This is a friendly, interactive exchange of information on all Real Estate related subjects. Follow on Twitter: @RETALKS


Moderator: admin

  • 1
  • 3
  • 4
  • 5
  • 6
  • 7
  • 9
 
myraa
Real Estate Talker
Posts: 13
Joined: Thu Mar 30, 2017 7:25 pm

Re: What must the governments do to stop speculation?

Sat Apr 22, 2017 5:49 pm

I understand that it is a contract and that the builder can sue you if you don't go through with the sale.  When people flip the assignments for a higher price it seems similar to selling a stock option for a profit.  The flipper only has to make a 10% or so deposit much like a stock option.  The flipper wants to sell it before completion so he never has to come up with the entire purchase price and incur the property transfer tax.

So how people treat assignments reminds me of option trading. 

Banning the sale of assignments is what Ontario is looking at.  The idea being that if you want out of the contract you need to talk to the builder and see if the will allow you to do this but you can't sell the assignment to a third party
 
yzfr1
Real Estate Talker
Posts: 241
Joined: Tue Mar 19, 2013 8:35 pm

Re: What must the governments do to stop speculation?

Sat Apr 22, 2017 5:53 pm

myraa wrote:
Can they tax assignments like they do stock options?  With a stock option you have at the right to buy a stock at a fixed price.  You can choose to exercise the option and buy the stock but if you sell the options to someone else for a profit you would incur a taxable gain.  I think the logistics of how to implement this would be tricky for assignments.

Alternatively, can they just ban the sale of assignments?  If you want to sell it early you would have to sell it back to the builder.  Or you can wait until after completion to sell it but would have to pay property transfer tax.  

Any thoughts?

 

It's absolutely impossible to tax a assigned sale for a % you can only do a flat fee. Everyone would register the sale as $1, it would be impossible to find out the actual agreed up price of the sale of the contract. It's always done on the side. The only time you can tax a % if you have a system that makes the whole thing blind and anonymous. When I buy a futures contract or a equity from the TSX my order is placed onto the market floor. No one knows my lot for sale, only that there is a equity for sale. 
Whats stop offshore investor from making a side deal with the buyer of the contract from registering a $1 sale, then settle up in cash and spit the difference in the tax saved.
I hope this thorough explanation can put this topic to rest. 

Why would the seller pay any money for their contract back??? they want to sell property and not speculate on the contract. They already came up with a walk out price that meets margins and makes investors happy. They want that thing gone.
As long as it possible to transfer a title, for free or $1,000,000 its impossible to stop the sale because its not blind. You can ban the $$$ but people will just do it behind your back and claim its a strait transfer. 

I think the regulations should be, once you enter a contract to buy the home. You must complete, you can't transfer it. Then when you complete you can put it up for resale and then subject to PTT. Also maybe if you did not occupy the unit for 1 year you need to pay GST / PST for the entire cost of the unit.

BUT this is the big but. what about the average joe who loses his job, cants complete and needs to get rid of it. His life is basically over if we make all these crazy regulations. It works both ways.. we are only looking at it myopically.


 
 
myraa
Real Estate Talker
Posts: 13
Joined: Thu Mar 30, 2017 7:25 pm

Re: What must the governments do to stop speculation?

Sat Apr 22, 2017 5:54 pm

Thanks TDMA.  I had heard that people can walk away.  Thanks for confirming that.  The builder can sue but usually doesn't do that unless there has been a huge drop in the value of the property.  I recall reading about a builder who sued because the market had crashed and people were trying to walk away. 
 
yzfr1
Real Estate Talker
Posts: 241
Joined: Tue Mar 19, 2013 8:35 pm

Re: What must the governments do to stop speculation?

Sat Apr 22, 2017 5:55 pm

reallyreal2 wrote:
yzfr1 wrote:
myraa wrote:
Let's cut out the personal attacks and one-upmanship and talk about real estate instead.


When jitman runs out of arguments it always results to personal attacks. Just like when diplomacy ends, vilolence starts. Again it illustrates my point.

Yes selling a presale assignment can be taxed, anytime anything trades hand it can be taxed. Selling lemonade on the side of the road can be taxed. When you buy a used car on Craigslist and register the car you must declare the value and then its taxed. Most people cheat and declare a lower value.

