Is BC's first time home buyer grant being used to facilitate CMHC Insurance fraud?

For the past two posts we have been talking about Quadra Homes and their promotional pamphlet for their Langley Condo Development.

Quadra made the news for their unauthorized usage of the BC government's logo when hawking their condo's. The story was headlined in the Vancouver Province newspaper: Major developer was reprimanded over unauthorized use of provincial logo to help sell condos.

But as we asked yesterday, what about counselling buyers to circumvent the new regulations against zero down payments?

House buyers needing 95% financing are not allowed to borrow the last 5% for their down payment. If they do their loans won’t be eligible for CMHC mortgage insurance.

Is the Langley brochure counselling and assisting buyers to do something illegal?

It's an important question because it's not just Quadra Homes engaging in this practice.

One of the contributors to our comments section (hat tip Ray) passes on a similar tactic being used by Aragon Properties at their FLO and DUO developments in New Westminster.

Prospective clients recently received this email blast:

The email clearly promotes a "Zero Down Payment Program" and says:

- 95% insured mortgage financing
- 5% down payment loan with flexible terms
- Offer effective until March 31, 2013

It certainly looks like Aragon Properties is leveraging the BC first time home buyer grant like Quadra was... with one significant difference.

Instead of suggesting you find a generous uncle to spot you the $10,000 down payment until the grant arrives (at which time you pay him back), Aragon says they are offering to loan you the money you need for the down payment themselves.

Perhaps instead of pursuing the unauthorized use of provincial logos to help sell condos, the government should be looking at what appears to be widespread illegal use of the first time home buyer grant to circumvent CMHC mortgage insurance regulations?

Just a thought.

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Major developer reprimanded over unauthorized use of provincial logo. What about counselling home buyers to circumvent 5% down payment requirements?

In our last post we told you about the pamphlet pictured above which had come out for a Langley condo development.

Seems that pamphlet got the attention, not only of this blog, but of the Provincial Government.

As a faithful reader pointed out in our comments section, the Vancouver Province reported that a Major developer was reprimanded over unauthorized use of provincial logo to help sell condos.

A major condo developer has been reprimanded by the B.C. government for the unauthorized use of the provincial logo in a promotional brochure for a new development in Langley.

Quadra Homes agreed Thursday to delete all references of the government’s registered logo from its website and to destroy the remaining promotional brochures for the development, named Yorkson Creek, which carried the B.C. logo on its front and back page.

The issue came to head on Wednesday after The Province contacted the Ministry of Finance asking about the 28-page, glossy brochure, which began arriving on doorsteps in the Langley and Abbotsford areas within the last two weeks.

The Provincial Government’s first-time homebuyer’s bonus of $10,000 was detailed in the first few pages of the brochure. But the rest of the pages are dedicated to the benefits of buying at Yorkson Creek.

“It is not just misleading, it is wrong,” said Doug Bigg, who received the brochure last week. “I interpreted it as taxpayers' dollars being used to advertise condos for a multi-million dollar corporation. If I thought that, then I’m sure most other people would think that.”

But the government had nothing to do with the brochure, the Ministry of Finance said. And on Thursday, the company was ordered to remove all unauthorized references of the logo.

“This unauthorized use must cease immediately,” part of a letter sent to the company read. “Failure to do [so] in a timely manner may lead to further action on our behalf.”

Personally I think there is more to this than just misuse of the Government's logo and misrepresenting their endorsement of the development.

As Garth Turner noted this week, house buyers needing 95% financing are not allowed to borrow the last 5%, or their loans won’t be eligible for CMHC mortgage insurance.

Turner cited the story of a banking loans officer wherein the...

banking loans officer suggests that he take out a 10k line of credit, give it to his father, so his father can give it back to him with a gift letter. Voila, 5% down.

Turner proceeds to point out that this arrangement circumventing the 5% down payment is illegal.

If that is true, is the Langley brochure doing something just as illegal? 

Note this page of the pamphlet:

It suggests that first-time buyers: "Borrow the down payment from your favourite Uncle and pay him back when you get the $10,000."

Isn't that exactly the same as Turner's example? 

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More on the $1 Condo for sale in Richmond and other realtor gimmicks

Yesterday we told you about a Richmond condo that had slashed it's asking price from $355,000 to $1.

Hoax?  Data entry error?

Adding to the mystery was the fact that various sites and realtors had updates with the 'new price'. Richmond realtor Arnold Shuchat  even commented on his blog about the listing.

Shuchat said:

I've just uploaded this listing for a condo at the Laguna in Richmond. And I always thought 1% Realty referred to some commission arrangement! This ranks as one of the largest price reductions ever: From $355,000 down to $1!

We asked if anyone knew what this was all about?

Was it an error? Or was it legit?

In case you missed it, Arnold Shuchat posted a reply to our comments section on that post.

(the post came minus the academic credentials after his name in his google blog signature. Does that mean we should stop referring to him as 'Alphabet Arnie' ?).

Shuchat tells us: 

Well, after getting a few calls on this one, I checked in with the listing realtor. It turns out the one of the owners is a Toronto based realtor and there has been a trend there to list properties for $1 to create some attention. They have no intention of selling for $1 but expect to have offers presented on Sunday night....etc. 

Based on a lot of negativity on some of these blogs, it would be an interesting wager as to whether a multiple offer scenario will materialize.

It will get sold because I think the owners will do what has to be done to sell it. 

I also predict a post-sale advertisement claiming "Sold $315,000 over asking price"!

We thank Arnie for the info and look forward to hearing from him with what the outcome on this little bit of realtor games is.

And Shuchat is right, you can almost see the press release sent out by the selling agent trumpeting just as Shuchat joking predicts: "Sold $315,000 over asking price!"

But let's face it, if it draws attention and the bids come in... it is a creative advertising gimmick to list the property for $1 and set a deadline to sell to the highest bidder.

And there's nothing wrong with that (providing they actually sell to the highest bidder).

Which is more than I can say for this next example.

As everyone is well aware, the federal government moved last year to eliminate the various ways banks had been helping home buyers skirt the 5% down payment requirement (ie. up to 7% cash-back offers).

We also know, all to well, that the biggest lament in the real estate industry right now is how significantly the new mortgage regulations have impacted entry-level buyers... effectively cutting the knees out from those looking to climb the 'property ladder.'

Check out the latest weasel manoeuvre to circumvent the new mortgage regulations.

(although I'm sure they would prefer the more politically correct analysis of 'creative accounting').

The latest ploy comes to us via this pamphlet for a Langley condo development.

The pamphlet outlines how first-time buyers can receive, from the provincial government, a $10,000 first-time home buyer grant.

Their suggestion (as you can see the the third picture above - click on image to enlarge): "Borrow the down payment from your favourite Uncle and pay him back when you get the $10,000."

The key to that $10,000 can be seen here:

With units starting at $179,900... the $10,000 would cover your 5% down payment to buy in this Langley development.

Nothing like watching some elements of the real estate industry actively encouraging home buyers to evade regulations eliminating those derisive 'zero-down' lending practices.

Who says we're all that different from the Americans?

(hat tip Tom)

Of course aren't liar loans, zero down, government R/E handouts and an industry that relentlessly pumps these options how we ended up at this apex where living in a van becomes a lifestyle choice?:

(hat tip GreenhornRET for video)

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