I suppose it’s not fair of me to say “another” as though it were a common occurrence, since only 23 condo projects in Toronto have been cancelled since 2012.
But every time this happens, those who were “burned” cry foul, when all the while, they should have known the risks.
Two of the major Toronto newspapers picked up the story, and as a result, City Councillors are saying “something should be done,” when in fact, nothing ever will be.
Let me explain to you why this is a risk every pre-construction condo buyer takes…
I’m really having trouble understanding the world today.
Every day, it’s more and more complicated, and yet the complication arises through our own doing.
I’m one of “those people” who thinks the world is getting too soft.
Everybody is offended by everything. Constantly.
I can’t open a newspaper without seeing somebody crying foul about something, and most of the time, it’s seemingly innocuous.
The topic of “entitlement” came up in the comments section of a blog post last week, and a reader called it “the elephant in the room.” I certainly hope it’s not; I hope it’s something everybody would see, even if I, or other readers, forgot to mention it.
Entitlement is a word that gets thrown around a lot these days.
Privilege is another.
But what about responsibility?
When I was raised, these were traits we aspired to possess.
Remember what it was like in Grade-10 when you handed in an assignment one day late? You got 10% taken off, on the spot. Two days late? 20%. Today, public schools have not only done away with “late marks,” but just about any other responsibility or accountability that an impressionable young boy or girl ought to understand.
One of my family members is a teacher, and she has kids in her classes that get eight. Like, eight percent. As in 8% in a class, when 50% is a “passing grade.”
Do those kids fail?
They’re passed, usually at the behest of some socialist guidance counselor or vice-principal, as the “leave no child behind” school of thinking believes that we should teach these children they should skip class all year, do no work, call the teacher names with no repercussion, and then move on to the next grade, rather than learn responsibility and accountability for their actions.
I suppose the “business” of university will start doing the same – passing kids along, so they can get enter the workplace completely unprepared, with no concept of reality. But in order to accomplish that, the universities would need to take some time away from their busy schedule of creating safe spaces for students who don’t want to debate anything, because there should only usually be one side to any argument.
I could go on. But I feel as though I may have already lost half of you.
I may be a 37-year-old, trapped in an 82-year-old’s body, about to go outside and yell at a cloud for moving too fast while shaking my fist at a young whippersnapper for skateboarding too close to to my prized petunias, but it doesn’t mean I’m going to hold it in.
A few weeks ago, a notable condominium project called “Museum Flts,” was cancelled.
I know what you’re thinking, and yes, the project was cancelled because of financial woes, and yes, we should have known this a long time ago as they clearly couldn’t afford the “a” in “Flats”…
When the project was cancelled, my phone started to ring.
I talked to a half-dozen people, some who had bought into the project and had Googled “pre-construction” and found my blog, and some in the media who thought it was a great story and wanted some background fodder.
And even though I’ve “seen everything” in this industry, I was absolutely shocked to see a complete and utter lack of understanding, and accountability, among those who had bought into the project, and were saddened, disappointed, frustrated, outraged, confused, and financially crippled by its cancellation.
Two of the major Toronto newspapers picked up the story.
Let me provide the links and a couple of excerpts for some context before we move on:
From Friday’s Financial Post: “Cancellation of 10-storey Toronto Condo Tower Throws Buyers Back Into Pricey Market”
The cancellation of a ten-storey Toronto condominium development that has thrust would-be owners back into an increasingly competitive condo market has renewed calls for tighter regulations and more protections for buyers of pre-construction projects.
The Museum FLTS condominium cancelled earlier this month is the latest condo project to be shelved. Developer Castlepoint Numa cited lengthy delays in obtaining the necessary approvals, building permits and, in turn, financing, as reasons for the halt.
“Recently, the industry has been experiencing the most significant cost increases in a decade,” the developer said in a post on its website.
Castlepoint Numa is returning deposits to original purchasers and giving them the first opportunity and a discount on the next residential phase of its greater Lower Junction neighbourhood project.
But those promises are cold comfort for Michael Lynn, a 47-year-old musician and university instructor who bought a one-bedroom unit in Museum FLTS 18 months ago. He received a registered letter on his birthday earlier this month, his first inkling that anything was awry.
