Former US President Donald Trump is accused of fraud by artificially inflating the value of his properties, which allowed him to take out more loans. This case raises a relevant question in Quebec: “Can we increase the valuation of the house by, for example, adding the purchase costs to be included in the mortgage loan?”
Closing costs and fees associated with a real estate transaction
Could this practice occur in Quebec? When buying a home, the purchase costs, which also include inspection and notary fees, play an important role. They amount to between 1.5% and 4% of the purchase price and consist of the following elements.
- Inspection before purchase: This is not mandatory, but is highly recommended to know the condition of the home and identify any problems that could reduce its value. Cost: Between $450 and $650 plus taxes for a single-family home in an urban area.
- Assessment fees: The financial institution may require an appraisal of the home before granting the loan. Cost: approximately $500, plus tax.
- Notary fees: These services include title search, drafting of the deed of sale, publication of the deeds in the Quebec Land Registry and preparation of the mortgage loan deed. During the transaction, the costs are adjusted between the parties. Cost for this service: between $1,500 and $3,000 plus taxes.
- Adjustments: This includes the distribution of municipal and school taxes already paid by the seller, as well as fees such as connection to telecommunications services, natural gas tank or heating oil, etc.
- Transfer taxes: Commonly referred to as “welcome taxes,” these fees are a percentage of the purchase price of the home.
Home Appraisal and Fees
Can a buyer add purchase fees or other transaction costs to the home valuation in order to obtain a higher mortgage loan from the financial institution?
To answer this question, we contacted Francis Martin, certified appraiser at MGF Evaluation Real Estate in Granby. “The valuation of a house is essentially based on comparative values,” he says, “i.e. on similar real estate transactions that have taken place in the same region.” There can be deviations of around 2 to 5% between two appraisal companies, depending on the assessment of certain factors by the assessors. But valuations cannot be artificially inflated; they are linked to the market. Additionally, we are subject to a code of ethics that officially prohibits this practice.”
Diploma
In conclusion, manipulating property valuations, as the Trump case shows, is not only a question of ethics but also has serious consequences. For the buyer, an inflated estimate means higher debt and increased risk as interest rates continue to rise.
When it comes to property valuations, it is important to remember that integrity and accuracy are of the utmost importance. They are vital to the health and stability of the real estate market. As consumers, investors and industry professionals, it is our responsibility to ensure accurate valuations to ensure a balanced market.
Advice
- Understanding the market: The Trump case underscores the importance of understanding the real estate market. Stay informed and vigilant.
- Independent Verification: If the seller presents you with a valuation report and you suspect that the asking price is excessive, you should definitely hire an independent appraiser to obtain a second opinion. This approach ensures you an objective assessment and can protect you from possible overvaluations.
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