Tips, Advice, and Explanations from a Vancouver Mortgage Broker  

Archive for the ‘Contracts and Subjects’ Category

Top 3 Important Dates in a Real Estate Transaction

Thursday, October 7th, 2010

Transcript of Video Blog:

Hi, everybody. It’s Rowan Smith from the Mortgage Centre. I want to talk today about subjects. Specifically, what is a subject in a contract?

So the way I like to describe it is a subject is essentially a large ‘if’ statement. So if you’re writing an offer, say $500,000 subject to you getting financing, subject to a building inspection.

So when someone says, ‘what subjects have you put on the offer?’ typically it’s going to be your financing subject, it’s going to be your subject for building inspection, it’s going to be subject for anything else that you want, verified or looked at or confirmed prior to your offer being binding. Until you as the buyer remover those subjects, the deal is not binding.

So when you are trying to make your decision as to what subjects you need, you’re going to want to consult your realtor. You’re also going to want to speak to me before you do it to know what we’re going to require for financing. That will guide us in how much time, we are going to need for that subject removal, for that deadline.

Typically I like to see five business days. Not always possible, but that’s the ideal number. A little bit more certainly doesn’t help and it will take a lot of pressure off.

So when you are wondering what a subject is, it’s the conditions to your offer.

For the Mortgage Centre, I’m Rowan Smith.

Top 5 Things NOT To Do After Writing An Offer

Thursday, July 22nd, 2010

Transcript of Video Blog:

Hi everybody, it’s Rowan Smith with The Mortgage Centre. I’m going to do a little top five list. These are top five things not to do once you’ve written an offer.

OK, so number one. Do not write an offer and leave on vacation. Now there’s a couple of catches to this, OK?

You can do it. But during the subject removal period I’m going to need you here. Your Realtor is going to need you here to sign things, review documents.

So don’t write an offer and expect to be able to leave town during the subject removal period. Especially do not be gone during the closing period.

Because you have to be here to sign in front of a lawyer, especially if you’re buying property in British Columbia. So you’ve got to be here.

Now if you’ve got two months from the time you write an offer to the time your completion is, feel free to be out of town for part of that time.

I mean everyone’s got work and business obligations. And they may want to take a vacation. That’s fine. But just keep those vacations coordinated with the home buying process. It’s a big item. So vacations are a very important thing.

Number four. Do not transfer your dollars around for your down payments. People will often be in an effort to be helpful to me, they will transfer dollars from their ING account into their CIBC checking. From that TD savings into their CIBC checking. From their RSP into their checking.

The problem is, then I get a copy of that checking account statement, and it looks like you got a whole bunch of money just flew into the account.

So what I end up having to do is document every large deposit on there. That means I have to get the ING, the TD account, the RSP account, and the CIBC checking account. I’ve got to get it all to track where every dollar is. It’s a lot easier to just leave the funds where they are.

And once we’ve got the down payment accepted by the lender, then you can move them around.

Number three is, do not buy lots of new things, especially on credit. And I’m referring to people that will gloat and they’ll get excited about buying their home. And so they’ll go to The Brick and they’ll buy a whole bunch of furniture on a “do not pay plan.”

And then they’ll go to Best Buy and they’ll buy appliances and all this type of thing. Do not do that.

Wait until you’re in the home. If you incur additional debt before the closing date and the bank finds out about it, they can pull that approval. Because you may not qualify even though you can afford, you may not qualify for that new debt in addition to the debts you already had.

Now this is even if those debts are going to be paid out prior to the completion with the sale of an old home. Just check with me first. Be very careful about buying new items.

Number two. And this is the most common one that I see of buying new items, is do not buy a new vehicle. Those vehicles, especially vehicle leases, have massive payments, or can have massive payments. And it can throw the debt servicing and your ability to qualify for the mortgage. Again, completely out of line.

So before you go do that, get your mortgage completely finalized. Have the approval ready. Have it instructed to the lawyer’s office, and then you can start shopping for a new vehicle. I still don’t recommend buying it until after you’ve purchased the new place, just to avoid any challenges.

