Saturday, March 27, 2010

Regular people... just gettin screwed

Over the next few years keep the polaroid camera handy.

Because there are sure to be many classic photo opportunities from friends in a situation like this one from Dany Cote of Calgary.

Our buddy Dan put down $20,000 on a Calgary condo in 2007 when he signed a presale contract to buy for $420,000.

Cote was pre-approved for the money and Canada Mortgage and Housing Corporation (CMHC) agreed to insure the loan - so no worries, right?

Now we all know that the real estate market took a bit of a dive in 2008 and while it has completely re-inflated itself in Vancouver... apparently that's not the case in Calgary.

According to a recent appraisal, Cote's condo is only worth $335,000 now - down from the presale purchase price of $420,000.

And with that appraisal, CMHC will only insure a loan of up to $313,000.

What about CMHC's pre-approval, you ask?

Richard Cho, a spokesperson for CHMC, breaks the bad news.

"Typically, when a property is approved for CMHC insurance, CMHC does tend to honour that agreement during that period. However, there are times when an application is reassessed."

Ummm... reassessed?

Well, Dany-boy fell into the reassessment category and is seems that he's on the hook for the difference when the market went cold.

For our buddy Dany, that means he must come up with an $84,000 donation to complete the sale.

Does he have that kinda cash sitting around?

"My wife and I aren't in the position to advance the money and get over the bad situation. We're just regular people trying to get by." says Cote.

On Tuesday, the builder sued Cote for breach of contract seeking both the $20,000 deposit and the difference between the presale contract price and the condo's current market value.

Watch for this type of story to play itself over and over again once interest rates shoot up and trigger a drop in real estate values.

More and more Regular people just trying to get by are gonna be regular people just gettin screwed.

Isn't funny you don't see that scenario in the sales brochures?


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1 comment:

  1. You do not see this kind of article in the main stream news media very often.

    The following article was posted on the Bloomberg News web site on Mar. 25, 2010:

    Lower Home Prices Can Fix What Government Can't: Caroline Baum