At the same time, while battling my way through the Case Study scenario that I outlined in my most recent blogs, I’ve been dealing with a developer that has proven themselves incompetent, ethically challenged, and downright offensive!
I guess at 66 years of age and almost four decades of working with people buying real estate, and most of the thousands of “buys” that I’ve been involved in being “pre-construction sales“, I’ve just become complacent.
I bought a $1 Million + detached house from this no-name developer (there’s tip #1), deal with “known entities when buying pre-sale.
I really like the floor plan, (and there’s tip number two – “don’t let plans mesmerize you“, which they are known to do.
With this buy (we’ve bought nine properties in the past decade) we knew exactly what we were looking for, which was fundamentally to get out of living in condos.
To this day, ten months, after having purchased it from the Internet, we continue to be run around on every front.
We bought it as a “ticket out of Condo Land” more so than seeking a new home. We absolutely love our townhome in College Park, or at least the inside of it which really does make up “your home“.
But the combination of a dysfunctional board of directors, a disgusting interdependency with the City, who has singled-handedly ruined what was a beautiful park, dealing with a disproportionate number of “renters” abusing the facilities, and a continuing list of other negative aspects of condo life, collectively led us to the only rational conclusion, which was to exit Condo Land all together.
So, on Christmas eve, after losing an intellectual exchange with my partner about an investment opportunity in London Ontario (that would have included moving there for at least a couple years), we jumped at the idea of owning a detached home in Oakville close to the lake for just over a million dollars.
The plan was simple as we would keep our downtown condo townhouse as an income property (I considered selling it but I hate doing that, and “cash flow” at this stage of the game is far more important than cash sitting in a bank.
When you invest in real estate, your “estate” remains constant (long term growth) with your all cash scenario, but immediately kicks in “income“. Maintaining the income property in excellent repair is rewarded with “tax write offs” and a perpetually solid investment property.
I’ve never been able to understand “slum lords“. We keep all of our rental properties in peak physical condition which plays a big roll with tenant appreciation.
So, with a cash flow upwards to $7,500 per month (equates to landing an impressive job!) and retaining the full asset of the townhouse without a mortgage, you can see how wealth is built in real estate.
All that sophisticated talk about “leverage” by academics sounds so academically good, but I live in the real world and I’ve always preferred to pay for what I want, up front. No bankers, mortgage brokers, unrelated third parties in my life carries a significant hidden value to me personally.
So, I bought the house in December last year on the day before Christmas, basically over the phone. As always with condos (the road is condo the house is not – it’s called a POTL “Parcels of Tied Lands“), we had a 10 day “Rescission Period” so buying wasn’t such a big deal to me and again, we knew what we wanted and this one promised to deliver exactly that!
The Realtor that I first spoke with had told me there were “seven remaining homes for sale“, but when we got through to the CEO, he told us there were “only three left” and then the COO told us there “was only one left“, so we bought it.
To this very day, every knowledgeable Realtor in the area that I talk with, tells me that “you can’t buy detached in that area for a million“!
We checked out the developer who seemed to be branching out from their usual area which was at the direct other end of Toronto, north east of the city, but all indicators were good, or a good as the Internet can deliver (big difference).
Now, I would tell any client to fly there and physically walk the site, inspecting all surroundings, but it was Christmas and I was traveling and I figured that with everyone telling me that this area commands almost double the price for a home, I could navigate my way through just about anything, and I did what I would tell my clients never to do. I went firm on the deal without returning to inspect the investment offering and do my conventional due diligence.
I actually still really like the house and as recently as yesterday, after delivering formal Notice of our intention to walk away from the deal, we were still ready to reinstate the deal.
When I returned in the spring to check out the site I was disappointed to realize that I had been lied to about there being only one lot remaining and it being a “premier lot” requiring an additional $50,000 which I paid.
I had already learned that there was also six other lots still unsold.
In law, they call this “entering into a contract in bad faith“. In the University of street we call it lying!
