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Re-release: Has BC's booming real estate market been infected by fraud?
  Mar 03, 2006

Methodology- A random sample of 250 ‘qualified’ respondents in the lower mainland of British Columbia between February 3-8, 2006. This survey features a margin of error of 4.75%, 18 times out of 20, @96% competency.

Question #1
How did you choose your real estate agent?
Advertising    29 %
word of mouth    54 %
Other: including community locations etc.-    17 %
Question #2
In your opinion was the listing price of your real estate or property for sale higher, lower or about right of what you believed its fair market value to be?
Higher    08 %
Lower    34 %
About right    58 %
Question #3
Was the final sale price of your real estate or property-higher, lower, or the same as the listing price?
Higher    02 %
Lower    74 %
The same    24 %
Question #4
In your opinion did your real estate agent give you 100% of his or her effort to obtain the top price from the sale of your property or real estate?
Yes    46 %
No    41 %
Undecided    13 %
Question #5
All things considered, how satisfied were you with your real estate agent’s performance?
Very Satisfied    17 %
Satisfied    42 %
Not Satisfied    32 %
Very Dissatisfied    09 %
Commentary
Slightly less than one-third of respondents selected their real agent as a response to advertising, more than one-half from word of mouth and just fewer than one out of five from other methods such as meeting the agent in the community. Those sellers who selected their real estate agent from advertising were not satisfied or very dissatisfied (55%) while those who selected their agent from ‘other’ in the community were very satisfied (82%).
It would appear from this ROBBINS Poll that most respondents believed they should have listed for a higher price or believed they listed for the right price. However, according to respondents in this poll the majority of real estate is selling for less than or the same as the listing price. (It will be interesting to see what these numbers are at a later date).
What is also very interesting is that even though more than one half of decided respondents believe their real estate agent gave 100% toward selling their property, less than one out of five were Very Satisfied. This Poll suggests that people who sell their property with a real estate agent they know well will be more satisfied than those who sell their property with an agent they met through advertising.
This Poll does not consider the implications of ‘false respondent loyalty’ to one classification of realtor over another. It does serve well to measure the distinction between how a potential realtor is found, and the likelihood of satisfaction, which apparently would follow.
There are some disturbing questions surrounding the integrity of real estate sales in the lower mainland of British Columbia, which have prompted further investigation by ROBBINS. There appears to be a practice, particularly amongst better-known firms of most favoured member preferential bids (MFMPB).
What happens here is the listing agent for the seller only advances offers on a property that he or she chooses to advance, often purposefully ignoring potentially better offers from other lesser known members of sales reps, a kind of an insider quid pro quo amongst real estate brokers to the economic detriment of their clients potentially.
For instance, let’s say you are selling your property and your listing agent receives two offers. One is from an ‘outsider’ with an independent or lesser-known real estate firm, and the other from an associate of the listing agent’s office or other well-known member broker. Let’s say the ‘outsiders’ offer (all conditions being relatively equal) is $10,000 higher than the offer from the friend of your listing agent.
The listing agent purposefully neglects to advance the independent’s offer and only advance their ‘associates’ offer. The independent’s real estate agent soon realizes that the property sold for less than their client was offering, but won’t say anything lest he or she be ‘blackballed’ from the business.
In a more simple scenario the real estate agent lists the property, receives one higher offer from a third party, and brings in their own client with a lower offer, but only advances the lower offer in order to ‘double end’ the commissions. In either scenario the consumer (the seller), the independent and his or her client are all getting the shaft from this crooked business.
There is a lot of evidence to suggest improper and likely illegal sales and promotional activities are going on throughout the lower mainland in real estate. The real estate scam works like this. A real estate agent in order to induce a client to list their property with them puts out advertising with an entire litany of houses they have allegedly JUST SOLD. Well, upon further investigation it turns out these JUST SOLD homes were properties which that agent had sold well over a year or more ago. The deceptive realtor simply recycles the old sales and represents them as current sales to make look more successful to a prospective client.
This is breaking all the laws in the real estate book, but do you think anyone is doing anything about it? Advertisers don’t check to see what information is being placed in the advertisement, they will print anything for the realtor so long as the check cashes. Where is church lady Val on this one?
One more real estate ‘scam’ runs rampant throughout the lower mainland. Ever see those signs that a condominium is going up and you can get yours cheaper ‘pre-purchased’? Maybe you want to buy an existing condominium because you and your family need a place to live right now.
