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Deborah Scott in her Kerrisdale home. Buyers are paying her in increments as they get access to their money. They plan on demolishing the house, but are letting her rent it back for two years.

Kerry Gold/The Globe and Mail

Before Deborah Scott put her 1927 Kerrisdale house on the market in September, she had heard that accepted offers on houses on the west side were falling through.

She soon discovered the buyers are there, but the offers are not so straightforward and not always sincere.

Within days of the agents' open house, she received five offers, including some from foreign buyers and others from Canadian citizens with undisclosed addresses. She accepted an offer subject to financing. The offer fell through that night because the buyer's bank wasn't willing to give them a third mortgage, she says.

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She accepted another offer a little less than asking, for $6.288-million, which gave her an option to rent the house for two years. She was looking to rent back because she didn't want to move her kids too many times and they were already handling their parents' divorce. However, the buyer, from Richmond, couldn't get all the mortgage financing required and needed until spring to get the remaining money out of China, she was told. They gave her a $200,000 deposit and agreed to give her another $300,000 in December. To protect herself, she got it in writing that both deposits are non-refundable, to be held in trust by her realtor. If the subjects are not removed by the spring closing date, she will receive $500,000 for her trouble. The risk is, of course, that the market could plummet. But it was the only offer she got that worked for her.

"We got a notice on Friday saying they were having trouble getting their mortgage. They need a mortgage for $3-million, and they couldn't get it – they could only get $1.5-million. So they came back and said we can get our money out of China, but not until March. So now my closing date is March. That's high risk for us, but it offered me a two-year rent back."

To her dismay, the buyers plan on tearing the house down, but that was the case with all the offers, she says. Ms. Scott had purchased the house in 2000 because it is a character house in excellent condition. There are five houses near her that are set to be demolished and she estimates that one-third of the homes on her tree-lined street are empty.

"Buyers are tying up all these offers, waiting to see which one bites and where they can get the financing. And if they don't, they just pull the offer out.

"So I have accepted an offer and think someone is negotiating with me in good will. And meanwhile, they are working on other properties. And any other offers I get, I say, 'no, I've got an offer.' And I miss out on an opportunity to accept something. They are misleading the seller."

She found the process stressful, particularly when the offers included odd clauses, such as the one from a buyer who wanted to reserve the right to add or change the buyer's name to his wife and/or his mother-in-law, without further notice to the seller. Ms. Scott wouldn't consider those offers.

She also discovered one buyer was making multiple offers. She found out that another agent received an offer that was addressed to Ms. Scott. The buyer's agent had forgotten to remove Ms. Scott's information from the offer on another house, made the same day.

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Kip Fotheringham, who owns a house in Southlands, said he also experienced the unsettling precariousness of the current market when he attempted to sell his house in the summer of 2016. He and his wife put their house up for sale with the provision that they could rent it back for three years, until their kids graduated from school. After five months, they found a buyer who agreed to everything, without any conditions. They set the closing date for two months later. However, the buyers said they had trouble getting financing and asked for another month.

"And then they came up with another excuse, and then another," Mr. Fotheringham says. "It kept going on. They said, 'the money will be in the bank tomorrow, blah blah, blah.' And then they reneged, and by law, they owe you the deposit and any damages that can be proven. And by that time, you literally could not sell a house in the fall of 2016 anywhere near the summer price."

The 15-per-cent foreign-buyers tax had been introduced in August and prices for west-side houses rapidly dropped. The buyer wanted out of the deal and they wanted their deposit returned.

"They said that the agent misled them, that she didn't know the real estate market. [The buyer] owns at least six houses and has transacted more than that, so this whole 'I'm new to the real estate game,' that didn't really wash."

Mr. Fotheringham threatened a lawsuit, but after realizing the time it would take and the legal fees, he settled for the deposit as compensation.

"I had to hire a lawyer and they finally conceded and gave us the money. It was unbelievable.

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"I knew it was bad. I didn't know it was that bad," he says of the market. "You just have to be on your toes, [understand] that things are a little different, because they are. I don't think you ever really know what's going on. It's a different world."

The buyer lost "several hundred thousand" dollars on the deposit, Mr. Fotheringham says. But they'd already purchased the house across the street from his home. They'd made an offer on that house, he says, around the same time they'd offered on his house. But it had a quicker closing date, so it went through. Now, the house is for sale.

"They just flip houses like flipping cards. It's bizarre.

