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Purgatory Glory posted:Nice video summary of this situation and its implications: Lol it’s as bad as I thought. The banks and developers playing pass the parcel with the risk and it consistently landing on the most vulnerable. As much as I lol at the buyers who overextended themselves, this is really where regulation is supposed to step in and spread that risk out.
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Feb 6, 2023 05:37
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qhat posted:Lol it’s as bad as I thought. The banks and developers playing pass the parcel with the risk and it consistently landing on the most vulnerable. As much as I lol at the buyers who overextended themselves, this is really where regulation is supposed to step in and spread that risk out. On the other hand, I don't really feel sorry for the guy who bought two houses at $2.46 million each.
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Feb 6, 2023 05:48
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Here's what $2.46 million gets you: https://www.youtube.com/watch?v=suUFG8BUajQ
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Feb 6, 2023 05:52
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McGavin posted:On the other hand, I don't really feel sorry for the guy who bought two houses at $2.46 million each. Yeah no gently caress that prick. But this can’t be the only person who has bought a presale in the past year or so and is now royally hosed because the bank is walking away. Either the bank should be made to honour the price at presale otherwise the financing can’t legally be approved even informally that far in advance, or the buyer should be able to walk away because financing ultimately failed. Or presale should straight up be illegal unless purchased with cash. People shouldn’t be losing down payments because two wealthy as gently caress parties don’t want to share in any of the market risk. I think any regulation at all would make both developers and banks think twice before lending and selling houses to people at insane prices who can’t afford it. qhat fucked around with this message at 06:05 on Feb 6, 2023 |
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Feb 6, 2023 05:54
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On the other, other hand, I probably shouldn't be too critical, because I live like two streets over.
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Feb 6, 2023 06:09
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qhat posted:Yeah no gently caress that prick. But this can’t be the only person who has bought a presale in the past year or so and is now royally hosed because the bank is walking away. Either the bank should be made to honour the price at presale otherwise the financing can’t legally be approved even informally that far in advance, or the buyer should be able to walk away because financing ultimately failed. Or presale should straight up be illegal unless purchased with cash. People shouldn’t be losing down payments because two wealthy as gently caress parties don’t want to share in any of the market risk. I think any regulation at all would make both developers and banks think twice before lending and selling houses to people at insane prices who can’t afford it. I'm speculating that this guy didn't even try to involve a bank until it was time to get ready for completion. Knowing what's going on with the market he sees the writing on the wall. So it's possible no bank is at fault or even involved until now. And if deposits are given back on completed property's that lose value, we willl have rewarded all the poo poo bags who paid bums to camp out and purchase pre-sale condos to flip.
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Feb 6, 2023 06:17
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Purgatory Glory posted:I'm speculating that this guy didn't even try to involve a bank until it was time to get ready for completion. Knowing what's going on with the market he sees the writing on the wall. So it's possible no bank is at fault or even involved until now. And if deposits are given back on completed property's that lose value, we willl have rewarded all the poo poo bags who paid bums to camp out and purchase pre-sale condos to flip. I think that's what really bothers me about this story, we don't actually know. I'm not sure what these people are even doing selling houses to people who obviously don't have the money, and haven't given any rock solid guarantees that the money will be closed. It sounds like they did go to the bank and they said "You ____currently____ qualify" which is as good as saying nothing except a slight wink wink, and the developer just took it as red (which they shouldn't be doing, IMO, made worse by my next point). By the sounds of it the developer is super sketchy and predatory too, since they are graciously allowing the buyers to borrow from their private lending partners at double digit rates. Basically gently caress absolutely everyone in this story, but I can see how a normal person can get caught up in this scheme and lose everything because they didn't understand the details of real estate law, which is probably an indication that there isn't enough protections for buyers.
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Feb 6, 2023 09:00
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A quick perusal of search results for "Mattamy Homes lawsuits" suggests that you should not hand them cheques for hundreds of thousands of dollars in deposits and promise to fork over millions more. But hey, you gotta live somewhere... or two or three different places, as the case may be. I don't know if they're any more or less sketchy than the typical cookie cutter subdivision developer. My impression is that they all suck but Mattamy isn't bringing up the average.
