Amid Canada's crushing housing supply shortage, some homeowners may have noticed a rise in flyers offering to pay cash upfront for property. One real estate broker explains that although these mysterious notes are legal, it's usually a strategy from investors looking to make a quick profit.
"They're trying to get a little bit of value," John Pasalis, the president of Realosophy Realty in Toronto, told Your Morning's Anne-Marie Mediwake on Thursday. "They're investors… preying on people who don't know the value of the home."
Pasalis warns that these investors will "lock the seller into a contract," however they'll never end up buying the home – they get value by then finding a buyer who will pay market value.
"They're making money off of the difference between what they pay for it… versus what someone's willing to buy."
WHAT IS WHOLESALING?
The practice is legal in Canada, and Pasalis says that "basically, it's like wholesaling," but what is that?
Typically, real estate wholesaling involves finding properties for sale, putting them under contract and then in turn finds a third-party buyer.
Pasalis says that although it can appeal to some sellers because they "don't have to do anything" typically involved in a home sale, like staging and open houses, the reality is usually different.
"They're usually selling their home for a fair bit of a discount."
HOW DOES IT WORK?
These investors usually cast a wide net and are "basically flyering everybody," according to Pasali -- but specifically targeting seniors who have been in their neighbourhoods for decades.
"Seniors who've been in their homes for a long time," Pasalis says. "Probably who don't know what their homes are worth."
The presentation of the flyers also can also be part of the guise, looking like they're from an individual looking to buy, rather than a investor looking to get a deal before flipping it to another buyer.
"They look like they're handwritten," Pasalis says. "They look like they're a family or… someone who's trying to get into the neighbourhood."
Pasalis says that these offers aren't being made by real estate agents and in most cases, it's important to note they will never end up actually buying the home.
"They're basically making money by flipping the deal to someone else."
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