And lastly, the number one that I consistently get that blows me away is, do not quit your job. From the time you write that offer until the time you move in you have to be prepared to stay in your line of work.

Now things happen. Sometime companies sell off divisions. You get transferred. Other times you may just get fired. That’s life.

But the reality is that you also will have a lot of choice in these cases many times. And there’s no need to quit your job right during that period of time.

So from the time you write that offer to the time you complete, stay on your job. Stay the course. What you do after you’re in the property is up to you. And life takes many changes and it’s unpredictable.

So there is no way that anybody can fault you if you lose your job two months down the road. Or you quit and transfer into a new role to get a pay increase or whatnot.

So there it is. The top five things not to do when you’re buying a home.

For The Mortgage Centre, I’m Rowan Smith.

Cashbacks and Incentives can Have a Hidden Cost

Sunday, November 16th, 2008

In the current real estate market, with developers of new homes hoping to sell their inventory (or being desperate to do so). Incentives can take many forms: cashback after completion, renovation allowances, vehicles, real estate commissions, paying the GST or any manner of incentive.

In real estate, as in anything else, there is no free lunch. If you buy a house for $500,000 and get $20,000 cash back after closing. Did you really pay $500,000? Or did you really py $480,000? The banks say you paid $480,000 and this can affect your financing options.

I came across this article that was in the Vancouver Sun on November 15th and was written by Derrick Penner. I am going to re-publish it here for reference as it explains the costs of the various incentives such as cashbacks and other incentives that developers and lenders offer.

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They are temptations to buy a new home: offers of cash back, decorating allowances, commission payments, even new cars.

However, consumers face a potential financing sting if they accept such incentives without doing all of their homework, accord to the Mortgage Brokers Association of BC.

Association President Brian Petersen said it comes down to whether or not the lender views the incentives as a discount to the purchase price. In that case a lender will deduct the value of the incentive from the size of the mortgage a buyer was trying to arrange, he said.

Mortgage lenders usually won’t quibble over allowances of a few thousand dollars for new appliances or to upgrade furnishings, Petersen said.

However, lenders won’t look past higher vale incentives such as a developer paying the real estate commission on the sale of the buyer’s existing home, or throwing in expensive gifts such as automobiles.

“On a substantial kind of thing worth $20,000, $25,000 or $30,000, a good [mortgage] underwriter would not let that by,” Petersen said.

The example he used was a buyer looking to buy a $500,000 condominium — with a 10-per-cent down payment — from a developer who was throwing in a $20,000 car as part of the deal.

Petersen said a lender may look at the situation, decide the buyer is purchasing a condo and a car, and deduct the auto’s value from the price tag of the condo. So instead of advancing the $450,000 mortgage the buyer was expecting, the lender advances only $432,000 — 90 per cent of $480,000 — while the developer still needs to be paid the full $500,000.

Petersen said he has seen a couple of cases in the Okanagan, where he is based, where developers have thrown in cars as incentives and buyers have been stuck trying to come up with additional funds.

Petersen added that it is important for a buyer to tell his lender about incentives he accepts. To withhold such salient facts would constitute fraud. Offering incentives is not something unexpected in a buyer’s market for real estate, Petersen said, and there is nothing wrong with them so long as consumers understand the implications that might come along with accepting them.

“We’re trying to get people aware that it’s not going to end up being a free ride for them,” he said, “you may end up paying for it.”

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Title Fraud and Title Insurance

Monday, July 7th, 2008

So we get questions all the time about title fraud, how it is done, how to avoid it, and what the real risks are. I am going to reprint an article from the Vancouver Sun that explains a few issues regarding title insurance and then my commentary follows.

The article was originally published in the Vancouver Sun on June 20th, 2008 and was under the title, “CON ARTISTS SELL HOMES WITHOUT OWNERS KNOWING”

By Gillian Shaw
Vancouver Sun

When the annual assessment for Normal Gettel’s home didn’t arrive in the mail this year, he phoned the BC Assessment Authority.