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Feb 6, 2023 09:25
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I think maybe risk should scale to the power and resources of the parties involved. Maybe the deposits should be higher (20% maybe?), but the buyer should be able to walk away from the contract and lose the deposit if they can't close. It's not like Mattamy is going to go broke if that's what happens, and it punishes people that take stupid risks too often because 20% is a lot for a normal buyer so they're going to try like hell to close if they can. Then again, they can just wait to get sued and declare bankruptcy; pretty sure that sort of judgment is discharged by bankruptcy but correct me if I'm wrong. That said, I have no tears to shed for these idiots that bought multiple presale properties though, it's obvious they were investors and investors must wear the risk. Walk away, declare bankruptcy. Purgatory Glory posted:Nice video summary of this situation and its implications: So Mattamy is pushing people to use a lender who would be charging them 10% and hahahahahahaha WOW 
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Feb 6, 2023 14:15
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Do people think developers offer pre-sale units out of the goodness of the hearts? No, they do it because they need a hedge against this exact situation. No developer is going to say "these units are going to be worth far more when we build them, but out of kindness I will sell it to you now for less money than I know it will be worth." If you're going to wander in and say "I think this is a great deal because I'm sure number only goes up," then you better be okay with accepting the downside risks as specified in the purchase contract. That's how investing works. Real estate investors are such a terribly frustrating people.
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Feb 6, 2023 14:39
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Pre-sale contracts are bullshit and are immensely in favour of the developer. Most people should never buy a pre-sale, but if you absolutely must, I would pay the $300-$500 to get an actual lawyer to look over it. That said, I'm also not going to have much sympathy for the particular people they interviewed. Bro, you're not a regular working guy if you're buying a 2 million dollar house, come on. On another note, I cannot comprehend paying that much for these monstrous copy+paste lowest-bidder McMansions in a suburban hellscape like this. I took a look around the area and there's just...nothing. There's nothing there. A few strip malls with chain restaurants and dollaramas and if you really want to live it up you can drive down the road to the mall with more chain restaurants and a dollarama, but also a Walmart! I suppose some people like this but it is really not for me. With apologies to anyone here that lives in Oakville.
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Feb 6, 2023 14:47
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Mattamy homes funded an extremist Facebook group that was also the largest 3rd party advertiser to get Doug Ford elected and preserve exactly these kinds of unfair rules.
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Feb 6, 2023 14:50
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Fidelitious posted:Bro, you're not a regular working guy if you're buying a 2 million dollar house, come on. Exactly. $800,000 is quadruple the amount of liquid assets needed to be in the top 10% of Canadian families. In other news, pay no attention to where the Bank of Mom and Dad is coming up with these six-figure "gifts" to the kids.
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Feb 6, 2023 15:22
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Fidelitious posted:Bro, you're not a regular working guy if you're buying a 2 million dollar house, come on. He bought two 2.46 million dollar houses. Also, the north side of Dundas in Oakville (where all the new developments are) is very much a suburban hellscape, but the south side has a ton of parks and trails to go and walk around in. McGavin fucked around with this message at 16:52 on Feb 6, 2023 |
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Feb 6, 2023 16:48
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McGavin posted:He bought two 2.46 million dollar houses. Yeah, I mean it's pretty clear that this guy wanted to take a gamble, and he did, and he lost. Tough loving poo poo, stop whining about the contract. Next you gonna complain that the games in the casino are always stacked in the house's favour? That's the game you chose to play, bucko!
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Feb 6, 2023 17:12
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He also claims to be a loving real estate lawyer.
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Feb 6, 2023 17:15
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McGavin posted:He also claims to be a loving real estate lawyer. I had that in my post but then I removed it. That's really the icing on this cake. He knew exactly what he was getting into, and he's upset he hit the downside. I guess that's why you don't lay hundreds of thousands of dollars and a loving bet.
