Can Wholesalers Double Close In Canada?

Question

Hi BP Members and Fellow Wholesalers,

I'm a wholesaler in Toronto, Canada looking to make an offer on a home very shortly. If the offer is accepted and a PSA is signed, I will eventually have to double close as the property is mortgaged by a bank and from what I understand banks won't allow you to assign their properties to an end user (is this true for Canada as well?).

Thus, once a deal is made, I will have to do a "double close", but am not sure how this would be done in Canada since we do not have title companies. There is very little reading on the subject (for Canadians), which deepens my curiosity. I did watch a video where an American investor praise Canada for the "skip transfer", which allows you to do a double close without transactional funding or paying land transfer taxes. I've tried to research more about a skip transfer, but cannot find anything further about this type of transaction.

Are there any investors or wholesalers (Canadian or otherwise) with knowledge on the proper way for a fellow Mountie to double close in a real estate deal? I intend to consult a lawyer on this subject, but if any BP members have some tips or experiences to share, it would be greatly appreciated.

All the best,

Parker M.

Roy N. · Answer

- dated, now incorrect, statement about Canadians and our propensity towards debt and savings;

- misunderstanding about {residential} real-estate financing in Canada;

- claim there are no programs similar to FHA available in Canada {CMHC provides similar insured mortgage and first time homeowner programs};

... that's about where I stopped.

Roy N. · Answer

Naturally, you must purchase whatever educational materials/services being offered to receive an answer to a question.

Parker Mott · Answer

Here's Phil's response:

"We just did a skip transfer on a deal in Canada a few weeks ago.

One of the great things about investing in Canada is that so few resources exist about it so we basically have the business all to ourselves.

We wish you all the best."

Didn't answer my question about citing his sources about the skip transfer, so that leaves plenty of room to be skeptical.

Parker Mott · Answer

Ouch. I'd be interested in the other inaccuracies you observed, Roy. You have to take everything you watch on Youtube about real estate with a grain of salt.

Roy N. · Answer

Parker:

Given the inaccuracies in the five minutes of the video I watched, I'd be very sceptical of any of his advice.

Parker Mott · Answer

Thanks for all your helpful replies. For what it's worth, this is the video I was referring to that mentions "skip transfers" (see 7:25). https://www.youtube.com/watch?v=b93fu6jGeEo&t=581s

I emailed this investor, Phil, personally about his mention of "skip transfers" and will let you all know his input if he responds. Maybe he's on to something we don't know; if a skip transfer is possible in Canada it would sure be worthwhile to pursue if you have to double close on a deal.

Luc Boiron · Answer

@Parker Mott My wholesales so far have all been assignments. I have not yet heard of any skip transfers.

Some sellers are not OK with assignments, such as banks selling properties under power of sale. There's a few different ways around this. One way is simply to have the seller's lawyer to do a direction re title, which is basically a signed document that say Buyer A will not be the one on title for closing, it will be Buyer B.

The other option is just to assign the document using the standard OREA Assignment of APS form. At my understanding, the seller's lawyer cannot refuse the assignment unless there is language in the APS specifically stating that the APS cannot be assigned. However, you would remain liable to the seller under the APS if the assignee does not perform, unless the APS includes an assignment clause that allows the liability to transfer.

Feel free to PM me and we can chat if you have any questions.

Roy N. · Answer

@Claude Boiron

There was a group who were involved with rolling properties 2 - 3 times each ... may be one in the same.   This is why I indicated that intent plays a role and not just the mechanics of the transaction.

That said, I agree with you, if you can sell the contract, why would you close then resell ...  paying double transfer fees.

Just because you can do something does not imply you should ...

Claude Boiron · Answer

My understanding, in Ontario, is that skip transfers are not possible  without paying all the fees and taxes, twice. Why would you not just assign the deal, @Parker Mott?

@Roy N., my understanding is that the Vancouver Realtors who were really up to shady stuff, were assigning deals which had been entered into in bad faith, and without full disclosure to the sellers, than: 1- The Realtor stood to benefit in excess of his/her commission; 2- The Seller had the right (and should have been encouraged) to have his/her own Real Estate representation before entering into a deal.

Roy N. · Answer

@Parker Mott

We periodically assign an APS to third-party, but in our case, the party is typically related ... and we are not adding an amount to the end purchase price.  We have also closed a deal and sold off a portion which was not of interest to us - the closest we have been to a "skip transfer".

There is generally nothing wrong - legally - with the transactional mechanics of buying a property than {almost} immediately selling all or part of it.   Your intention, on the other hand, could get you into real (legal) or moral (political?) trouble.   Real Estate agents in Vancouver were sanctioned earlier this year for promoting/participating in what were essentially "skip transfers" in a quickly rising market.

Can Wholesalers Double Close In Canada?

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