A man from Vaughan recounts the heartbreaking experience of losing a substantial amount of money due to a failed pre-construction condo deal. This unfortunate situation is a growing concern as condo prices drop and property appraisals fall short at closing.
Victor shared his distress, stating, “It’s devastating to invest your life savings and see it vanish in an instant.”
In 2020, Victor purchased a two-bedroom, three-bathroom condo in Vaughan, only to face a significant financial setback. Despite paying a 20% deposit of around $675,000 to the builder, the final appraisal at closing valued the property at $590,000, leaving him with a potential additional liability of up to $100,000.
This scenario, according to industry experts, mirrors a broader trend in the market. Many buyers of pre-construction condos from previous years are now grappling with lower-than-expected appraisals during closing, leaving them liable for the price difference.
Patrick D’Aloisio, a Vaughan-based lawyer, highlighted the predicament faced by purchasers like Victor, emphasizing the importance of securing mortgages correctly to avoid such financial pitfalls.
When confronted with this valuation gap, buyers typically have limited options: proceed with the purchase, transfer the contract to a new buyer, or risk legal consequences by defaulting on the agreement.
D’Aloisio explained, “Assignments need to be priced conservatively to cover high closing costs, often aligning with or even undercutting resale values.”
Social media platforms are witnessing a surge in reassignment listings as sellers seek alternative buyers to take over their contracts.
Despite exploring reassignment, Victor’s plea to transfer his unit was rejected by the builder, leading to the termination of his agreement and loss of his deposit.
Expressing his frustration, Victor lamented, “I’ve lost everything, and now they’re threatening to recoup their losses by selling it at the current market value.”
To safeguard against such risks, experts advise potential condo buyers to consult with mortgage brokers for thorough financial protection.
D’Aloisio emphasized, “Ensure your mortgage approval is solid and enduring to withstand market fluctuations.”
As the real estate landscape evolves, experts caution that inadequate long-term financing arrangements could expose more buyers to costly repercussions.