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Feb 6, 2023 17:35
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PT6A posted:Yeah, I mean it's pretty clear that this guy wanted to take a gamble, and he did, and he lost. Tough loving poo poo, stop whining about the contract. Next you gonna complain that the games in the casino are always stacked in the house's favour? That's the game you chose to play, bucko! To be clear, nobody in this thread sympathizes with this guy, if there’s anyone on the planet who should know better it’s that guy. He took the suckers bet and now that he’s losing his shirt he wants bailed out. gently caress him into the ground. I still can’t overlook the fact that there are these developers that are perfectly okay for people to show up without a guarantee to close and they are perfectly happy to let them put down hundreds of thousands because they know if everything goes south, they get to either keep the money or direct them to their own lending scheme which is prohibitively expensive. Like this is what surprised me, that you can actually buy these things and in some cases there’s no option to lock in that presale price somehow, it’s not like you’re making an unconditional offer willingly like a moron, you just don’t have an option. Pay up and take all the risk, and get involved with our private loan racket if the market tanks. That what I think is exploitative. Basically my takeaway from this is that yes buying presale is a loving horrible idea and nobody should ever do it under any circumstance.
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Feb 6, 2023 17:51
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His angle is the developer is actively selling units for less. Making the bank not honour the old values. The values were coming down anyways so I don't know why he thinks that works.
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Feb 6, 2023 18:05
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I'd be interesting to see just how hosed the developer also is here because it's likely they are. They have no option at all but to drop the price of the product. Prices are in free fall and no one has the money to buy the product at the previous price. The only option is to drop the price or not sell it, and the developer also has a line of credit with the bank they need to pay off. They need to sell the product. In the best case they're making less money than they expected and breaking even, in the worst case certainly seems possible they're selling these things at a loss having spent too much on the land and overspent during a time of incredibly inflated construction costs. The previous ones they've sold are probably holding up the company from absolutely being in the worst outcome category. The way this sort of lending works is the banks won't even lend to a developer to get started until they have a certain amount of pre-construction deposits and can prove viability. If it becomes easier for pre-construction buyers to bail out, then that'll probably breakdown this whole system and freeze lending and make it harder to build new homes. I can't pretend to know what better regulations there should be here. Haven't really thought about it much. All I know is that it's hosed. Don't buy pre-sales folks!
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Feb 6, 2023 18:34
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Femtosecond posted:I can't pretend to know what better regulations there should be here. Pre-sales should not be allowed.
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Feb 6, 2023 18:43
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I love that case where I think in Toronto pre-sale buyers of 2 br condos ended up getting 1br condos, sometimes with a tiny closet-like "den" and the developer was like "Sorry we ended up not having enough money to build the 2br units we promised, enjoy your 1br!" I get why people do pre-sales though. For so many people the prospect of owning anything is a nearly impossible dream. That 10% or so savings can sometimes be what makes or breaks them being able to afford it.
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Feb 6, 2023 19:01
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Baronjutter posted:I love that case where I think in Toronto pre-sale buyers of 2 br condos ended up getting 1br condos, sometimes with a tiny closet-like "den" and the developer was like "Sorry we ended up not having enough money to build the 2br units we promised, enjoy your 1br!" Keep in mind that up until now: - line up for presale or pay somebody to do it for you. -sign for whatever unit they will let you buy - sell assignment for 100k profit. -pat yourself on the back for being a real estate mogul. Now you have to actually buy place 
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Feb 6, 2023 19:40
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McGavin posted:Pre-sales should not be allowed. Why? It's a perfectly valid contractual relationship, and an investment. Like all investments and financial instruments, it exists to spread risk and reward, and, yes, that involves the purchaser bearing anything from "some" to "quite a lot of" risk. The attitude that real estate ownership should be a unique class of investment free from risk is baffling to me. The sheer amount of coddling homeowners get is insane. You made a poo poo investment, you lost a lot of money. Sucks to be you, I guess! How is that any different from doing some dumb poo poo with the stock market and losing your whole rear end?
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Feb 6, 2023 19:47
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Pre-sales are just a way for developers to shunt as much of the risk and financial burden onto buyers as possible. Buyers are the only ones getting screwed in pre-sales horror stories like 99% of the time.
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Feb 6, 2023 20:04
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PT6A posted:Why?