Friends and associates of that off shore consortium buy up through bonding agents (on credit so they don’t use their own money) 15-20 of the condos before they are built. Let’s say these rich dudes pay on average $150,000 per condo including carrying costs and other costs with the bonding agent. After the development is completed, this offshore group sells each of these condos for $250,000 each, to you and your friends in the community. After doing this on several buildings millions of dollars of profits are made for both the developer of the condominium and the offshore investors. The bigger real estate brokerage firms broker many of these mass buys by offshore investment groups.
What happens on the 10th or 11th deal for the offshore investment goes sour in declining markets? Well, they sell off the properties of course and take their residuals losses as tax write-offs from the gains made previously. It doesn’t matter to them that the market starts to soften or slide and you and your friends from the community buy at $250,000 and end up with a property with a market value of $200,000 or less. (Nice country Canada). This situation impacts on so-called free markets. A bona fide free market is pluralistic, with buyers and sellers operating with approximately the same information. When ‘organized markets within markets’ impact markets than the theory of a free market evaporates. The more these pseudo markets change from ‘buyers’ to ‘sellers’ markets the more problems arise for those true market buyers and sellers who are not participating on speculation or for extraordinary gains.
Port Moody in BC is a good example of this. One firm, which is actually owned by offshore interests but is considered by most to be owned by a BC interest, is driving much of the condo development. The offshore interests also buy in at the pre development stage, and the ‘other’ offshore interests, who own the development company also holds back on the release ‘for sale’ many of the units in the development for sale at a later date. This ‘organized’ market creates false demand and inflates sales prices. When demand is high at lower levels this impacts on demand through mid and higher prices. Smaller homes in Heritage Mountain are selling for $600,000 to $700,000 for example, based in part on the false market. When the average mortgage is $300,000 this means that when the bottom comes out of the false market, or other influences such as interest rate increases begin to quash demand and increase supply these homes could according to experts lose 25% or more of their value virtually overnight. Similarly the prices being paid in Anmore for real estate would make P.T. Barnum blush. Said one realtor, 'those people who bought in Anmore got taken to the cleaners…its awful.'
(Lastly, what happens when one of these real estate groups purchases a Canadian movie production facility through an offshore group simply to take advantage of ‘movie tax credits’ specifically designed to assist with the difference in Canadian and (primarily) U.S. currencies? What happens when the offshore group involved donates to a major political party, which designed the tax break in the first place? Isn’t the BC taxpayer/consumer getting gouged again)? (Nice country Canada).
In Coquitlam unsuspecting homebuyers are confronted with the potential of purchasing a home equipped with a multi-thousand dollar time bomb. Big “O” Pipe installed in homes in the 1990’s (and no longer used) is collapsing or breaking up like Czechoslovakian glass. This is causing leaks in these homes that often cost tens of thousand of dollars to repair. The Mayor of Coquitlam at the time these pipes were permitted, Lou Sekora acknowledged the problem recently and said the city “didn’t know” the pipe was faulty at the time. Former Coquitlam Mayor Jon Kingsbury called the leaky Big “O” pipe situation “potentially bigger than the leaky condo crisis.” A manufacturer of pipe whose business is in Coquitlam told ROBBINS that ‘even the pipe permitted now in municipalities can’t stand up to its promise of lifetime’. Current Mayor Maxine Wilson has indicated that ‘it is a liability issue’, but told ROBBINS “she is only staying on as a transition Mayor for one term only.”
Coquitlam city councillor Louella Hollington indicated last week that she was unawares there was a problem but would bring it up with council as soon as possible.
With some unsuspecting purchasers of homes in Coquitlam’s upscale Westwood Plateau and Westwood Summit area being confronted with huge bills after the purchase of these homes, it is likely that lawsuits against all members of City Council personally will be far behind if they do not address the problem poste haste?
Politicians often hope for lawsuits so they can hide behind the ‘its before the courts rationale’. What happens when the elected officials and employees are included in these lawsuits as defendants and have to pay their own legal fees, pay for damages personally or have their credit destroyed through litigation whether they are right or wrong? Will agency laws protect elected officials and city staff who continue to hide behind willful blindness? What might this mean for new Coquitlam homes in the Burke Mountain area of the city? Will advertisers be held responsible when realtors employing fraudulent solicitation tactics are also involved in the sale of Big “O” bomb homes (BOBH)?
What about the new rainfalls impact on various condo and house developments set on hillsides in the area? There are reports that one particular condo site in Coquitlam may be set to slide down the hill. With the difficulties in Delta and North Vancouver over excessive rainfall and slides, will current Coquitlam Mayor Maxine Wilson and her associates on council see fit to solve the problem, or maintain the position that city dollars are best spent on CUPE jobs than the taxpayer’s water problems?
Addition-real estate fraud alert (March 3, 2006). Whistleblowers have been contacting ROBBINS fast and furious with horror story after horror story about real estate fraud. Here's the latest. When you go to purchase a condominium, the seller is required by law to provide you with the minutes from strata council.
