Law Times

Page 10 January 18, 2016 • Law Times www.lawtimesnews.com Using a credit card to buy real estate Toronto company enters online condominium sales BY MARG. BRUINEMAN For Law Times I ts plan to make real estate purchases available online has its share of legal chal- lenges, but BuzzBuzzHome's Toronto owners say they aren't insurmountable. And its next step is to have a 'buy it' button on its site, making the purchase of a condo available online through a credit card for the first time in North America. A significant part of the chal- lenge is forging a path to mini- mize the risks. "It's an extension of the con- sumer love affair with online shopping," begins Lisa Laredo, a sole practitioner whose law prac- tice focuses on real estate, corpo- rate, and estate law. It is also a challenge to the traditional real estate industry, which has been facing accusa- tions that it is controlled by a self- interested profession, she adds. BuzzBuzzHome co-owner Cliff Peskin says the legal issues are indeed a major area of focus as the company works toward adding a 'buy now' button to its site in March. While real estate has never before been available online in this continent, he says there are companies in other countries that are working to- ward making this a reality. "It's one of the sectors of the economy that hasn't been entire- ly transformed by the Internet" through an online sales compo- nent, says Peskin. "But real estate is a very tough nut to crack. "There's a very long list of items we have to be aware of." And, of course, the sheer size of the purchase — often described as the largest single investment people will gener- ally make in their lifetimes — is a primary reason why it hasn't yet happened. But Peskin points to stocks and cars as other large purchases that are now regularly made online. Peskin makes the distinction that his company's real estate sales element will be restricted to new builds, an extension to the site's current brand as being a vehicle for new construction inventory. And in working with its lawyer, BuzzBuzzHomes has identified three main roadblocks it needs to overcome. The first issue to solve was how to make the initial deposit through a credit card so that it will be held in a trust account until the agreement of purchase and sale could be finalized. That is being facilitated through the use of two accounts through merchant service providers. The next was to prove iden- tity, required through the Pro- ceeds of Crime (Money Laun- dering) and Terrorist Financ- ing Act. BuzzBuzz also examined the issue of the requirement of using a licensed brokerage for real es- tate sales. But since sales will be restricted to new builds, the ser- vice will be used by the develop- ers themselves, who are permit- ted to directly facilitate the sales of their own projects. Peskin says real estate agents can still bring customers to the site to buy new homes and get commission. Also, the 10-day cooling off period required for new condominium purchases allows buyers to have the agree- ment of purchase and sale re- viewed by a lawyer. "From an entrepreneurial per- spective, it's a good thing," says Rodney Ikeda, a partner at Gold- man, Sloan, Nash and Haber LLP where he practises real estate law. "But a whole bunch of questions come to mind." How will a buyer do his or her due diligence, how do buyers know the builder is legitimate, and how can they get answers to their questions? Ikeda asks. These are questions often han- dled by a real estate agent, typi- cally used to broker transactions and address the specific needs of the buyer. In addition to wondering how the credit card will be charged, Ikeda sees a distinct advantage to people with high limits that could put those with lower lim- its, as well as the developer, at a disadvantage. Someone with a high limit may well put a down payment on several units on speculation and pull out of the agreement during the 10-day cooling-off period. That could clog up the system, if only tem- porarily, and potentially bump serious buyers out of the deal. If a refund is involved, the de- veloper could well end up pick- ing up the credit card costs. He also thinks that the on- line availability won't necessar- ily reduce costs because the sales office and sales staff will still be required. He compares it to In- ternet car sales, which only ap- peal to a certain segment of the population. Many others still want to go to a dealership to kick the tires. "They're not going to put all their sales eggs in one basket," he says. Additionally, real estate agents will be required, if not at the front end of the deal then at least at the back end to adminis- ter the sales. Both Ikeda and Laredo are interested in the process Buzz- BuzzHomes will employ to translate the click of the buy now button into a signed purchase and sale agreement signed by both parties. "Is it wise, from a public pol- icy point of view, to allow indi- viduals to assume significant lia- bility with the push of a button?" Laredo asks. She also wonders if the 10- day rescission period afforded the purchasers of condos might be extended to those who buy freehold homes online as well. That would allow them the op- portunity to consult a solicitor and other professionals, such as real estate agents, as well as giv- ing them the chance to back out of the deal. She suggests that, without ad- ditional protection, purchasing a freehold home worth hundreds of thousands of dollars online, free of the traditional process, could well end up being a high- risk transaction. And in the event of mistakes, Laredo wants to know who would be responsible, the devel- oper or the web site host? "I do feel that electronic sale of real estate, because of its huge personal financial significance, constitutes an entirely new area of e-commerce and merits gov- ernmental scrutiny in order to protect the public interest," says Laredo. LT FOCUS THE MOST COMPLETE DIRECTORY OF ONTARIO LAWYERS, LAW FIRMS, JUDGES NEW EDITION Perfectbound Published December each year On subscription $80 One time purchase $83 L88804-764 Multiple copy discounts available Plus applicable taxes and shipping & handling. 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