure I could fit a king size bed in my master bedroom, and if my light fixtures started leaking or my heating system didn’t work I’d just up and move. It’s a good thing these people bought, since you can’t lose investing in real estate!

This post was submitted by rancid.

With a few new and old developments selling quickly in Vancouver it is time once again to open up the hood and take a look at various techniques (dare I say “scams” which I will use interchangeably throughout this post — apologies in advance) used by real estate salesmen and marketeers to move their product. I am expert in neither salesmanship nor marketing but do have a gargantuan tumor of skepticism.

This is the first in a planned series of posts surrounding sales and marketing tactics used in the real estate industry, focused mostly on BC but many tactics are universally applied pretty much everywhere. Sales techniques generally involve establishing: the good for sale is scarce, trust with the customer, the product has value to the customer, and the product has value to others besides the customer.

This first post concentrates on condo presales.

Confidence Scam

The technique I saw in action in Toronto. What happens here is that many prime units are listed as “SOLD” in big red letters on a big wallboard. Customers are obviously disappointed with this but a sales agent takes their number and will phone them if one comes available. Of course within a day or two they get a call, either indicating the unit is back on the market or the owner of the presale is looking to sell it for a quick profit due to some cash crunch or whatever. This works well when the customer believes they have an inside track to the prime units through the sales agent. In many cases ethnicity or other commonalities are used to their full advantage to foster trust.

This line of salesmanship is particularly offensive — it comes across as a gambling house scene out of the movie The Sting. The atmosphere is loud, fast-paced, and it’s hard not to think “something bigger” is going on and you need in on it. Phone calls from salespeople are filled with background noise and conversations are fast and interrupted, giving further sense of urgency. Include the trusted “insider” shepherding the buyer to the till, and the fix is in.

Now or Never

This works particularly well if you’re in the middle of a lineup. Salespeople can be pushy and fast, “requiring” you to sign a thick and complicated contract quickly. If you don’t buy now, they say, there are dozens more waiting in the line. The sense of urgency is thick, and an ultimatum is often given. Luckily in BC there is a cooling off period after signing a contract, where you can renege if you get cold feet. One hopes the adrenaline and endorphins wear off before that period ends.

Crying

Don’t laugh. Salespeople will cry to get a sale. Remember Gil, the Glengarry Glen Ross-esque salesman from the Simpsons? Don’t fall for it. There are many things to cry about in life; walking away from a “hard up” sales agent doesn’t even come close.

Lineups and Media Hype

The idea here is to produce the appearance of impending scarcity by producing lineups in lengths far exceeding the number of units being sold. If successful — and it often isn’t — the media are often quick to pounce on the opportunity of an easy story, and the positive feedback loop is closed. Lineups beget lineups and the development sells out quickly. The same technique is used at night clubs. We witnessed this recently with the new Metrotown Bosa condo/hotel development and to a lesser extent with the Village at False Creek.

Pre-selling to Insiders

This technique was used most recently by condo marketing virtuoso Bob Rennie on the Village at False Creek, where he claimed 30 units were sold to a select few “insiders” who got first kick at the can. This technique is useful because it shows customers that industry insiders have confidence in the market so the investment is a good one. In the case of the Village at False Creek, the astute will have noticed it was unclear whether or not the 30 presales actually completed. The wording of the press is a bit ambiguous:

“Rennie said it’s his initial goal to try to sell 60 condos in 60 days and he might already be more than halfway there. Last week, he did some market testing and got offers on 31 units, he said.”

Hm. He got offers but did he close? You need to close, man.

Bait and Switch, Lost Leaders, and Discounts

This is simply offering specific units at discounted prices but only having more expensive or less desirable units for sale. This is pretty common everywhere. Discounts are, again, pretty straightforward: slap an “up to 50% off” sticker on a billboard and witness a feeding frenzy ensue. The obvious question, of course, is up to 50% off what, exactly?

False Comparables

I’ve never witnessed this first-hand but, if a developer has other projects on the go close by, they can temporarily inflate asking prices, giving the sense that a particular unit is priced to market.

Condo Fee Discounts and Other Incentives

This is where the developer will, through agreements and warranties (some legally required, mind), provide a lower strata/maintenance fee for buyers. This can sometimes be done through straight incentives (offering to pay a certain % of fees for N months) or through a prepaid warranty. When these incentives end and the strata is flying solo, fees can escalate significantly. Other incentives include discounted financing rates (0.5% APR or whatever), cars, additional parking spots, paying the HST, the list is endless.

Add-on Fees

This applies to condos as much as cars. The sticker price isn’t necessarily what you’ll be paying. Be sure to look at the bottom line.

Walk-through

This is where presale buyers are only given a very short time to do a walk-through to look for deficiencies. Often only one hour is allotted. Any deficiencies (mostly cosmetic; large deficiencies are usually covered under warranty) not noted are the responsibility of the buyer. Think about this for a second: you buy a $500,000 asset and are given only one hour to find deficiencies?!? Does that seem reasonable?