He was refunded his nearly $60,000 deposit, along with $400 in interest, but does not think he will be able to afford a similar property in the same neighbourhood.
Lynn believes developers should be forced to meet a higher bar before they start selling units and taking deposits.
“At the moment, they can promise the world just to get the buyer in and then, say, ‘I’m sorry we couldn’t do that’.”
I’ve done enough newspaper interviews over the years to know the game.
You need “colour” for a story to work.
A story about a condominium being cancelled does not work if you don’t have a name, a face, and a quote to go along with it.
And both articles from the National Post and Toronto Star have exactly that!
Here’s an excerpt from the Star article:
From Saturday’s Toronto Star: “Cancellation Leaves Buyers of Pre-Construction Condos Priced out of Market”
Kurt Trowbridge, 34, who bought with his partner, Zak Osman, 38, says they, too, have been priced out of the market while the developer held their money for more than a year.
“We’re still in disbelief,” Trowbridge said. “The market has changed so much.”
He said he felt sick about the cancellation. The couple had worked hard to save a deposit. They had shared their happiness with family and friends.
“I felt kind of ashamed telling people we made a bad investment,” he said.
Jason Paris, 43, has been living with family while waiting for his condo but there are others worse off, he said.
“There are couples still living with their parents (that) planned their wedding timed to the condo closing. There is someone who was moving from London, England. There are people who have been impacted more than me, but it still sucks,” Paris said.
At first, he wasn’t too worried because he has a place to live while waiting for another opportunity. Then he realized that new, stricter mortgage rules that are being introduced in January will probably make it tougher to qualify for a more expensive home.
Here we have people who are willing to go on record, and put their names out there. I say, good for them.
All too often in today’s society, it’s the anonymous keyboard warriors who shout the loudest, and offer the most vitrol, not to mention act the most cruel.
I respect every single one of these people for going on record, and I understand their plight.
But forgive me when I say this: these people took a risk, and suffered from the wrong end of a risk-reward equation.
The person quoted who said, “I feel like of ashamed telling people we made a bad investment,” I have so much respect for this guy.
But Kurt, don’t be ashamed!
The people you are telling have made far greater mistakes, and far worst investments. They just might not talk about them.
At least you tried something. At least you took a risk. It didn’t pay off, but you took a risk. How many other buyers out there were frozen; paralyzed with fear, as the media continued to predict a market decline for a decade, who sat on the sidelines and did nothing?
I infamously put $15,000 into Nortel Networks when I was 19-years-old as my very first stock market investment, using a 65-year-old broker, who had been through three market cycles, and yet he thought it prudent to take every dollar I ever made pumping gas at Sunoco, making kebobs at Bruno’s Fine Foods, packaging fish at Metro, and bussing tables and eventually bartending (awesome job!) at Shark City – and put it all into ONE stock.
Talk about a bad investment. Everybody has a story.
I respect these people for making the investment, and for going on record with their stories.
But a lot of them, and all of the people I talked to last week, somehow are coming out of this saying, “It’s not fair.”
Or “It shouldn’t have happened.”
Or my favourite, “Somebody should do something.”
And that somebody is……………wait…………….I know this……………..the government?
The classic go-to!
And thanks so much to the City Councillors who jumped on this bandwagon and offered “Something should be done,” only to go home and eat a microwave pizza.
I’m sorry, but nothing will be done.
And if “something” is done, ie. there’s a mandatory $20,000 per buyer refund for any cancelled projects, the developers will simply build that into their pricing strategy from the onset.
This is the way pre-construction condos are sold in Toronto, and it’s why for the last decade, I have been the most outspoken critic about the perils, and risks, of buying pre-construction condos.
I have never sold a pre-construction condo to a buyer. Not one.
A family friend recently told me, “That’s where you should be, dude! Those fat 4% buyer-commissions? You don’t want a piece of that?”
Nope. Never have.
As both articles noted, only 23 projects in Toronto, since 2012, have been cancelled – according to real estate think-tank, Urbanation.
But how many have been delayed by a year, or two, or five?
How many have had an “occupancy period,” where you basically pay rent on a unit you’re supposed to own, for upwards of TWO YEARS?
