Iced

He’s a blog dog, a vice-president of the NHL and works in Manhattan. Life’s grand. It would be better if he didn’t have to vex over his sister.

“I’m sure you get a million of these, but it’s the typical story I read about on your blog all the time,” he says, “and this time it’s about my sister in the GTA.”

She’s forty, in sales, and five years ago had the bright idea (like all of us during the pandemic) of buying a pre-con condo. Eight hundred thousand. The building was to be ready in two years, but that didn’t happen (of course). In the meantime, life rolled on. She married, got a dog, tired of renting and they bought a townhouse in the east end.

“Life is good until the long delayed condo comes knocking 5 years later,” Mr. Puck says, “and the bank says they won’t lend her the money – and by the way, the condo is being appraised way below your contract price from 5 years ago. They’re showing her below water even after counting her pre-con deposit.

Is there anyone you know she can talk to about this? The bank is saying she needs to find a co-signer – not much luck with parents and in-laws who are (guess what) in their 70s/80s and also over-leveraged on their own slices of the outer GTA. I live in the lovely USA (11th Province?) so they won’t look at my assets either.

I think what she really needs is a good lawyer/adviser to help her through all of this – I’m happy to cover their fees too if it means she can get out of this mess. She was told (not sure by who) that if she doesn’t close on the condo, the builder could also come after the townhouse as well. No idea how accurate that is but she needs to talk to someone who knows about this ASAP.

Yes, a mess. The condo market in Toronto, like that in Calgary and Vancouver, is a swamp. Resale listings at record levels. Over 16,000 unsold new apartments. Developers burning the furniture to stay alive (borrowing against their own units). Construction halted. Prices fading. Rents falling. The assignment market exploding. Months and months and months of inventory.

What to do?

First, sis must understand she has a contractual obligation to close the deal. It’s legal. It’s not going away. She can’t just walk off, kiss her deposit adios and get on with life. If she does not close, the developer will commence an action against her and the ultimate costs could be substantial.

For example, if the unit is taken back by the builder and ultimately sells for $650,000 sis will be on the hook for the difference between her contracted price and the sale price. That’s $150,000, plus legal fees and additional closing expense, which might include many months of carrying costs as the developer waits for a new buyer. (Additionally, she lost the use of her deposit for five long years.)

So, she has to close or face the certainty of a suit – which could even impact her employment status. But now the bank says it won’t pony up the funds to finance closing, which is why her wealthy American brother is writing to a pathetic Canadian financial blog.

Well, there’s no path out of this quagmire that does not involve her losing money. Like, a lot of it. Failure to close will delay the day she has to pay (until a new buyer is found) but end up costing the most. Bad choice. Finding an alternative, subprime lender who will provide financing, rather than the bank, is a viable (but costly) option. The mortgage rate could range between 7% and 12% – or up to three times what the Big Six charge. Ouch.

Of course, she could talk the oldies into taking a reverse mortgage on their house to give her the money to close on a condo unit she can’t likely rent for enough, won’t live in, will have a negative cash flow and possibly blow up the family while cruelly stealing parental equity. Not so hot. She could try for a second mortgage on her new townhouse, but it’s doubtful that would yield enough for closing. No go.

There’s always the assignment market, assuming she has that clause in her condo agreement. Then she can try to offload the unit at a discounted price to some other schmuck, hopefully on the same closing day. She’ll still need to bring a fat cheque to cover the loss. By the way, there are currently just over 5,000 condo assignments on the market in the GTA. Good luck with that.

Of course, sis can always contact the developer, cry a lot, drop to her knees and beg. But, face it, nobody has any sympathy for a Covid-era condo specuvestor, especially within the company that financed the building based on her contractual commitment.

Nope, sis needs a lawyer. He can tell her all these things and bill her for doing so. Her existing matrimonial home is not at risk, even if she decides on personal bankruptcy to escape payment. But the personal, reputational, professional and financial costs of that move are immense. Plus, it’s an ethical failure.

Face it, bro. You gotta send money. But she knew that.

About the picture: “Thought I’d submit a photo of our recently departed “Zeus,” a rescue we got from the mean streets of Taber, Alberta, nearly 18 years ago,” writes Bradley. “He might disagree, but Zeus was super dog like, and followed us around, chatted to us, fetched, and regularly served as a pet visitor to people in a local nursing home – bringing lots of joy and cuddles to elderly residents there. Even confused and demented people would light up, smile and tell Zeus they loved him when he would sit purring on their laps.  This is him hanging out and sunning on our deck, one of his favorite places.  We’ll miss our handsome boy terribly, but are so lucky to have had him in our lives for so long.  Hope you have space for him on your blog.  Thanks Garth.”

To be in touch or send a picture of yor beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2025/07/04/iced/