McClelland Minute - August 15, 2010

Don’t be a Victim

I would be the first to admit that my Scottish heritage makes me somewhat cautious with my personal spending, particularly if it is a big ticket item.  A number of years of experience as a Realtor have also opened my eyes to the number of things that can go wrong in a real estate transaction.  I am always amazed how some people will spend more time researching the features of their next cell phone or winter vacation than they will on property worth several hundred thousand dollars.

Over the years organized real estate has developed a systematic approach to assisting clients to research property, negotiate a fair purchase price, conduct inspections, and close satisfactorily.  All of it is strictly regulated by provincial and national commissions selected by government and the industry.  It is also the reason that the vast majority of real estate trade in Canada is facilitated the support of a licensed (and accountable) Realtor, lawyer or auctioneer.

Even when both the buyer and seller appear to be honest people, the “devil is in the details” and all parties should be diligent in their inspections and heed any warning signs that might be uncovered.  Say you want to buy a car wash, convenience store, or similar business that depends on cash.  Your observation is that the traffic through it doesn’t seem to reflect what the books are saying.  Is someone striving to give themselves an untaxed bonus? It may not be the owner either.  I saw one situation where questions lead to a key employee.

Motivation and emotion has always been a significant part of negotiation.  Too often I have seen buyers trying to take advantage of a seller’s situation perceiving that distress may overcome good judgment.  It may be an older woman who has recently lost her husband, and a neighbour comes over stating he will be happy to buy her farm so she “doesn’t have to worry about it anymore”; or a couple going through a divorce who signs over their home for the amount on the mortgage without getting an independent opinion on value. 

It can be investing in shares in a promising development located in unregulated market like Costa Rica.  The reporting gradually gets lax, and finally someone flies down to have a look, only to find rocks and jungle.  Where did the money go?

It can also be simple fleecing of your wallet.  A friend or coworker persuades you to listen to a charismatic salesman at an investment seminar who promises to make you rich without any money in play simply by joining his “network”.  A number of DVDs and several thousands of dollars later you find that the only people getting rich are the instructors and they have moved on to another group of people in the next city. 

Every few years someone will try to interest you in a Ponzi or pyramid scheme that pays out interest or dividends to old investors from funds provided courtesy of new investors, such as the one recently ran by Bernie Madoff on the East Coast.  Don’t think it can happen here?  Ask the women who lost thousands each in a network that promised them a pathway to independent wealth.  Most subscribed without the knowledge of their family.  The coordinator kept coming back for more until someone finally figured out the truth.  Everyone was so embarrassed that no charges were laid allowing the central figure time to disappear.  People like Bernie Madoff had to start somewhere. 

Vern McClelland is associate broker with RE/MAX of Lloydminster.  If you have questions or comments on this article or other real estate matters, he can be reached at 780.808.2700 or through the McClelland Group website www.mcclelland.ca

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