How many buyers were shocked to see $47,850 of “closing costs” for their $399,000 condo?
How many buyers have had their promised 10-foot ceilings changed to 8-foot, with no financial compensation? Or seen their magnificent 400 square foot terraces reduced to 60 square foot balconies, and been told, “The balcony is ‘exclusive use, common elements,’ and therefore you wouldn’t own it; you didn’t purchase it, and it’s not a material change.”?
I could go on, but you’ve heard this all from me, many times, over the last decade.
Sure, a lot of people made money on pre-construction condos, but that’s because the market continued to climb, and I maintain they’d all have made more in the resale market, not having to pay occupancy fees or closing costs.
I’ve never understood the investment. The risks are too high.
And seeing these poor folks turfed out of Museum Flts sucks, but they need to hear the tough love here: it’s the risk they took.
To come around now, and cry foul, say that “something should be done,” or complain that developers shouldn’t be able to do this, when they had every opportunity to evaluate the risk-reward proposition of this investment three years ago, simply reeks of that entitlement, privilege, and lack of accountability and responsibility we spoke of earlier.
I had clients looking at freehold houses with me several years ago.
I was showing them properties on the east side around $800,000.
They went cold on me, and I found out eventually through a mutual acquaintance that they had bought into a pre-construction condo, and didn’t want to consult me as they “knew I was completely and utterly against the idea.”
I was a little hurt that they didn’t at least run the idea by me. It had nothing to do with the commission, for those of you about to suggest as much, but rather if they knew I was “completely and utterly against it,” and didn’t ask for my opinion, then they were being irresponsible. There are pros, and there are cons. And while they had access to somebody who could point out all the cons, better than anybody, they chose not to hear it.
Their project, as you might assume from the way this story was set up, was eventually cancelled.
They were given somewhere around 0.75% interest on their deposit, and turfed aside.
Those houses I was showing them at $800,000 were worth about $1,150,000 by the time their pre-construction condo project was cancelled.
Hindsight, I know. That’s what you want to tell me.
But they could have completely mitigated that risk by purchasing an $800,000 freehold home, in an A+ location, which I said at the time, and was proved to be correct, would massively out-appreciate the market average.
I feel bad for them, but I really shouldn’t.
And nobody should feel bad for anybody profiled in the two articles above, just as nobody should feel bad that at 19-years-old, I took my life savings and put it into ONE stock, even though I should have known better. I could have blamed the stock broker, and I could have blamed accounting scandals that plagued the industry in the late 90’s and early 2000’s, and I could have simply blamed the market. But I always blamed myself, and I learned from that experience. It cost me $14,400, since I rode the stock all the way down to $2 at the advice of my broker, but it was the best $14,400 I ever spent.
I haven’t made a poor investment since, and I trace it all back to that investment when I was a kid.
So for those of you that are thinking about a pre-construction purchase, read the articles above, and ask yourself, “What level of risk would I tolerate, and how do I feel about this as a potential downside outcome?”
And for those of you that have invested in cancelled projects, don’t blame the developer.
There are so many things you could have done differently.
Did you use an agent? Or did you walk into the sales centre and trust the “floor agent” who works for the developer?
Did you hire a lawyer during the Provincially-mandated 10-day rescission period? Or did you simply assume everything was kosher, and try to save the $3,000?
Those questions are almost rhetorical, since I’d wager 50% of buyers would say “no” to both questions.
I tell new real estate agents all the time that I have a saying. A mantra, if you will. It’s simple, and it’s helpful. It goes, “Find a way to blame yourself.”
You didn’t sell that house? Find a way to blame yourself.
You didn’t get that listing? Find a way to blame yourself.
Your buyer client started working with another agent? Find a way to blame yourself.
Instead of blaming that stupid home inspector who didn’t know anything, or that jerk of listing agent who had it out for you, or that miserable parent of your buyer-client that got in your way, or your client’s idiot boyfriend who was a market bear – find a way to put the blame on yourself, and you’ll learn what you could have done differently.
I would encourage anybody with a real estate disappointment, whether it’s the buyers at Museum Flts, or anybody else out there, to try using the same mantra.
Who knows, you might learn something…