Quote:
Originally Posted by seven thirty
Coldrsx> dead on or so it seems at 12.5%. incredible.
Innersoul>if you don't mind me asking, how have you determined that 20 of your 160 purchasers will walk? Is that simply a hunch or have these purchasers communicated that to you? That's a scary reality however I would think it's would be a rare occasion when the builder/developer would come chase the walking purchaser for further damages above and beyond their initial deposit. agree?
Clearly, I need to do some digging as lubicon stated>there will never come a time when builders/developers will advertise this information. I do however wonder if that 5-15% cancellation is accurate as of today? It's a problem that most developers fear getting into it and seems to only be getting bigger with time (at least for the next 18-24 months) They didn't sign up to be in the resale game so one would only believe their objective would be to avoid taking back units and associated carrying costs. There doesn't seem to be anything developers/builders can do but sit tight and hope for the best if they have upcoming possessions. Even with rental possibilities, still too much uncertainty out there...
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Yeah we are in communication with purchasers prior to their possessions. Thus, we have a fairly good tab on how closings are progressing or will progress. It is a scary reality and as it has been mentioned situations change during the course of construction. The project I am involved in has only taken two years. Essentially, those 20 can be divided into two categories:
1) We just don't have any interest in closing any more (these are largely speculators or "weekend" investors).
2) Those who can't get financing (I will explain below - these purchasers are fairly easy to resolve as we have our own brokers who can likely approve them. However, many in this case end up falling into the category above.
What we are finding along with a number of other sites around the city is the appraisers are not appraising the suites at what they purchased at and in many cases significantly lower. Thus CMHC won't insure the loan and that becomes a big issue. The main problem, that blows my mind, is that appraisers don't take into account the same factors that we do when pricing a suite. For example our courtyard facing suites are higher in price than exterior ones. A fourth floor suite is higher in price than second floor suite. The appraisers only look at the layout an upgrades, sometimes they even slip on the latter. This is a HUGE problem.
As for builders chasing the purchasers for further damages it isn't as far off as you think. Generally, in the industry what happens is a suite that isn't closed on is passed to a realtor who has the ability to sell at a lowered price. The difference between the price paid for by the initial purchaser (the walker) and what the realtor sells for can be charged to the initial purchaser. In most cases the threat is what gets people to close.
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