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Feb 6, 2023 20:06
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PT6A posted:I had that in my post but then I removed it. That's really the icing on this cake. He knew exactly what he was getting into, and he's upset he hit the downside. I guess that's why you don't lay hundreds of thousands of dollars and a loving bet. First, laughing that they changed the picture on that story. Second, what exactly was he getting into, if you spelled it out in stock market long term investing terms? Paid 800k deposit on 5m of houses. Mortgages are great because they're essentially leverage that'll never get margin called. Except he didn't buy the houses, he bought contracts to buy the houses. So it's a futures contract So he paid nothing but gave an 800k deposit on a futures contract on 4.2m, 5m total of asset. Let's say he was going to do 20% down, he needed to find another 200k before close and a lender that would give him 5:1 leverage, which he did with the caveat from the lender that they'll only lend him 80% of the value of the thing at close date. Now the assets are worth 4.2m or whatever. He's got the 800k deposit still there but needs 1.64m total deposit because the lender will only do .8 * 4.2m, 3.36m instead of the .8*5m=4m they were going to do. He needs to bridge in another 600k (assuming he had 200k) to close. Let's assume he's investing with a 10 year horizon and real estate yielding and appreciating at like 8% a year from here. 600k @ 10% = 60k/year more expenses. Those houses are still worth 9m in 10 years and he's out another 600k of his final return on top of the 2m in interest he paid on the mortgage in 10 years. 4m profit minus 2.6 cost = 1.4m. If he just invested in the stock market and got 8% a year, he's only clearing like 927k in 10 years. His futures are worthless, you can get the same thing for the same price right from the builder. He can hang on to them and hope the appraisals go up before he needs to produce the cash. They could go even lower as house prices drop more so maybe he could sell the contract for zero dollars to someone else, basically 4.2m for 4.2m obligation and he doesn't worry anymore. Must be pretty stressful man. I don't feel like the guy fully appreciated that he was going all in on a non diversified 5:1 levered futures contract with a shaky lender type of investment. Would've been better to invest in ornamental gourd futures. I'm going to hesitantly side with the lawyer and say that canadians are probably too dumb to be able to just sign up for this on a bored Saturday afternoon in a dingy trailer office, hesitant because it does seem to be like 50% of our economy. Maybe let them sign up for it but if they do, it's a trick and they're now handcuffed to a certified financial planner for any purchases over $500 or something.
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Feb 6, 2023 20:16
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Purgatory Glory posted:I get frustration on both sides. We've had developers shrug their shoulders and say they need to charge more to presale buyers because costs and labor have gone up(gently caress that builder). And real-estate has the unique investment aspect where a buyer thinks "you haven't got my yet so I'm in the driver's seat"(gently caress that buyer) McGavin posted:Pre-sales are just a way for developers to shunt as much of the risk and financial burden onto buyers as possible. Buyers are the only ones getting screwed in pre-sales horror stories like 99% of the time. Well, yeah. It's typically a high-risk investment. But plenty of investments are high-risk, and until just now, plenty of pre-sale poo poo paid off well for the buyers despite the occasional horror story. High-risk investments, though they can often be quite stupid, shouldn't be forbidden. Pre-sales are essentially a way for developers to say "well, I'm going to limit my upside, but also essentially eliminate my downside," and conversely, buyers can reap a large upside without doing anything, but they risk a massive downside. They should be allowed to take that risk. It's fine. It's stupid, yes, but it oughtn't be forbidden. Why do we need to save these literal real estate lawyers from themselves?
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Feb 6, 2023 20:21
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You should be allowed to insulate your home with asbestos. Yeah, it's a high risk, but you should be allowed to take that risk. It's fine. It's stupid, yes, but it oughtn't be forbidden. Why do we need to save people from themselves?
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Feb 6, 2023 20:42
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To make a leveraged investment like that outside of the real estate speculation market you need to pass some middling “qualified investor” test but also have a bunch of assets to pledge against them. Maybe that would work here! Mortgage lenders already provide different (worse) terms for rental properties than they do for owner-occupied, except the condition is “there won’t be a lease” and not “will be occupied by the purchaser for 12 months”. It would be great if that was a requirement, but even with the worse economics on the non-occupant mortgage it’s probably still quite profitable to speculate. We’d get better data on speculation at least?
