It takes a little agent to notice trends that are earning big agents alot of money ( excuse the pun) If I was a big agent listing and selling tons of houses for way over market value why would i question my food trough?
It took a couple of recent sales to sound the alarm for me.
A small kerisdale home sold in Sept for 1.489, new owner puts it back on market for 6 days in end of march for 1.598 but very soon realizes the market since Sept is way up, and changes the price on day 6 to $2.190 and sells it within a couple weeks for $2.1. The house was the same as it was in September.
Upper dundarave view bungalow with assessed value of 1.3 ish goes on market for $1.990.000 Local agents thought actual value was probably more like 1.7, it sells over asking with a clean -no subject -offer at $2.3 mill. At least one offer was an overseas buyer who is a non resident.
Did you know as a non resident most banks will give you a mortgage with no checking on your income if you put 50% down? National bank will loan you without asking proof of income for only 35% down. However the down payment money has had to have a trail and be in an account for 3 months.
Did we learn nothing from the fiasco in the USA?
If the market keeps going up, they flip and get their money out. If it tanks, who is footing the bill? Will we really be able to find these people?
It gets worse.
Banks sell those mortgages. I have heard CMHC owns billions of dollars of them. What happens when the property values go down?... hmm... this is all eerily reminiscent of the sub prime chaos. Who is checking into this?
FINTRAC is getting reports of supposedly all wired money through a financial institution. ( EFT is electronic funds transfer)
SWIFT reporting only applies if you send EFTs by transmission of a SWIFT MT 103 message, as a SWIFT member, through the SWIFT network. (SWIFT means the Society for Worldwide Interbank Financial Telecommunication. It is a co-operative owned by the international banking community that operates a global data processing system for the transmission of financial messages.)
Real Estate agents are required to report any suspicious transactions. They are also required to fill in identification forms when they are dealing with people they do not know. These files are sent to the brokerage and then sent off to the Real Estate Board. They are kept in case FINTRAC requests them. But who is checking?
Here is a far fetched example of what could happen
What if person X and person Y are friends. x buys a property for $1 mill
Now x gets his friend to buy his property for $2.5
Y putting down 35% or $875,000.
the rest borrowed from the bank.
X has made 1.5 million and heads back home waiting for Y who disappears from Canada ,leaving the bank to foreclose.
X and Y split the $625,000 profit.( ok ...less 10 % witholding tax, PTT and commissions)
At that time the house is no longer worth - because it never was - 2.5 million
So whoever bought the mortgage is on the hook.
Far fetched ? Yes but is this possible? yes. "Oh! The bank would never loan them on the inflated 2.5 value" you say? In speaking with appraisers they look at CURRENT market value, so since many homes in very specific areas have gone up ridiculous amounts, the appraisals will show the market value at that inflated amount. Not that this is happening but the fact that I imagine it could is scary enough for me.
Another scary thought-
Lets look at rent ratios.
Take a homes cost and divide that by its yearly rent.
10 used to be a good market return in years past. A $400,000 home renting for $3300 a month. Thats a rent ratio of 10.
Las Vegas has property values with a rent ratio of 6 now so thats would be seen as a good buy.
Vancouver? Try 36- 42!
That $2.5 Million home might rent for $5000 a month, that means its cost is almost 42 times its yearly rent.
Its unfortunate I am working with many buyers right now.
If I advised any sellers? Take the money and run...