My point about taxing a presale is, without setting up a very complicated regulatory system it's impossible to tax.

When you enter a contract on a presale, you have the right to purchase the property at a future date and a fixed price. Your right can or cannot be excersized.

If the market drops you can choose not to buy it.

Now when you sell a pre build. No property is changing hands. You are selling the right to buy that property.

How will you tax it? There is no intrinsic value of the contract, its the right to execute at a date. Its like a futures contract.

Now what if someone holding onto a pre purchased condo and the value goes down. Should they be taxed as well?

My whole point is, its impossible to tax the transfer of the contract.

All you can do is ban foreign ownership.


Sorry - I don't think you understand how presales work.  It is a contract - you have to buy at a future date.  You don't have an option to buy and if the market goes down walk away.

Ok as a bear I assume you never owned property before. You can absolutely walk away anytime, its called breach of contract. You lose your deposit. 
 
myraa
Real Estate Talker
Posts: 13
Joined: Thu Mar 30, 2017 7:25 pm

Re: What must the governments do to stop speculation?

Sat Apr 22, 2017 6:01 pm

yzfr1, I completely agree with you.  The logistics of taxing an assignment would be a nightmare.

I can see problems with an outright ban on selling an assignment.  It would be difficult if someone lost their job and couldn't afford it anymore.  In my subdivision, someone wanted out of the contract (for legitimate reasons-health problems or new job out of town ,can't remember) and they talked to the builder and they let them out of the contract and even gave them back their initial deposit.    

So I would hope that a builder might be compassionate if someone was in a real bind.
 
tdma800
Real Estate Talker
Posts: 2977
Joined: Wed Jan 23, 2008 9:12 am

Re: What must the governments do to stop speculation?

Sat Apr 22, 2017 6:02 pm

myraa wrote:
Thanks TDMA.  I had heard that people can walk away.  Thanks for confirming that.  The builder can sue but usually doesn't do that unless there has been a huge drop in the value of the property.  I recall reading about a builder who sued because the market had crashed and people were trying to walk away. 

its a trick that annoys the people that dislike foreigners because typically what happens is those foreigners just walk away and 'eat' the loss of their deposit.  aside from the capacity/feeling whether or not someone can or cant give up the deposit, its not a big deal at all to walk away and even if you find someone to buy 'it' from you, you have to pay the developer a fee. its not like its free profit at all like others are saying
 
yzfr1
Real Estate Talker
Posts: 241
Joined: Tue Mar 19, 2013 8:35 pm

Re: What must the governments do to stop speculation?

Sat Apr 22, 2017 6:09 pm

What I think they should do is...

When you buy a pre-sale. Developer collects the deposit. Then you finance on the spot... so none of this pre approve garbage. 

You start paying mortgage right away on completed value. That money will be held in escrow by 3rd party or government. 

Now you've taken the speculator right out of it. Also makes people more responsible and strengths the market. Pre-sale condo can be a privilege for people with better finance.

Harry dick and tom with 5% downpayment can stick to the secondary market. 
 
myraa
Real Estate Talker
Posts: 13
Joined: Thu Mar 30, 2017 7:25 pm

Re: What must the governments do to stop speculation?

Sat Apr 22, 2017 6:10 pm

I didn't know you had to pay a fee.  TDMA. any idea how much the fee would be?  A percentage or a flat amount?

TDMA, you know a lot about real estate.  Thanks for sharing your knowledge.  I appreciate it.
 
myraa
Real Estate Talker
Posts: 13
Joined: Thu Mar 30, 2017 7:25 pm

Re: What must the governments do to stop speculation?

Sat Apr 22, 2017 6:14 pm

yzfr1.   I like that idea.  My friends bought at the Viceroy in New West  (paid about $360,000) and they had to put down a deposit of $80,000 early on and then second deposit of $80,000 a few months before they moved in.  I was quite surprised by how big the deposits were.  I think that was unusual.
 
tdma800
Real Estate Talker
Posts: 2977
Joined: Wed Jan 23, 2008 9:12 am

Re: What must the governments do to stop speculation?

Sat Apr 22, 2017 6:16 pm

yzfr1 wrote:
What I think they should do is...

