Friday, 3 June 2016

Latest real estate scam       

I remember when I bought my first home. It was a townhouse and I paid $95,000 for it. That is what the seller listed it for. Twenty years later, I sold it for $128,000—the price I listed it for. I bought a second home which was a detached three-bedroom home with a huge backyard that was in a very quiet neighbourhood. The previous owners listed it for $239,000. They agreed to sell me their home for $195,000. Twenty years later, the property is now worth half a million dollars and it is fully paid for.  My wife and I have no intentions of ever leaving it.

The selling and buying of real estate has vastly changed for the worse. What we do is we look at the selling price of a house that has recently been sold, and compare it to the price it was listed for on the real estate Multiple Listing Service as the “asking price.” Then our eyes go wide and our legs go weak and we are astonished at the monstrous gap between the two numbers. Nowadays, when a seller puts up his home for sale, the listing price is not what he really wants. He wants much more. When a potential buyer offers to pay the amount that is listed, the seller will tell the first potential buyer that he will think about the offer. Then when another potential buyer offers to buy the property for the listed price, the seller tells him that a previous potential buyer has offered a hundred thousand dollars more but he will sell it to the second potential buyer for the listed price plus the hundred thousand dollars in addition. The second buyer agrees and the seller then tells him that he will think about the offer. By the time the seller has sold his property, the seller has received three-hundred thousand dollars over the listing price. This practice is outrageous.

In Vancouver, a 2,100-square-foot home on E. 26th Ave. just west of Main St. was listed for $1.6 million dollars and sold for $2.165 million, more than a half-million dollars over the asking price. The growing demand in Vancouver to the tune of $567,000 over asking price is pricing some people right out of the market. For many, renting may be the only option if they hope to stay in the city. When will the bidding wars begin for renters of apartments?

Bidding wars are nothing new to Metro Vancouver residents, and in such a competitive market where the seller is seeking a higher price than what the property is listed for as a direct result of the bidding practice.  It becomes part of the new real estate strategy. Obviously, the “asking price” is entirely, and increasingly, meaningless. 

Here is another part of this kind of scam. They will list the house far below what its value really is to get you to come and look at it and fall in love with it, especially when it is within your budget. And once you make an offer, you’re attached to the idea of buying it, so you might be persuaded to pay far more once you’re in a bidding war. It is a clearly the infamous bait-and-switch scam—which is illegal.

If you go into a car dealership to buy a new car and the car you want is listed for $20,000, if the dealership then asks a second potential buyer to place higher bid on the car, the government would pounce of the dealership and charge them for doing that because that practice is against the law. It is possible that the home owners can get away with this bait and switch scam because they are not a business but simply private individuals.  However, the sales persons are part of a business.

Housing in Toronto is sold through a form of blind auction, with the sale going to the highest (or otherwise most attractive) bidder, so the advertised “price” is merely a suggestion. But it has become less than a suggestion. In my opinion, it’s more often than not, an outright lie.

The sale of property where people are routinely forced to make life-altering decisions in a matter of hours or days, are faced with false information with respect to the real price of the property. In the real estate industry where the agent representing the purchaser gets paid by the seller, he or she gets paid far more if they persuade their own clients to pay a higher price. This is an industry in which purchasers bid in an auction without knowing for certain how many other bidders there are or what other people have bid.

This kind of practice is pointless to the buyers because they never really know where they stand with respect to their offers. In addition to the practice being cravenly manipulative, it wastes a lot of people’s time as they go out to see house after house thinking that the houses they are seeking are in their price range when in fact, they are not. Although the selling agent has told them directly that the houses are actually within their price range, the sales person is really doing this in order to receive a higher commission.

If the real estate industry cared a tinker’s dam about this bidding scam, they would put a stop to it but since they will do anything to increase their commissions, they will continue to permit sellers to rip of buyers with this outrageous bidding scam.

The Real Estate (MLS) listing service could do away with this scam altogether and instead just list the average selling price of comparable houses nearby as a more reliable guide for what buyers can expect. Because the selling price is determined by what people are willing to pay for that kind of house in any particular location, and recent sales of similar nearby houses, those listed figures would be the closest approximation of what the houses are really worth.

I don’t think that it is a smart decision to publicize the difference between the asking price and the higher bidder’s price paid. It may make sellers happy but it will scare off buyers who don’t want to get into a bidding war and end up paying far more than the houses are worth. 

Real estate agent Manjit Singh recently put up an MLS listing for a three-bedroom semi-detached house in the Junction for $1 to jumpstart bidding. But he was open about the fact that he won't take less than $700,000 for it. Is this man stupid?

Whatever purpose the agents and sellers have in scamming us, the rest of us can stop paying attention to them. The sales persons should stop putting the outrageous high bidding offers in the headlines. The actual basic selling prices are astonishing enough.

In a court case heard in Ontario in 2009—Quesnel v. Barry v King the court said in part; “It is well settled law that an enforceable agreement is created where there is an offer by one party, acceptance by the other party, with a mutual intention of creating a legal relationship and supported by consideration (payment of the down payment).

The sellers of the properties current actions are serious because they deprive the buyers from the very things they legitimately bargained for.

I hope someone takes these creeps to court and also ask for punitive damages. 

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