CBC reports that PACE Developments demanded an additional $100,000 from customers who paid deposits on homes before the pandemic
A condo developer canceled or forced higher prices on deals for pre-construction units north of Toronto, according to the CBC, creating an unexpected fear for potential homebuyers in an already stressful real estate market.
CBC reported on Nov. 20 that PACE Developments gave buyers of their Phase 1 units at Urban North Townhomes in Barrie an ultimatum: either pay an additional $100,000 on the sale price or take a refund of the down payments paid between 2018 and 2020 and Continue.
PACE told the buyers and CBC News that the decision had been made to cover the additional costs resulting from the pandemic, such as more expensive materials and construction delays. “This situation affects buyers in the earliest stages of this project, which had a scheduled completion date of more than a year ago,” PACE Developments Director Yvonne Sciavilla told CBC News.
The situation has caused a stir in the real estate industry in the Toronto area. Many are baffled, blaming the developer’s demand with the potential to erode trust between clients and a real estate industry that continues to kill the Toronto real estate market.
Check in to our Urban North Phase 1 Freehold Townhomes in Barrie, ON. You can really see the terraced houses taking shape. Some of our blocks are nearing completion. We are excited to see this development come together and develop into a beautiful community! pic.twitter.com/JvpxUO4bFs— PACE Developments (@PACEDevelopment) November 11, 2021
“I understand the supply chain issues we’re dealing with,” said Odeen Eccleston, a broker and developer at WE Realty. She cites the labor shortage and the skyrocketing cost of everything, especially wood.
But she notes that the entire industry incurs these costs. “There are plenty of projects, hundreds of projects signed in 2018 and 2019 and prior to the pandemic. And of course there have been delays and losses.”
Eccleston admits that it occurs to everyone to pass those costs on to the customer. “But it’s almost unthinkable because we just know that’s inappropriate.”
“There was a pandemic,” added Meray Mansour, a real estate agent at META Realty Group. “Some people have lost money. Some people made money. That’s just part of doing business. You can’t turn around and say, ‘Oh, I’m losing money, so I need money from you if we already have this agreement.’”
“They may want to recoup some costs now, but in the long run they will hurt their business,” she adds. “As a real estate agent, I wouldn’t feel comfortable referring my clients to that builder. How can my buyer trust them?”
Both Mansour and Eccleston say PACE Developments could be within its legal right to cancel agreements, as did the experts CBC spoke to. The news channel had no access to the contracts.
“The builders have all this power,” says Mansour. “Their contracts are so huge. They have clauses that protect them. Technically they can. It’s not illegal what they’re doing, but it’s unethical.”
Eccleston believes the developer had no choice but says it is “embarrassing” for the industry to offer customers with a signed agreement a financial ultimatum before canceling the project. “Our integrity and reputation is so important.”
What it comes down to:
Eccleston adds that developers have canceled contracts and issued refunds in the past. That’s nothing new. But usually it’s not because they’re looking for more money, but because development as a whole has stopped.
“Normally that’s within the first year,” she says, noting that this development puts enormous pressure on buyers.
The pre-construction clients had waited years for their new home, endured the same delays as the developer, made housing arrangements while counting on the security of a promised home in the future as prices in the Toronto real estate market spiked. hand walked .
Buyers who thought they had no choice but to buy back into their pre-construction units told the CBC that PACE is taking advantage of current prices, leaving them stranded in a Toronto real estate market where they can no longer afford the prices they signed on. can secure up to a year or two ago.
Toronto real estate prices are up more than 20 percent since 2020, and homes in some surrounding areas near Barrie are up more than 40 percent.
“They probably don’t mind losing some of their buyers who aren’t willing to pay the extra money because they can flip it and sell it for more money,” Mansour says. “Even more than 100K extra.”
Eccleston worries we could see more developers do the same, choosing between eating up the pandemic-era losses or maximizing their profits from pandemic-era price increases by abandoning their customers.
“If it’s within the parameters of their legal documentation, it becomes a choice between their morality and reputation or their bottom line,” Eccleston says. “This is a decision for developers, likely across North America, to put their reputation, customers, integrity and morality first. Or is it all about a dollar?”