# Advice 2 homes in GTA, need to get rid of one



## alexshim (Oct 19, 2018)

Hi, I am new to this forum, but I am looking for some advice.

I want to first say that I already know that what my mom did (see below) is a huge mistake, I am just seeking for some possible solutions.

I will start by writing my story first so that there is some understanding of how things unfolded.

I moved to the USA 12 years ago, my parents stayed in the Toronto area. Had a nice home in Vaughan. 

My dad passed away 3 years ago. My mom was left alone and unfortunately due to my job and personal life I could not move there and help her.

Anyways, for some reason, and I can't explain my mom was convinced by someone to buy 2 new construction homes, one in King and on in Vaughan. 

I found out, I asked her to give one up but she kept saying market will go up and I can make money, etc., etc. 

Anyways, 1.5 years later, my mom is the proud owner of 2 expensive homes. 

Obviously the market is horrible now. She is carrying 2 mortgages. She has been trying to sell one of them, but no good luck.

I guess, I am trying to see what options she has. In US people can give up the house to the bank , loose their deposit, etc. but I think in Ontario you can't do that so easily. 

Renting one of an option but of course it wont even cover the monthly mortgage. 

I am not even sure what to do, she needs to get rid of one of the houses. It seems this market is not going to pick up anytime soon.

I am thinking personal bankruptcy but then they will take away both houses. 

If anyone has a similar problem, what are you guys doing?


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## moderator2 (Sep 20, 2017)

This post was not visible as it was held for moderation. Bumping it now so it can be seen at the top of the forum.


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## OnlyMyOpinion (Sep 1, 2013)

Why is it obvious that the market is horrible now? I know GTA is not as robust recently as in the past few years, but I'd be surprised if new homes bought nearly 2 years ago are a losing proposition unless you are trying to sell for some ungainly profit?
This is her problem, so it is comendable of you to try to help out, but it sounds like she may not be too easy to convince to do the right thing - which I think is to sell both places based on your comments.
She should be a long way from walking or bankrupcy unless there is more to the story.
Get a realtor to appraise and do a comparative market analysis, compare with the outstanding mortgage(s), then you'll know where you stand.


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## Longtimeago (Aug 8, 2018)

Definitely some relevant information missing. 

Presumably, she started out living in a home and still does. So what happened to that third home? Did she sell it and go rent somewhere while the 2 new homes were being built? Is she living in one of the 2 new homes now? When you say she was convinced to buy 'two new construction homes, 2 years ago', were they up and move in ready 2 years ago or has she just closed on them now? The picture really isn't clear.

I also agree with OnlyMyOpinion regarding the current market. There is no reason why she shouldn't be able to sell one or both at a profit from a 2 year old purchase price. The only reason why it might be a problem is if the location really sucks (next door to an abattoir) or her asking price is simply not in line with the market price. The most common reason for a house not selling is that the seller wants more than the market says the house is worth. Most other reasons for not selling like outdated interior etc. are obviously not a factor in this case. Tell her to follow OMO's advice and get a reputable realtor to give her a market appraisal and forget about big profits some other realtor who sold her the house in the first place, tells her she can get.


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## Pluto (Sep 12, 2013)

I'm not surprised she is in trouble as apparently she bought new builds which are typically about 25% higher priced over the same thing used. I saw this in TO around 1990 when somone I know bought a new build as a rental investment. 25% premium over used. market tanked. Recession arrived. Tenants vanished. New Tenants could not be found willing to pay same as old tenants. Investors sold for some 40% loss - 25% premium evaporated as soon as they bought, and the general market fell 20%. 

they were caught up in the euphoria and fear of missing out. Sounds like the OP's mother got hung up on the same thing. No sure way to fix this, all one can do is try to reduce the damage. Sales people really hooked her.


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## Mortgage u/w (Feb 6, 2014)

If she speculated and was able to afford 2 new builds, why can she no longer afford them? You seem to put blame on the market but a payment is a payment regardless the economy.

Without understanding the full story, I don't think you will get the advice you are seeking.

If your mom is in financial distress, then she should sell everything. If not, you hold on to the investment and assume the risks.


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## alexshim (Oct 19, 2018)

*Re*

Thanks, for the replies. 

In terms of the missing information. She can potentially afford it but it stresses her out to have to pay a huge mortgage.

She did have a third house, which sold in 2017, actually not too terribly. 

I think it makes sense to try and hold and keep it on market. I am just worried the values will tank further with the increasing interest rates., etc. 

What would happen lets say if the value of the home becomes less then the mortgage?


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## OnlyMyOpinion (Sep 1, 2013)

That explains a lot (not).

This seems at odds: _"it makes sense to try and hold and keep it on market"_. You either continue to hold onto the house(s) or you list them on the market don't you?

If you continue to own the houses and pay the mortgage as required, nothing happens. If you sell the houses and discharge the mortgage you will have to pay off the balance owing - whether you net that much from the sale or have to draw upon other sources.


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## alexshim (Oct 19, 2018)

OnlyMyOpinion said:


> That explains a lot (not).
> 
> This seems at odds: _"it makes sense to try and hold and keep it on market"_. You either continue to hold onto the house(s) or you list them on the market don't you?
> 
> If you continue to own the houses and pay the mortgage as required, nothing happens. If you sell the houses and discharge the mortgage you will have to pay off the balance owing - whether you net that much from the sale or have to draw upon other sources.


