[jing]

Repost from RFD RE thread. From Garth Turner originally about someone someone who bought in at Joyce by Westbank.

Ask Janice.

Two years ago she bought a one-bedder condo (actually more like a big closet, at 440 square feet) in East Van, in a 38-story building near Boundary Road, across from a SkyTrain station. Nice location. Big price. It came new from a developer, who actually furnished the mortgage.

Janice paid a little less than seven hundred. Plus tax it came to $729,750, with financing of just under $600,000. Now it’s killing her. The mortgage rate is 9% (not uncommon for a loan from a non-bank lender), and she still owes $580,000. Desperately, Janice is trying to get conventional financing so the interest charges can be slashed.

She went to Scotiabank. They arranged an appraisal.

Oh dear.

The detailed report (23 pages) examined the unit, the building, the hood and comparables. With regard to current value, this was the conclusion:

These five comparables sales are considered to be the most similar to the subject property. Note: comparables 4 & 5 are dated sales in the subject complex. Note: comparable 6 is an active listing in the subject complex. The adjusted value range is from $537,000 to $569,000. The final appraised value is $560,000.

Gulp. A loss of 23% in two years. If Janice were to sell, paying commission, it would be even greater. Worse, with a mortgage larger than the total value of the property she’s underwater. No equity. Nothing to borrow against in order to refinance.

Grasping for help, she reached out to local mortgage guy Mark Fidgett. “She was referred to me with the hope that I might be able to help, as I provide equity financing,” he tells me. “However, her current mortgage is with the developer and with her being underwater, there’s nothing I can do. The payments are clearly unsustainable at that rate. She hoped to move to a bank mortgage through Scotia, but aside from income ratios, the loan-to-value alone makes it impossible, with $580K owed on a property appraised at $560K.”

Of course, a lot of this is her fault. She bought a shoebox. She paid too much. She borrowed from the wrong source. She agreed to a bad mortgage. And she obviously made a lousy, emotional investment – losing a quarter of her equity, all of her downpayment, and being saddled with finance charges plus property tax and strata fees ($640 monthly).

Says the sympathetic mortgage broker: “Not sure what the market was when she bought, but any realtor pushing a 440 square foot condo, 1 bedroom + den (seriously), not even in the downtown core, at $1,660 per foot needs to have their head examined.”

Well, she’s pooched.