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Feb 6, 2023 20:45
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Subjunctive posted:To make a leveraged investment like that outside of the real estate speculation market you need to pass some middling “qualified investor” test but also have a bunch of assets to pledge against them. Maybe that would work here! Do you think there's any way in which a literal real estate lawyer with enough liquidity for $800,000 in deposits wouldn't be considered a qualified investor?
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Feb 6, 2023 20:50
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PT6A posted:Do you think there's any way in which a literal real estate lawyer with enough liquidity for $800,000 in deposits wouldn't be considered a qualified investor? No, that’s why I said it was a middling test. But there are “regular buyers” who are doing this presale dance who probably don’t qualify, and wouldn’t be able to make an equivalent speculation outside the residential real estate space.
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Feb 6, 2023 20:52
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That said, if the liquidity comes from HELOC then he might not qualify, since in Ontario it’s $1M in net assets (and a top-1% income). But AFAIK it’s all self-attested anyway and very rare that anyone asks for proof in a way that would capture liabilities correctly. (I was told not to bother including the math for spousal support I pay, even though it literally cuts my net income in half.)
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Feb 6, 2023 20:56
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Subjunctive posted:No, that’s why I said it was a middling test. But there are “regular buyers” who are doing this presale dance who probably don’t qualify, and wouldn’t be able to make an equivalent speculation outside the residential real estate space. I can agree with that. I think a larger problem, in general, is the tendency to view that sort of qualification as "rich people hiding the tools they use to get rich from 'normal people.'" I can understand that viewpoint, but the thing is that you can also lose a lot of money very fast, especially if you don't fully understand the consequences of what you're doing, but even if you fully understand what you're doing.
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Feb 6, 2023 20:57
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The cool thing is that Canadian securities regulators recently made an amendment so now anyone can participate in these kinds of investments without qualifications. However, they are limited as to how much they can invest per year (I think it's a maximum of $100k a year).
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Feb 6, 2023 21:01
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PT6A posted:I can agree with that. I think a larger problem, in general, is the tendency to view that sort of qualification as "rich people hiding the tools they use to get rich from 'normal people.'" My reading of the thread is that most people want protections for people who want a place to live. The speculators will either need much tighter restrictions or to be excluded through other means like taxing it so much to not make it worth it.
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Feb 6, 2023 21:06
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PT6A posted:Well, yeah. It's typically a high-risk investment. But plenty of investments are high-risk, and until just now, plenty of pre-sale poo poo paid off well for the buyers despite the occasional horror story. The ability to make objectively stupid decisions and still make money hand over fist is the surest sign that you're in an inflating bubble, isn't it?
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Feb 6, 2023 22:32
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The reason we have regulation is to prevent stupid people from being taken advantage of by wealthy corporations who have found a neat lifehack to creating a feudal empire which negatively impacts everyone else. If the possible outcomes are too onerous or insidious for average Joe to understand up front, and that’s the only way for these corporations to survive, perhaps we should say good riddance to them anyway since we clearly don’t need them.
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Feb 6, 2023 23:01
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Real estate generally being a leveraged investment is part of why people think it's such a good return, even if they don't understand that it's leveraged. Putting down 200k on a 800k place that has a 10 percent price increase is a 40 percent return minus debt carrying costs. Part of why real estate is overpriced is because the downside risk is treated like it's zero, so people price profitability based on the 40 percent return minus debt costs. I kind of wonder what structuring mortgages as floating based on a percentage of the market price would do . I'm sure that fucks things up a different way but it would mean the bank shares the downside risk and the upside gains, and it takes away the mechanism of gains on a leveraged purchase all going to purchaser.
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Feb 6, 2023 23:06
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Boot and Rally posted:My reading of the thread is that most people want protections for people who want a place to live. The speculators will either need much tighter restrictions or to be excluded through other means like taxing it so much to not make it worth it. It's also that it's unreasonable to expect people to make consistently good decisions in a system where you are involved a couple of times in your life and every other party spends all day living in the environment. The people that we actually want to support in this situation are not at all sophisticated actors on average and it's not reasonable to expect them to be. The pretend fix for that is real estate agents who are supposed to act in a person's best interests. But they don't, and their interests are in direct conflict. It's a really broken system where people basically just trust that the people around them know what they're doing and sign away decades of their income because it's how you do it.
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Feb 6, 2023 23:14
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