Sorry what I meant was to hold it and not lower the price, rather then drastically lowering the price, and hoping the market comes back to life. See if anyone would want to buy. 
Ideally my mom wants to sell the King one but the market there is not as easy as Vaughan, at leas that is what i am told.

Can you write investment loss from your personal taxes in Canada ?


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## OnlyMyOpinion (Sep 1, 2013)

Selling a secondary house (not your principal residence) would result in either a capital gain or a capital loss in the year of sale, based on the sale minus purchase price of the house. You can use only use losses to offset gains (gains might come from the sale of any number of types of capital property, including shares). 
You can't use losses to reduce other types of income. You can however carry losses forward into future years and use them to offset capital gains (if you have them) in the future.


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## Pluto (Sep 12, 2013)

I doubt the market is going to come back to life anytime soon. There are more rate hikes promised, so it seems it will only get worse. If she can hold them for, say, 10 years, it should be OK in terms of the market value of the houses. But in the meantime you say the rent does not cover the mortgage. This is bad, and the answer is plain. The builder and the tenants are the winners here.


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## Mortgage u/w (Feb 6, 2014)

Looks like your mom got influenced by the RE craze when everything was on the up and she wanted to cash in. Well, like any speculative investment, there are risks involved which need to be assumed. When making such investment decisions, you need to have an exit strategy. Buy low sell high is the obvious strategy. But what is her strategy for the opposite scenario? If she doesn’t have one, it was a poorly executed investment decision. 
The choices are simply. Hang on or jump out. No one knows what the future holds.


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## alexshim (Oct 19, 2018)

Mortgage u/w said:


> Looks like your mom got influenced by the RE craze when everything was on the up and she wanted to cash in. Well, like any speculative investment, there are risks involved which need to be assumed. When making such investment decisions, you need to have an exit strategy. Buy low sell high is the obvious strategy. But what is her strategy for the opposite scenario? If she doesn’t have one, it was a poorly executed investment decision.
> The choices are simply. Hang on or jump out. No one knows what the future holds.


Yes, she did. I wish she listened to me when I said not to buy. Now this is irrelevant. She did not have an exit strategy because she was sure she will be able to re-sell... not the case.
Of course this was poorly executed investment decision.

What I am trying to figure out now is how to salvage. And it may be impossible, but was looking for ideas.

1. Hold house for 10 years is not an option... maybe a few years she can but not 10 years.
2. Try to sell at a loss and write off the loss via taxes ? is what her accountant offered.

Question is, should she wait for spring or just keep lowering the price until someone buys.... a lot of her realtors are telling her to wait it out... no one has a crystal ball so hard to say, but by what I am seeing, market will be worse not better in the near future...


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## Earl (Apr 5, 2016)

Is the house priced comparatively to other houses in the neighborhood? Are other houses in the neighborhood selling? It's a tough situation to be in with no easy way out.


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## Just a Guy (Mar 27, 2012)

To be fair, this is getting into the worst time of year to sell. It’s a period where only the desperate tend to close and prices are at their lowest. Last week in December is when I get some of my best deals, but I just closed on two three bedrooms and a one bedroom for $200k total (no, not in gta, but it’s still a hell of a deal) because the people just wanted out. 

This is the time when banks want stuff off their books, people want money for the holidays, and no one is looking because of the weather and being busy with the holidays. 

I’d pull the listings off he market, maybe realist late February or early March depending on the weather. It’ll probably sit for several months if mispriced, but a realtor should be able to advise what the current market prices should be. 

As for a list of comparable properties which have recently sold, it’ll give you a proper idea of how much damage you’re looking at.


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## marina628 (Dec 14, 2010)

Interest rates keep going up lowing the pool of qualified buyers ,I would hang onto it collect rent and building the equity in paying down the mortgage and possibly in 2-3 years she will reach the break even point.


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## Just a Guy (Mar 27, 2012)

You put a tenant into it, first off it won’t cash flow. I know the OP hasn’t provided many details but, it being bought recently in GTA is enough information for me to come to that conclusion easily. 

Second, you put a tenant in there and the value of the property will probably quickly decline as tenants don’t usually take the “pride of owenership” and tend to wear places out quite quickly. 

There’s a big difference between “home quality” and “tenant quality”.


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## Longtimeago (Aug 8, 2018)

alexshim said:


> Sorry what I meant was to hold it and not lower the price, rather then drastically lowering the price, and hoping the market comes back to life. See if anyone would want to buy.
> Ideally my mom wants to sell the King one but the market there is not as easy as Vaughan, at leas that is what i am told.
> 
> Can you write investment loss from your personal taxes in Canada ?


And therein I think lies the real issue which you are still not making clear. "and not lower the price". What does that mean and/or imply? Where did she come up with her listing price from? Give us some specifics, what did she buy each house for 2 years ago and what price is she listing for now? Who advised her on what price to list at and did she take the advice as given? Did she get market appraisal prices from 3 or more reputable real estate agents? Has she looked at comparables on the streets nearby that sold recently and where is her price in comparison? How long has she had the King house listed on the market? Is it listed on MLS or is she trying to sell it without using an MLS agent?


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