Welcome to the GreaterFool, Silly Person© edition. This is a rare but meaningful opportunity for you to heap ridicule, abuse and even sympathy upon people who are probably too dumb to own money. However, that makes them perfect candidates for borrowing it, then buying real estate with less attention than they’d put into shopping for sumptuous butt-lifting jeans. Trust me, I know.
Here’s Gail. She’s screwed.
I’m at the end of my wits and hope you can offer a solution.
I bought a new condo (12 unit building) last August and put the for sale sign up three weeks later. The condo was advertised with concrete floors and party wall adjoining the bedroom. I cannot sleep in either of the 2 bedrooms due to footstep noise, snoring, bed creaking. Each footstep reverberates—the force depending upon who is walking. I cannot tolerate this and want to sell – but the builder slashed the remaining 3 units price to $269,000 and I paid $312,000.
Is my only recourse to sell at a huge loss? I cannot complain too much about the noise as it will appear in the minutes. Help Garth! Thanks, Gail.
Let’s recap. You bought in August for $312,000 and put it back on the market in September. It’s now January, and no sale. Comparables are being offered for $269,000, which means yours won’t find a buyer until (a) all of the other units sell or (b) you trade for less. So assuming you find a buyer at $265,000, after commission (and there may also be a mortgage-breaking penalty) you net about $250,000 – for a loss of at least $62,000, or 20%.
Good work, Gail. It takes a special talent to toss a fifth of your money in five months. You should consider working for the Department of Finance.
Seriously, don’t buy something for $312,000 that you have not thoroughly investigated. A good inspector would be able to flag too-thin partitions, and perhaps knocking on a few doors in the building would have yielded some useful comments.
What to do now? It’d be cheaper to foam the inside of your unit, buy earplugs and learn to tap dance.
Now, say hi to Larry. Poor, confused Larry.
I have a demanding job that pays OK, and I’ve managed to save a few hundred thousand dollars, and have no other assets of any significant value. My job has brought me to Saskatoon, and if I purchase a home in the area by the end of January my employer will cover 100% of the home inspection and legal/land title fees associated with the purchase. I am considering purchasing in either Saskatoon or Warman, which is a small community located approximately 15 kilometers north of Saskatoon.
Through reading your blog, I realize that there are substantial risks which exist in the Canadian real estate market, particularly in British Columbia and Toronto. Saskatchewan is currently benefiting from a natural resources boom, is growing, and has its deficit under control. That said, I realize that Saskatchewan is not immune to volatile global economic influences/problems, nor is it immune to newly introduced mortgage regulation changes. While I don’t believe that the Saskatoon and area real estate market has much room to increase substantially in value over the short term, all indicators seem to suggest that it won’t substantially decrease in value over the short term either.
Anyway, I would very much appreciate your advice on this difficult decision that I am needing to make fairly quickly. Thanks very much Garth, and Happy New Year!
Yeah, sure, Larry. It’s different in Saskatoon, where the average household makes less income than in Oshawa and the forecast high for Friday is minus 20. The population is just 225,000 and the average house costs $338,000, or 27% more than in 2008. In all of Saskatchewan, there are only 539,000 working people, making Regina and Saskatoon (and Metropolitan Warman) potentially far more volatile real estate markets than places like the GTA or Montreal.
In short, higher house prices have been the result of people like you drinking the Kool-Aid, not from soaring incomes, big immigration or swelling commodities. In fact, oil, gas and potash values are a fraction of what they used to be. Once again, we have a housing market pumped up on emotion and debt, not economics.
And that fabulous company offer? A $300 home inspection and $500 legals? You’re one cheap date.
Finally, let’s welcome Darpan to this select club.
I have been following your blog closely for 6 months now and would like to thank you for all your useful information. I married two years ago and at that time purchased in a hot market a semi detached 2000sq ft home in north Brampton countryside for $400,000. I was told from a local real estate agent that I could possibly sell for $430,000. I understand that the market is going to crash, and the value on my mortgage may very well be more than the value of my house. I have a prime minus 1, five-year term/35 year amortization mortgage. Me and my wife are not interested in taking a loss, and are also not totally pleased with our home, problem is that I work from my basement as a personal trainer, and renting a unit can become very costly. I am in a dilemma Garth! Please provide me some input as to what I can do to protect my hard earned dollars :-)
First, Darpan baby, the realtor dude’s lying to you. The nether reaches of Brampton are more likely to revert to corn than grow equity. You’ll be lucky to get your money out, minus commission, which means a loss. But this could pale in comparison to what the hood will be fetching two years hence.
The best strategy is to bail, whatever a greater fool is willing to pay you for it. You’re living in a mistake – a transportation no-man’s-land where it can take 90 minutes to commute into downtown Toronto, and the municipality has all the cachet of a vintage Wal-Mart. God meant this for cows, Darpan, not guys sweating in basements.
Get out. Now.
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