Layout Changes

Often presale contracts are worded such that the developer has the ability to change suite layouts and this is laid out in the contract. CBC Marketplace did an exposee in early 2008 on this and other dirty tricks about 3 years ago. Make sure you know what you’re getting. If it’s ambiguous, well, I guess you know better next time. Go to the link for more useful tips on how not to get shafted. A derivative of this scheme is to produce showrooms with dimensions on the large side of what actual units will be. Vaulted ceilings and lighting are used to make a suite seem larger than it really is.

Forgetting about Parking

Many people incorrectly assume a condo comes with a parking spot. Not necessarily…

Developer Financing

This isn’t necessarily a scam but some developers have agreements with financing outfits to allow buyers to obtain mortgages. This can be an advantage or a disadvantage but, given how much other hanky-panky could be going on, I would be cautious dealing with these outfits. It may turn out to be a good deal due to reduced overhead or the developer throwing in incentives (mentioned above), but it may not be as good a deal as you think.

How to Protect Yourself

So what are the methods available to bolster a defense against being taken to the cleaners? Some people suggest using  a buyer agent to help guide you through the morass. To this I suggest, even then, it pays to tread carefully. If a buyer agent is paid only on a successful closed sale, there is an inherent and unavoidable conflict of interest to close the deal. I would even suggest using an agent on a fixed retainer, and use someone who you know well, if that’s possible. Additionally, if you have a trusted friend or family member who knows some of the pitfalls to avoid when buying, employ them and get multiple angles of advice. Friends and family, in my experience, have often been more lucky than competent so even that advice should be evaluated carefully. It should be self-evident to retain a lawyer who is working for you, and paid the same regardless of your end decision.

As an additional aid, I prefer to concentrate on the numbers and blatantly ignore sales tricks. It comes down to the price and what income (imputed or rental) I reap from it. If you know what you’re willing to pay beforehand, it’s dead easy to walk away. I haven’t been into a condo or presale sales room for a while now simply because the numbers don’t work for me and it’s doubtful the price could be negotiated sufficiently lower to where they do.

You can attempt to change clauses in the presale contract more to your advantage. Given the complexity of the contracts this is no small feat. If sales are slow, however, it can’t hurt to try crossing off every clause that is not to your advantage. Remember how much money is at stake: hundreds of thousands of dollars of your income, past and future. In the corporate world, a contract of that size typically go through several revisions, sometimes major, before they are signed, as well as many hours confirming the contract is in the best interests of the company. Why not with a condo purchase?

Conclusion

Condo sales and marketing is fraught with different techniques designed specifically for extracting as much money from you as possible. I have attempted to list a smattering of the usual tricks for your perusal. Check out the comments for more tips and warnings from our loyal readers. This is not to say that buying a presale condo is always a bad idea; this blog would simply encourage you to properly account for the risks and be cognizant of the sales tactics used.

Oh, looky! The Vancouver Olympic Village is in the news again, with the condo-king talking about the challenge of selling these units.

The troubled Olympic village will be back on the market Feb. 12, on the one-year anniversary of the 2010 Winter Olympics, with significant price reductions.

Marketing specialist Bob Rennie said Monday in an interview he will begin to market about 150 units in two to three waterfront buildings, including the signature Building 4 on the waterfront that housed the Canadian Olympic team.

In what he said has become a “do-right or die” effort, Rennie believes the village has only one last opportunity to be successfully marketed if it is to escape its vexing image as a troubled neighbourhood.

“The word ‘Olympic’ is a really, really expensive word,” he said. “It is wrought with controversy. It can be seen as a weakness. But it can also be seen as a strength.”

When someone gets into a taxi at the airport and says “take me to the Olympic village” everyone knows where that is, he said. It’s not the same when someone says the name of a residential building downtown.

A cab driver will know where Main and Hastings is too, but that doesn’t mean I want to live there. The 25% price cuts show up further down the article:

“Everything is now on the table. These will be price-competitive to what is out on the market,” he said.

While he wouldn’t talk specific prices, Rennie said that last May he test-marketed units in Building 4 at around $1,400 a square foot. They didn’t move. At a reduction of 25 per cent — a figure being raised speculatively in the real estate industry — the price would be just over $1,000 a square foot or about $1 million per unit.

How pissed off would you be if you were a presales buyer and they ended dropping the prices on remaining units by 25%?

This post was submitted by wreckonomics.

This Vancouver Sun story was categorized in the “Sports” section… for some strange reason… Talk about “burying your lead”.

VANCOUVER — Millennium Development Corporation — the developer of Vancouver’s troubled Olympic Village — is in default on a loan of more than $71 million for a proposed West Vancouver luxury condominium and townhouse development, according to a petition filed with the B.C. Supreme Court by the project’s financial backers.

The petitioners claim that Millennium has defaulted in payment of principal and interest due on its mortgage and that they are owed $71,796, according to court documents.

Read the full article in the Vancouver Sun.

Oh, and who’s marketing these things?

The project, Evelyn Living, is being marketed by Bob Rennie — who is also marketing the Olympic Village — as a prestigious enclave on the slopes of Sentinel Hill, near the Park Royal Shopping Centre.