When I returned from Florida, I managed to catch the developer on site and told him that I was not impressed with the realization of how I had been “manipulated” into the deal, telling him that it was fortunate for him that the house was for me and not a client of mine or he would have me climbing all over him out of my conventional obligation to protecting my client’s best interests!
I expressed to him how disappointed I was that they couldn’t even sell eighteen lots in such a prestigious location as I had become aware that they had sold the other six remaining lots to another developer (not a good sign to me about the skill or intelligence of this developer).
I still liked the concept of getting out of a shared wall/shared facilities condo residential lifestyle so much that I still wanted to move forward with the deal.
In over ten months now, we have yet to even see samples of the standard features let alone, do our colour selections!
We did meet with the kitchen counter supplier (Paris Kitchens a very reputable company that gave us a margin of comfort) but they didn’t have samples of flooring, countertops, backsplash, etc. So, what good was selecting cabinets without samples of all the rest of the materials that form the kitchen.
So, after two Delay Notices in delivery dates, but no other communication or updates and no colour selections, the picture was not looking too bright for this investment. But this wasn’t our first rodeo and I was confident that in the end, due to the City of Oakville’s reputation for demanding that developers do it right, I was confident that end the end we had made a sound investment, one we would do well with.
It is disgusting that developers can stick buyers into contracts (ridiculous one sided contracts) and then totally ignore them, but amazingly, that’s what built Condo Land.
Consumers are lulled into a false sense of security with concepts that are sold to them to say that they are protected under the Tarion Warranty Program (originally Ontario New Home Warranty Program) alleging to “protect consumers” while actually trapping them into this one-sided game!
Fortunately, as impotent as is Tarion, a couple years back introduced a new element in its Warranty that requires developers to include in all real estate sales contracts an “Outside Occupancy Date”, being the latest that the developer can deliver the home.
Once a developer passes that date and has not given legal “Occupancy” (enabling you to move in) the consumer has a legal 30 day time window to deliver written Notice that they are exercising their right under the Tarion Warranty and withdrawing from the deal.
The consumer is entitled to the return of all deposits, plus interest and the potential of additional expenses.
But you have to deliver formal written Notice WITHIN 30 DAYS of the expiry of the “OUTSIDE OCCUPANCY DATE“.
Immediately upon receipt of the Developer’s Third Formal Notice of Delay, setting a February 2016 Occupancy Date, I immediately returned Notice to them and their lawyers that “their Notice was actually an admittance on inability to fulfill their obligations under our contract” and that I would be delivering the prescribed Notice on the day after said Outside Occupancy Date as set out in our Agreement.
I also offered to assist them by having them move the time frame ahead to enable them to immediately try to resell the house, requiring that we simply both sign a “Mutual Release” and have them return my $100,000 deposit with interest.
So, after all of that and another long trip up to their offices to give them my conclusions face to face and to “serve Notice” of my intention to serve Legal Notice, we decided to give them one last shot at saving the deal.
As a negotiator, offering an olive branch at this stage of the game, I usually see an immediate change in temperament, so we set out what they would have to do to bring the home up to the standard we expected, and have us re-instate the Agreement (save the deal for them).
We really did like that house plan and location!
This is one of the few times in a year that the developer responded immediately, asking what time he could call to discuss this latest potential solution.
Given a time he replied that he could not call then, and asked for another time, rather immaturely I felt as a professional would have suggested a couple times initially and invited the customer to choose at their convenience. Professional sales skills are something you don’t see much of these days and this guy could not be further off from ever being confused as a professional salesman.
He set a time to call us at 5:00 p.m.
Of course and as usual, we were once again stood up and actually have yet to hear from the developer. There is not a snowball’s chance in hell, that I will tolerate any more of this rude and unprofessional behaviour from someone who is obviously in over his head!
If there is one thing I despise in business it is incompetence and it doesn’t get much more incompetent than having a motivated customer trying to give you over a million dollars and continually slap their face!
It is my conclusion that unfortunate individual should learn first what it takes to build a reputation, and then go back to building houses.
It’s amateur time in this one! And I do not have time for amateur time!