The problem is this: The strata council's minutes are only as accurate as the strata council is honest. If the strata council does not include all of the information in the minutes including a total and fair depiction of costs and repairs, than the buyer might never know the whole truth and nothing but the truth associated with the problems or potential problems with the condo complex.
One recent whistleblower told ROBBINS that at a strata council meeting he and his wife attended recently, the council refused to accept information regarding significant repairs in their building. ROBBINS identified at least 15 condos up for sale in the building.
Is it possible that the council members might have a vested interest in giving a false impression of the condition of the complex? No matter how many laws the government says are there to protect you, they are meaningless if the people who at various stages in the process are liars or cheaters. What good is the Charter of Rights if no one can afford to get to the Supreme Court in the first place?
An investment in real estate is a significant undertaking for people. The more we investigate BC's real estate market the more buying real estate looks like walking through a minefield. With condominiums, are advice is this: Buy new, or make sure you have someone on the inside who lives in the building and has real knowledge of the building. Otherwise, watch out!
$32.5 million claim settlement in British Columbia brings renewed attention
Attention: Assignment Editor, Business/Financial Editor, News Editor
VANCOUVER, BRITISH COLUMBIA--(CCN Matthews - Feb. 20, 2006) - Real estate industry insiders now peg the average case of real estate fraud at $300,000, meaning years of personal and financial repercussions for those who fall victim.
Wayne Proctor, Director Pacific Region, First Canadian Title, said the growing incidence of real estate fraud over the past five years has resulted in immeasurable damage to people's finances and personal lives. The company, Canada's leading title insurer, estimates the average case of real estate fraud to be in the range of $300,000. In comparison, the RCMP estimates the average credit card fraud case in Canada to average around $1,200.
According to the Quebec Association of Real Estate Agents and Brokers, mortgage fraud amounts to an estimated $1.5 billion a year, and even though cities like Vancouver, Toronto and Edmonton and are hotbeds for this criminal activity, all Canadian homeowners are at risk. In 2000 real estate title fraud claims accounted for only 6 per cent of total dollars paid in claims at First Canadian Title. By 2005, that number reached 33 per cent.
A basic real estate title fraud scam can be simple: a fraudster targets a house, forges a transfer deed, registers in his own name, forges a discharge of the existing mortgage and borrows against the clear title. And unlike credit card fraud, where banks allow victims to suspend payment until an investigation takes place, there is no protection when a mortgage is fraudulently charged against a property. Title insurance is one way to buy peace of mind.
"The onus is on the homeowner to prove the crime and it can be very costly - financially and emotionally - to restore your title," said Proctor. "For a one-time premium, title insurance is one effective and inexpensive way to ensure your property is protected. It covers all legal expenses related to restoring a title and is available to existing home owners long after they have purchased their properties."
The surge in real estate title fraud and identity theft cases in recent years has prompted First Canadian Title to embark on an awareness campaign to educate consumers as well as the legal, law enforcement and lending communities. The result has been a renewed sense of industry collaboration and increased awareness among consumers. Also, the need for increased diligence and implementing strict prevention measures when it comes to reviewing real estate transactions has not been lost on First Canadian Title.
"Last year alone, our underwriting department prevented approximately $19 million in what we believe to be fraud claims," said Leslie. "We're simply becoming better at recognizing the tell-tale signs when something is not right."
According to Proctor, there are several indicators that serve as warning signs to real estate professionals for potentially fraudulent activity during a purchase or refinance transaction. These include:
- Inquiries and established credit are inconsistent with age, income or profession- Instructions that funds be paid to an unrelated third party individual- Counter cheque presented for deposit or identification instead of a personalized cheque- Employment information provided cannot be verified- Client(s) will only provide a cellular number for contact purposes
About First Canadian TitleFirst Canadian Title is Canada's leading provider of title insurance for residential and commercial real estate transactions and other related products and services. Established in 1991, First Canadian Title pioneered the concept of title insurance in Canada, and now issue hundreds of thousands of new policies each year. As a member of the First American Family of Companies, First Canadian Title's financial strength, stability and commitment to service excellence are second to none in the industry. Based in Oakville, Ontario, First Canadian Title employs more than 1,000 people from coast to coast. Customers include more than 11,000 lawyers and notaries nationwide, every major Canadian chartered bank, other lending institutions, real estate professionals, mortgage brokers, and builders. For more information about First Canadian Title, please visit www.firstcanadiantitle.com.
/For further information: Alison BagleyPilot PMR for First Canadian Title416-462-0199 ext. 24alison@pilotpmr.com/

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