COVID and the housing market

backmarkerducati said:
Another co-worker the unit was fine but the original building plans had 20 foot ceilings in the lobby and a waterfall, 10 foot and no waterfall was built (same thing zoning, building height...). He got them to upgrade the appliances and coutertops...
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Realistically, everyone wants to close with the original buyer except in exceptional circumstances. Upgrades are so obscenely priced that it is an easy way for the builder to ease pain. 100K in upgrades may cost them 10K but they get to keep the signed contract and closing date. When construction loans are running at close to 20%, they want incoming money asap.
 
GreyGhost said:
Realistically, everyone wants to close with the original buyer except in exceptional circumstances. Upgrades are so obscenely priced that it is an easy way for the builder to ease pain. 100K in upgrades may cost them 10K but they get to keep the signed contract and closing date. When construction loans are running at close to 20%, they want incoming money asap.
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And that might be a possible outcome for the people in the article. Hail Mary and maybe the developer drops the contract price enough to let them close to just get it off the books and to move on. Unless the developer is cash strapped I doubt it but as I said, they may look stupid, unless it works...
 
backmarkerducati said:
And that might be a possible outcome for the people in the article. Hail Mary and maybe the developer drops the contract price enough to let them close to just get it off the books and to move on. Unless the developer is cash strapped I doubt it but as I said, they may look stupid, unless it works...
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Depending on how many houses are going to fail to close, there may be a path. I haven't heard of it happening before but if a ton were failing to close, builder (or an associated entity) could offer a private second mortgage to cover the gap so the buyer can close. Set something like no payments for five years and then a painful balloon (something like 10% yearly so in five years you would owe 1.61 times original loan). Buyer can refinance or sell at that point to satisfy the balloon. Hopefully they are no longer underwater by then. That gets builder substantial cash now and another slug in five (or less) years.
 
backmarkerducati said:
There is a reason the contract price is the price. If this was 5 years ago (upward market) the appraised price is likely much higher than the contract price and they would scream bloody murder if the developer could raise the price at closing to take a win on increased prices. In this case the market dropped and the contract is now higher than the appraised, so obviously why should the developer take the loss now if they can't take the win in an up market.

Now we have seen unscrupulousness on both sides in other cases. Developers that let the contracts time out--automatically breaking them (give back the deposits with tiny interest) so they can resell at the much higher prices. Developers adding extra fees to try and get some more money out of it. We have also seen entire developments go up in flames that were underwater (seller or buyers???).

In this case, the people are likely desperate as the banks will not finance based on sold/contract price if the now appraised price puts them under water. At the same time maybe (likely wrongfully) they think the developer sold them short by not building the value of house they bought. That last part is always possible but unlikely (I do know of some cases). Maybe they hope the developer might have pitty on them and lower the price so they can close, unlikely as the developer can sell to someone else for the appraised price and keep their down payments (and maybe go after them for the delta) but if the developer is cash flow short--maybe? But who knows... in the end they are throwing out some Hail Mary's before just walking away from their deposits or maybe more. I would risk looking stupid to some randoms on the interwebs if it saved me 400K...
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The buyer has to ask more questions and get answers in writing. If a room is 2 inches smaller than on the plans you don't get to renege on the deal. What are the +/- percentages. How important is that too you.

If your family heirlooms dictate tight specific dimensions they can be accommodated at a price.

This is a million dollar deal. Very little is guaranteed and the contract protects the contractor.
 
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Well...last decision of the year from BoC today....I'm expecting 0.25% but am reading a bunch about another 0.5%, and some outliers wishing / dreaming / praying for a 0.75% cut.
 
mimico_polak said:
Explain to me like I’m 5…
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The people looking to lend money don't see as high of a return currently, so there's less resources (bonds) in the pool. Interest rates will go up to entice people to come back to lending.
 
Evoex said:
The people looking to lend money don't see as high of a return currently, so there's less resources (bonds) in the pool. Interest rates will go up to entice people to come back to lending.
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So you're expecting BoC to crank up the rates again? Or the banks to keep their rates high?
 
crankcall said:
My builder aquaintance here in Oakville says buying a knockdown vs empty lot can save well over a hundred grand with hookups and fees . The flattening part is cheap .


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Dev charges are a killer. I looked at rezoning my urban property. Fees and charges not including building permits to the city of Markham and York Region:

1 semi or 2 single family homes; $556,000

5 townhouses: $744,000 (plus $50k to setup condo corp)

8 unit Rental apartmentt: $932,000

When I moved here in 2000, dev fees were $zero.
 
GreyGhost said:
Bonds control fixed rates. Bond rates and BOC rate decisions are not always correlated. That is partly why delta between variable and fixed moves around.
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Variable rate mortgages rise and fall predictably with BOC rates.

Fixed rates bake in a few more economic variables and don’t react in step with BOC changes. Bond yields, inflation rates, global economic factors and events, strength of domestic economy, but mostly its competition between banks that impact rates. I’d look at historical data on BOC and fixed rates at charter banks - I expect them to be similar 3-4 mos after a BOC rate adjustment.
 
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