This post was submitted by Peter Pan.

The troubled Vancouver Olympic athletes village has entered a new phase of fail, going into receivership.  What does this mean?

City of Vancouver workers will likely begin work dismantling the erstwhile housing development within the next couple of weeks, perhaps even completing demolition by Christmas.  Everyone involved in the project will probably begin issuing public apologies early in the new year and digging into their personal bank accounts to cover any financial losses and protect taxpayers from any future expenses.

..or maybe not.

Actually all this means is that the City of Vancouver now takes over all marketing and sales responsibility, which apparently is their new specialty.

“We can now accelerate the sales and marketing program,” the mayor said, while acknowledging that taxpayers may still end up being on the hook for some losses.

As for how the agreement was reached, Ms. Ballem would only say: “The fact that we both agree to this meant we didn’t have to apply for receivership and then sue them.”

The city, through receiver Ernst & Young, will take over managing everything that Millennium still owns in the project – 480 unsold condos, commercial space and about 100 rental units – as well as other assets that were promised as security.

Although receivership won’t bring the city any more money than leaving the project in Millennium’s hands would, it will allow the city to move ahead in a more orderly way.

From the Globe and Mail.  Other stories and video over at CTV and the Vancouver Sun.

If it makes you feel happy, remember what Sam Sullivan said:

“Not one taxpayer has paid one dollar for the Olympic village,” he said. “And they never will.”

No sir. Not one, but all of them together.

I understand this is only a small subset of a small market and I am not saying this is the case for all of Vancouver

One of the area’s I have been watching for a while is the Capilano Highlands area of North Van. While I have seen price reductions (7 of the 18 current listing have dropped prices since July with an average drop of 3.5%), what is most interesting to me is the 3 listings that are not built but are only at the planning stage:

1. v853152
2. v855926
3. v854980

Are these builders trying to save you the HST or afraid to build these homes on the teardown properties they bought for fear of a degrading market, or am I just reading too much into this?

They are all different builders and different realtors:

Don Eiler’s Listing

Virani’s Lising

Peter Ebner’s Listing

This post was submitted by YLTNboomerang.

Whether due to high prices or HST, the sales numbers for new houses and condominiums in Vancouver has taken a tumble. Volume of new units sold is near record lows in the last month, but what does the news about next years BC HST referendum mean for our housing market?

This is happening at a time when house prices are starting to fall all across the province. Will we see buyers sitting on the sidelines and delaying the purchase of a new condo, house or townhome in the hopes of saving money on HST?

This could be one more small element that contributes to a collapsing housing bubble. Will it help to tip our market further over the edge or is there another rabbit in the hat? Negative interest rates? Home-buyer credit? Tax deductions? High paying government jobs for everyone? What could support the current high cost of housing in Vancouver?

We posted this in the free for all, but it’s worth taking a closer look: Eleven pre-sales buyers at the Vancouver Olympic Village are unhappy with their units and are trying to get out of their contract. They complain about changes to plan and faulty fireplaces. Presales contracts of course always favor the developer, and these issues aren’t enough to break the agreement, so the approach their lawyer is taking is to claim that the City of Vancouver took over as developer. Since they aren’t listed on the paperwork this would be a technicality that could nullify the contract. If they manage to make this argument work and other buyers want a way out of their purchases it could be more trouble for the O.V.

The buyers put down deposits of between $60,000 and $300,000 for False Creek condos priced from a low of $550,000 to units that sold in the millions of dollars.

They’re being asked to close their deals by the end of the month.

On Thursday, Baynham filed writs in B.C. Supreme Court against developer Millennium Water on behalf of six of his clients, who have addresses in Vancouver and West Vancouver.

Baynham says the City of Vancouver is the owner of the property, after bailing out Millennium when it couldn’t get financing. But that’s not disclosed in the sales agreements, he says, so the contracts are invalid and should be rescinded.

The city argues that Millenium still owns the project and is the developer, the city is simply the bank.

We saw a lot of pre-sales buyers try to walk away from their contracts during the mini-crash a few years ago, and developers suing the for the difference between their deposit and the current market value. It’s interesting that these buyers are trying to get out of their contracts while the stats still show that Vancouver property prices are still at an all-time record high.

River Green, The massive planned housing development advertised as Richmonds ‘very own coal harbor’ sold out this weekend, setting a new record for Richmond presales.

The biggest purchase was by a family who bought four suites valued at $5 million. Four penthouses also sold on the opening weekend at over $3.4 million. The 150 condo complex set Richmond sales records for individual condominium sale price and price per square foot.

Condo developer George Wong says this proves the once down and out real estate market is back. “It does set the tone for Lower Mainland real estate strengths. Certainly hope this is a shot in the arm for real estate in the province.”

The 28-acre luxury waterfront community is expected to take 15 years to build.

In fifteen years those buyers will either be thrilled they bought now before they were priced out forever, or potentially not so thrilled if the housing market fails to thrive. You’re going to have to wait 15 years to find the answer to that one.