A Richmond Hill, Ont., woman may lose the house she lives in because of bad timing and a falling real estate market.
“It was an absolute disaster,” Dora Elia said, referring to the chain of events that took place after she purchased a home in Innisfil, Ont., about a one-hour drive from her current home in Richmond Hill.
The plan was to sell the Richmond Hill home — where she has lived for the last five years — after securing the second home and apply the proceeds of the sale to her new house. But that plan hasn’t worked out.
“I am in jeopardy of losing both homes and owing money,” she told Global News.
At the root of the issue is what happened to real estate prices in Ontario, starting back in April.
“The bottom fell out,” mortgage broker Ron Alphonso said, describing the cooling in the residential real estate market.
“A lot of people who went into multiple properties are being adversely affected,” Alphonso said.
At the time of the purchase, Elia was dealing with multiple lenders and brokers.
She said she agreed to several mortgages to secure the purchase. While she accepts responsibility for agreeing to the purchase, she said the lenders didn’t supply legal paperwork in advance and put off her concerns, saying those would be addressed after the documents had been signed.
“You’re trusting in people who have a (mortgage broker’s) license and expecting them to be honest, not take your money,” she said.
Elia ran into trouble when the real estate market fell. After agreeing to purchase the second home, the market changed and her current home was worth about $100,000 less.
On top of that, the home she was buying was similarly worth about $100,000 less. In short order, she had effectively lost about $200,000 worth of real estate equity.
“Having this sudden shock of decreasing values — no homeowner expected that, most lenders didn’t expect it either,” Alphonso said.
Alphonso has built a reputation for helping consumers who are facing foreclosure and need to restructure debt. He is acting on Elia’s behalf to negotiate with mortgage lenders to reduce the amount owing so she can remain in her home.
Alphonso said reputable mortgage brokers will follow their legal obligations to provide documentation to consumers at least 48 hours in advance of signing a lending agreement. He said his company makes sure to advise consumers about expenses, legal fees, taxes and the carrying costs associated with purchasing a property.
“They can lose their deposit, they could be sued if they don’t close (the purchase)” Alphonso said, emphasizing the importance of making sure home buyers have all the necessary information about financing before signing any agreement.
Elia said her experience has been a stressful one.
“To have to start again, and to be pregnant at the same time, this is not something you want to have to go through.”
—With files from Melanie Zettler