“They said, ‘You don’t own the property any more,’ ” said Gettel, a printer who retired from his job at Pacific PRess in the 1990s, a few years after he had paid off the mortgage on his Richmond bungalow.

“I went to the land titles office. They pulled it up and said, ‘You don’t know the property any more.’”

“I said, ‘I hate to differ with you, but I didn’t sell it.’ ” The title told a different story. According to the property documents, not only had Gettel sold his property, assessed at $600,000-plus last July, but the buyer had also immediately put a $400,0 mortgage from CIBC on it.

The buy never showed up to claim the property.

The mortgage, at $2,600 a month, is in default, and Gettel can’t even pay his property taxes because, according to legal records, he doesn’t own the place.

So far Gettel, who is in his 70s and suffers from Chronic obstructive pulmonary disease, has paid his lawyer $10,000, and the case hasn’t even made it to court, although Gettel’s lawyer has filed a notice of pending litigation.

It’s all part of an elaborate scheme that has surfaced recently in B.C. in which con artists are attempting to sell homes without the owner’s knowledge, leaving the homeowner off the title but with hundreds of thousands in new mortgage debt against the property.

In the latest variation of the scheme in B.C., a would-be seller contacts a notary or lawyer to carry out the sale of a home.

A buyer, who is thought to be in on the deal, applies for a mortgage on the property and if the transfer is successfully carried out, the mortgage funds are paid to the seller. The buyer and seller disappear and so does the money, often leaving the homeowner to discover the ruse only when the bank notices the mortgage payments aren’t being made and comes looking for its money.

While such fraud is not new, title insurance company First Canadian Title said B.C. has seen a jump in suspicious cases this year. And a B.C. Supreme Court decision this month ruled that while a true owner could regain title to a property if it was fraudulently transferred, mortgages taken out on the property – even if fraudulently obtained – still stand.

In that case, a plaintiff asked for restoration of title, which had been fraudulently transferred to an imposter. The plaintiff also sought the removal of two mortgages placed by the fraudster against the property.

The courted directed land titles to issue a new title reflecting the plaintiff’s ownership. However, it dismissed the plaintiff’s action seeking cancellation of mortgages.

The latest cases have prompted an alert from the Law Society of B.C. to its members.

“As far as I’m aware there have been two or three attempts in B.C. in the recent past to perpetrate frauds of this nature and our notice was to be proactive in raising the awareness of the profession so lawyers could play a role in stopping the attempted frauds,” said Susan Forbes, director of insurance with the Law Society.

“In the cases we have recently become aware of, the fraud is happening at the level where there is an actual transfer of title; it is not simply a mortgage. A fraudster posing as an owner and conveying the property to another, who is a partner in the fraud.”

Gettel has been told someone claiming to be him showed up at a Surrey law office to sign the property transfer papers.

The property transfer lists the market value of his home at $607,600.

The next line, “consideration” – the transfer price – reads: “$1.00 AND NATURAL LOVE AND AFFECTION.”

The person listed as the buyer, Oleg Balan, took out a $400,000 mortgage on the property, but that appears to be the last the bank heard of him.

Gettel received a copy of a lawyer’s letter to Balan dated February 1, 2008 in which a lawyer for CIBC Mortgages Inc. demanded payment in full of $403,034.95 plus interest at $53.18 a day plus legal expenses of $375. The letter gave notice that CIBC Mortgages “intends to enforce its security” on Balan’s property.

CIBC Spokesman Rob McLeod said the CIBC is in contact with Gettel’s lawyer and no foreclosure proceedings have been commenced or are currently contemplated. He said the RCMP is aware of the file.

Such schemes constitute a lucrative sideline to identity theft and have been carried out in other parts of Canada. A 90 year-old Ontario man ended up in court with a bank demanding he pay the $300,000 mortgage that fraud artists had taken out on his property, which was sold without his knowledge. A court eventually ruled that he didn’t ow the money.

Balan’s name has also surfaced in the sale of a Vancouver home that was recently blocked when real estate lawyer Ron Usher doubted its authenticity. In that case, another man was listed as the buyer, but the mortgage proceeds were to be paid to a company, VP Custom Trading Inc. that lists Balan as a director.

