Foreign buyer may abandon Vancouver bid, gamble it's cheaper than tax
American Howard Dresner is trapped between two bad options after buying a small Vancouver townhouse: pay $85,000 in unexpected tax or let the deal collapse, lose the deposit and pay the legal penalties that would follow.
Dresner says he feels forced to consider walking away from the purchase — abandoning the contract — because that may ultimately be cheaper than ponying up the 15 per cent tax that came by surprise.
"Either way it's going to cost me money. I have no recourse," said Dresner. A family member who works in Vancouver will live in the Cambie-area home.
A new 15 per cent foreign-buyer tax aimed at cooling the market was introduced by the B.C. Liberals last week.
There are no exemptions for people who purchased property prior to the sudden announcement of the new Metro Vancouver tax.
The New Hampshire resident said it's unfair to target him.
"This [home] is going to be occupied — we're not speculating on real estate, we're not laundering money," Dresner said. "I understand there's a problem, but we're not the people they're looking for."
Thousands of deals in jeopardy
Realtors estimate Dresner is one of about 3,000 to 4,000 people now caught in contract limbo.
It's not clear how many pre-tax deals so far have fallen apart, but according to the Fraser Valley Real Estate Board, some have already imploded and many others are likely to follow.
'I understand there's a problem but we're not the ones they're looking for.'- Howard Dresner, New Hampshire townhome bidder
Dresner's agent, Andrew Hasman, said he has spent the last week making calls to clients to explain the surprise levy.
"You feel awful. You've done everything right, and yet you're left saying, 'I'm sorry.'"
Dresner's deal is supposed to close in September.
The purchase price of the 768-square-foot, 40-year-old townhouse was $568,000 — and Hasman said the unit still requires a costly renovation.
It's "insane," he said, to expect a buyer to pay a further $85,000 on top of that.
No way out, lawyer says
"It's just bad business for B.C. and it shakes people's confidence," said Hasman.
Dresner contacted a lawyer in Vancouver but was told there's nothing in the law to stop the government from intervening in a housing transaction — mid-deal or not.
If he walks away from the contract, Dresner will lose his $25,000 deposit and could be sued for any losses the seller incurs re-listing the place, including the gap between the eventual selling price and what the deal was originally worth.
"It will likely be less than the $85,000 tax I'd have to pay," he figures.
He's hoping for a last-minute change of heart by the Christy Clark government.
"It's only fair to respect those commitments — I've made commitments, the sellers have made commitments," Dresner said.
The B.C. government shouldn't suddenly — without warning — change the rules, he said.