"And it's all leveraged. Everyone is of the opinion that people are buying these houses with cash but I don't think that's true. Not from what I've seen."

Christine Duhaime, a lawyer and anti-money-laundering expert, says she's seeing a couple of new trends that are complicating the Canadian real estate market. People from China are increasingly buying properties in the names of companies.

"I think part of it is easier to move money out, but also it's that much more difficult to find out who's behind it, who owns it," she says.

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Foreign buyers or people with money outside the country are also using digital currency to make purchases, she says.

"I also noticed recently that Bitcoin has become a big way to move money out of China," she says. "It's instantaneous and no one knows at either end [where it came from]. It shows up as Bitcoin in Toronto, say, and you cash it out and go buy a house here."

"People say it's cooled down a bit, but I just don't see it," Ms. Duhaime says of the market. "I see people still buying, still a lot of demand, and a lot of foreign demand.

"People from China who are not money launderers who are super upset by being sort of painted with the same brush, they are pressuring for changes in the system. And then on other hand, people who are desperate to move money to Canada, most often to get their kids in high school here and will do whatever it takes to get out of China, whatever route it takes, that second group for sure is still fuelling our real estate sector. They want a house, and certain schools, the same things over and over again, times thousands of people."

Lawyer Khushhal Bains gets involved in the accepted offers that come apart, after subjects are removed and a deposit has been paid. He's not surprised that subjects aren't being removed from offers.

"The market is changing, rates have gone up a bit, and there's been a tightening of mortgage rules. I definitely hear a bit of, 'hey, I thought we had a deal but the subjects aren't removed,'" Mr. Bains says.

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A seller should take precautions, he says, because legal fees for going to court are typically around $30,000. And the seller only gets around half of the legal costs recovered if they win the case. They might typically negotiate for the deposit, as well as the difference in value, if the property value had dropped in the interim, and the selling agent's fee, if the agent hasn't waived their fee. His firm generally advises clients to settle with the buyer outside of court.

"What you want is more money, more skin in the game," he says, referring to a deposit that shows the buyer is committed.

A non-refundable deposit is especially important if the buyer is from outside the country, and wants a long closing date.

"There may be some creative solution to put the seller at ease, because absolutely you're a bit nervous. What happens if they can't get the money out of China? The rule of thumb is a five per cent deposit. So if someone wants to show they are really serious they put $100,000 down."

But the seller might first ask how much of a risk they want to take.

"When I sold my condo five years ago and the market was dipping a little bit, I had two offers. I took the [lower] one because they were local people as opposed to international people. I was worried that if the market tanked, the local people will close because they have other assets, while international people are hard to chase."

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Realtor Shali Tark, who specializes in the condo market, says she's also seeing a lot of offers fall through.

"In a competing market people are doing what they need to do to get ahead of the game, but their intentions are not sincere, and it's hard to tell from one offer to another," says Ms. Tark. "The buyer doesn't know which property to go for, so they [make an offer] and say, 'let's just tie up the property and see what happens.'

"My last experience was with a $900,000 property and the buyer needed one month for financing, and they were not local. We didn't take that offer. But I was just pleased that they were transparent with us instead of tying us up, given previous situations, where they give you false hope."

Most realtors will continue to market a property after an offer has been accepted, because so many offers do fall through. They will also set tight deadlines to have subjects removed, in order not to lose momentum on the sale. Another way to try to ensure an offer is sincere is include a clause in the accepted offer that if it's subject to inspection, the buyer will work with the seller to correct any deficiencies. If the buyer balks, it could be a sign they aren't genuinely interested.

"As a seller, that's a decision you have to make, give them a week and hope they are sincere."

Ms. Tark says when she's making an offer on behalf of a client, she will show proof that her client has a preapproved mortgage, to strengthen the bid. If she represents the seller, she's wary of offers that are high, and subject to financing.

"I look at the price sometimes and wonder, 'subject to financing at this price?' Is the bank going to even appraise it at this value? That's a red flag for me."

"Whether this mindset is becoming more common is hard to say. But it creates more work for the listing agent, that's for sure. And it's stressful for the seller, because the mirage out there is all these properties are selling over asking, and when they do go to list, the seller has certain expectations. These sorts of experiences make them think, 'is that my bad luck?' You don't hear those stories of what it took to get a place sold sometimes."

Cherise Burda, executive director of Ryerson City Building Institute, and John Pasalis, president of Realosophy Realty Inc., discuss the merits of a foreign-buyers tax in Ontario
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