- First Mortgage
- by admin
- 03 May
Dangers of the GTA Real Estate Market Cooling Off.
The Greater Toronto Area (GTA) has witnessed the “cooling off” of the real estate market compared to the historic highs of a couple years ago. For example, the Toronto Star had a recent article which extrapolated data from the Toronto Real Estate Board which notes that from March 2017 to March 2018, home sales have decreased by 40%. This decrease can be attributed to a variety of issues such as increasing interest rates, “Stress Test” employed by the banks or speculators expecting prices to drop even further so they are waiting. Whatever the cause, this decrease in real estate activity has put purchasers is unfamiliar territory.
Purchaser who have signed an Agreement of Purchase and Sale to buy a property with the hope of selling their property to fund the acquisition are seeing purchasers of their own sale property backing out of their transaction in record numbers. This phenomenon can be attributed to a couple factors such as bank financing backing out of the transaction because property values have decreased and the purchaser does not have the difference of the funds to contribute or buyers remorse whereby they are paying significantly more than market value to acquire a property.
Whatever the cause, this is causing significant issues within the realm of real estate transactions. If a purchaser cannot close their sale, then they will not have the funds necessary to close their purchase transaction. If they cannot close their purchase transaction the purchaser will likely lose their deposit and be sued for default under the Agreement of Purchase and Sale.
To avoid such a nightmare scenario, purchasers in the above noted situations have turned to Mortgage Assist to obtain a private first mortgage, a private second mortgage or a bridge loan. This will enable the purchaser to close is transaction if the sale transaction does not proceed on time and avoids the lose of the deposit and a possible lawsuit.