When you buy a pre-sale. Developer collects the deposit. Then you finance on the spot... so none of this pre approve garbage. 

You start paying mortgage right away on completed value. That money will be held in escrow by 3rd party or government. 

Now you've taken the speculator right out of it. Also makes people more responsible and strengths the market. Pre-sale condo can be a privilege for people with better finance.

Harry dick and tom with 5% downpayment can stick to the secondary market. 

http://www.mikestewart.ca/what-is-a-pre ... al-estate/
presale deposits are already held in escrow
 
tdma800
Real Estate Talker
Posts: 2977
Joined: Wed Jan 23, 2008 9:12 am

Re: What must the governments do to stop speculation?

Sat Apr 22, 2017 6:17 pm

myraa wrote:
I didn't know you had to pay a fee.  TDMA. any idea how much the fee would be?  A percentage or a flat amount?

TDMA, you know a lot about real estate.  Thanks for sharing your knowledge.  I appreciate it.


https://www.recbc.ca/psm/pre-sale-contracts/
there is no set fee but there definitely are fees for assigning it so its not like that those people getting lucky on assignments are getting off without paying anything
 
jimtan
Real Estate Talker
Topic Author
Posts: 5383
Joined: Tue Jul 31, 2007 10:59 pm

Re: What must the governments do to stop speculation?

Sat Apr 22, 2017 9:01 pm

Yah
Attachments
Burnaby South $1.6m detached.JPG
Burnaby South $1.6m detached.JPG (57.67 KiB) Viewed 50 times
 
VanLord
Real Estate Talker
Posts: 275
Joined: Fri Aug 24, 2007 3:52 pm

Re: What must the governments do to stop speculation?

Sat Apr 22, 2017 9:03 pm

yzfr1 wrote:

Now what if someone holding onto a pre purchased condo and the value goes down. Should they be taxed as well?

My whole point is, its impossible to tax the transfer of the contract.

All you can do is ban foreign ownership.

If you lose money on the assignment - its called a capital loss...you should know that
If you are a Canadian and you don't claim your capital gain on an assignment you are taking a big risk, as foreigner the gov has little recourse.
You don't have to ban foreign ownership or assignments, you can have all contracts registered by a lawyer and tracked by the land titles office. If the assignment changes hands the lawyers withhold a portion of the profit.  This isn't that hard, there are some logistical issues the need to be solved, but can and should be done.  While its true that the two parties may agree to a side deal (which can also be done on any real estate deal) but this is not to the advantage of the buyer, since he needs to have an accurate purchase price, otherwise he could be on the hook for higher capital gains.  
 
tdma800
Real Estate Talker
Posts: 2977
Joined: Wed Jan 23, 2008 9:12 am

Re: What must the governments do to stop speculation?

Sat Apr 22, 2017 9:05 pm

VanLord wrote:
yzfr1 wrote:

Now what if someone holding onto a pre purchased condo and the value goes down. Should they be taxed as well?

My whole point is, its impossible to tax the transfer of the contract.

All you can do is ban foreign ownership.

If you lose money on the assignment - its called a capital loss...you should know that
If you are a Canadian and you don't claim your capital gain on an assignment you are taking a big risk, as foreigner the gov has little recourse.
You don't have to ban foreign ownership or assignments, you can have all contracts registered by a lawyer and tracked by the land titles office. If the assignment changes hands the lawyers withhold a portion of the profit.  This isn't that hard, there are some logistical issues the need to be solved, but can and should be done.  While its true that the two parties may agree to a side deal (which can also be done on any real estate deal) but this is not to the advantage of the buyer, since he needs to have an accurate purchase price, otherwise he could be on the hook for higher capital gains.  

typing drooling. try bettering oneself instead of complaining about what others have. plonk
 
tdma800
Real Estate Talker
Posts: 2977
Joined: Wed Jan 23, 2008 9:12 am

Re: What must the governments do to stop speculation?

Sat Apr 22, 2017 9:05 pm

jimtan wrote:
Yah

linkless toy picture
  • 1
  • 3
  • 4
  • 5
  • 6
  • 7
  • 9

Who is online

Users browsing this forum: No registered users and 2 guests