A man phoned Usher recently asing if he would act for his father on the sale of the family home. The father arrived at Usher’s office with all the details of a $665,000 offer on his east Vancouver home, for which he said he had received a $66,500 deposit.

The client gave hime a phone number, but Usher checked the address of the property and called the house.

“I’m Ron Usher, the lawyer acting on the sale of your house,” Usher said, recounting the conversation. “He said, ‘I’m not selling, and who are you?’ ”

The perpetrators had filed a change of address with the post office to intercept mail linked to the fraudulent dealings.

The would-be buyer in case also turned up as the buyer of a Burnaby property that land title records show was sold recently for $565,000. The buyer got a $518,670 mortgage on the property.

The BC Land Title and Survey Authority put a caveat on the property title after the notary who witnessed the seller’s signature on the deal notified the authority she has been told by police the person who signed the deal was not the true owner.

Gettel’s case also included instructions to the postal service to have mail redirected to a Burnaby address.

Gettel said he went to Richmond RCMP when he found out about the redirected mail, but said he was told it wasn’t something the police would look into. He said he has since talked to Richmond RCMP about his case.

Sgt. Susan Green, of the B.C. RCMP’s commercial crime section in Surrey, said the RCMP can’t release any information about specific investigations.

Ian Smith, director of land titles for B.C. and registrar in the Land Title Survey Authority’s New Westminster land title office, said such cases are very rare in B.C., but there had been several similar attempts in 2003 and 2004. This year there have been about five others that appears linked to the same perpetrators.

Smith said B.C. has safeguards in place to protect property owners from title and mortgage fraud.

He said B.C. property owners are protected through an assurance fund that compensates them if they are deprived of their title either because of an error in the administration of the land title system or through identity theft and fraud.

“With respect to the mortgage, if it was proved that it was a fraudulent mortgage as well, the bank would be left holding the bag.”

Usher also said he doesn’t know of any cases where the victims lost money in paying off mortgages that were fraudulently obtained.

“I have never seen anybody in all these cases in Ontario – and certainly I’ve heard of it here – basically an innocent owner having to pay the mortgage of the fraudster.

“It gets solved in some way. What the lawyers are arguing about here is what is the right process.”

<End of Article>


Ok, there are several things that are mentioned here that should be noted:

1. In many cases the properties were clear title homes. By having a line of credit or something else already registered against your property, even if it is has a zero balance, makes this type of fraud more difficult. Why? Because it adds yet another level of oversight to the process of transferring title. A lawyer would have to pay out a mortgage, or line of credit, and it would require an additional step in the process. This is by no means a guarantee to avoid fraud, but having a mortgage of line of credit registered against your property could alleviate a clear title home being transferred.

2. This is primarily happening in Ontario, but there ARE several instances of this occuring within BC.

3. The redirection of the mail is a key in these frauds. For this reason, try and go paperless where possible with email statements and email correspondences with lenders as this is much harder for fraudsters to redirect.

4. Usually the fraud is caught by simple diligence. If you haven’t received your property tax assessment, but your friends and neighbors have, don’t just let it slide. Look into it! Find out what the delay is. It could be that your mail is being re-directed.

5. Shred all important paper before recycling or destroying it. Why leave free information around for fraudsters.

6. If you are purchasing a home, get Title Insurance and make sure it also protects YOU and not just the lender. In most cases title insurance will only protect the lender from fraudulent transfer unless you specifically request it to be set up otherwise.

These are the basic tips that can help reduce the chance, although never eliminate it, of losing your home due to fraud. As the fellow in the article mentions, there is no known cases of a person having to repay a fraudulent mortgage, but the devil is always in the details, and the chances are that it could be very expensive during the interim while lawyers are sorting things out. Expect to pay some legal bills, at least up front, until money from the assurance fund or title insurance company kick in.

Although we cannot eliminate fraud entirely, these steps will make you a little more secure in the fight against it.