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Ethical violation or just incompetence?

Blog by Shaun Kimmins | June 8th, 2010

Relativity applies to physics, not ethics - Albert Einstein


Had Albert been a Vancouver Realtor, he might also have included real estate sales in downtown Vancouver in his list of things unaffected by petty annoyances such as ethics. How can that be? We are all supposed to work by a strict code of ethics and are required to act in the best interest of our clients - always. I guess the promise of multi-milliion $ buyer's agent commissions blinds some.

Poor, trusting buyers!

A group of buyers, new to Canada from the middle east, likely seeking a safe and sound real estate investment were sold on the certainty of $million dollar profits at The Fairmont in Coal Harbour at a time when it was clear to everyone I know that the market had run its course and was pointed down. We're not talking about Bob Rennie who had a responsibility to spin these condos as the best thing since sliced bread for his client, the developer. We are talking about an ordinary realtor working on behalf of trusting buyers. Not only were they corralled into these purchases, many were non-residents with no Canadian income who after entering into an unconditional contract to complete their purchases, didn't qualify for bank financing and were ultimately forced to seek secondary financing - paying exorbitent up-front fees and ghastly monthly interest costs. I know of one such buyer who paid $100,000 up front and is paying $25,000 per month in monthly financing costs. Ouch!

Where's their realtor in all this? Look no further than one of the lowest-priced listings in the same building. Hmmmmm. It started with a strong recommendation to buy in the building and ends with a fire sale at potentially huge losses to the clients. Is this incompetence or fraud? Difficult to say but it is sure going to sting for the people caught in this mess. In the particular case I am thinking of, the sellers are looking at a loss of $500,000 at least and possibly $1,000,000 given the price cascade that has begun at The Fairmont. What price cascade you ask? Unit #2409 just reduced its list price to $4,300,000. Still a hefty price-tag but when you do the math, it's starting to look more attractive from a dollar-per-square foot perspective.

Has he been drinking?

Here's another example of questionable ethics: One of the city's loudest realtors, in terms of his own self-promotion anyway, recently listed a west-facing condo at The Fairmont. When he listed this property it had an optimistic value of $4.5M. He listed it for $8,000,000! Wow, I hope he's a really good salesman! Given the lastest price reduction of #2409, this property would be lucky to fetch $4,000,000 so it's only $4,000,000 overpriced and really,  what's $4,000,000 among friends?

My Point

1. If something looks too good to be true...........

2. Get independent investment advice prior to purchasing real estate as an investment and don't enter into a multi-million $ condo purchase with the intention of "flipping" it unless you can afford to carry the worst-case scenario. Employ the high water mark test before buying.

3. If you are listing a condo or other property, and you actually want to sell it, be sure the list price is in relation to recently sold similar properties. Hallucinations don't count as comparables. Ensure your listing realtor can justify the recommended list price and again, hallucinations don't count as comparables.

For a dose of the truth, contact me any time. I look forward to speaking with you.