More complications

More complications

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Things aren't what they were -- and they're going to get worse
Although you certainly have the right to do things by yourself, it's become steadily advisable to use a real estate agent to act on your behalf.
Indeed, if you think that there's nothing to buying or selling property on your own, you may find out too late (and heaven forfend at your peril) that the complications involved are going to increase this month -- and, believe you me, this has nothing to do with the real estate industry's self-proclaimed conviction that it can do a better job for you.
Far fom it. Some new rulings being introduced this month have their roots in a governmental opinion that real estate transactions are fraught with risks and that some of them are related to questions of national security.
Actually, the concerns have their beginnings in attempts to curb money laundering through rules that have applied to real estate firms for the past fifteen years. However, then came 9/11, an event that forever changed America's attitude to what has often been referred to as the longest undefended border in the world.
Nowadays, as any of us who have a habit of crossing the Lewiston/Queenston bridge or other entry points to The Land of The Free know, the innocence of our purpose in doing so has started to be viewed with some uncertainty. We're also aware that, one way or another, we're going to need a passport to comply with what the Homeland Security authority seems destined to impose on visitors to the USA some time soon.
What, though, has this to do with buying or selling a house?
Aha! Let me explain.

Who are you and where is your money coming from?
Just as the St. Lawrence Seaway Authority has been asked to build additional fences alongside the Welland Canal (even though many/most of us think them unnecessary), so the Canadian federal government has been requested to raise increased barriers against funds that can finance acts of terrorism.
This may seem a far fetched concern, at least with regard to the great majority of residential real estate sales and purchases, but lending institutions, lawyers, and real estate agents are now faced with a need to prove that the relevant funding has no taint to it.

And this requirement takes effect as of June 23rd 2008 -- with the accompanying
adage that ignorance of the law is no excuse.

Among the regulations is the completion of a form that records every real estate transaction and the names and confirmed identities of the parties involved in it. Moreover, by extension there's an implied responsibility to ensure that the sales proceeds are not destined to reach any terrorist organization.
Such a likelihood will, of course, seldom if ever apply to buyers but, at the very least, their agents are expected to know enough about the sellers to ensure that the money isn't going to end up in the wrong hands.

Easier said than done?
The Canadian Real Estate Association is understandably discussing the effects of this added burden on its members -- not to mention an accompanying concern about the related privacy issues -- even though it unhesitatingly accepts the basic thinking of the imposing government authorities -- the federal Finance Department and FINTRAC (the Financial Transaction Reports Analysis Centre).
There's no doubt that terrorist organizations -- as well as people involved in money laundering (which is sometimes, but not always, one of terrorism's financing sources) -- have become extremely sophisticated in their ways of sidestepping the law and avoiding capture or, for that matter, any recognition of what they're up to. It's also fair to say that the real estate industry has, for some time, been made aware of "red flags" that suggest a "suspicious" transaction. If nothing else, brokerages have had to be on the watch for buyers who turned up with large sums of cash or appeared to be acting in less than the usual fashion of buyers and sellers.
However, as of June 23rd, there has to be a written record and some form of verified ID. For an agent to say they know a client/customer isn't enough. To state that the subject transaction is a repeat of others in the past won't do; in fact, it may be a warning sign! And, one way or another, there has to be some face to face meeting with the client/customer -- which can be difficult if he/she resides outside the location concerned (and never mind at an address overseas).
Moreover, these regulations apply to ALL monies received from clients and customers, whether in cash or not.
Needless to say, CREA is wrestling with the impracticalities that can ensue and admits that Jim Flaherty (the present Finance Minister) has given a sympathetic hearing to their account of the difficulties that could be involved
However, for now, the law comes into effect on its due date and time alone will tell how compliance with it can be realistically met.

The question of privacy
An alarming aspect of this heightened monitoring of illicit movements of money is the intrusion into private affairs, Real estate companies will be required to not only obtain personal details and acceptable ID from people involved in a transaction. They are also expected to retain the relevant written records for up to five years. In turn, they have to hold these records securely and, when necessary, to give the FINTRAC authorities access to them.
The implication, of course, is that your money is no longer going to be good enough. It's the colour of it that's going to matter. In effect, too, is a reversal of a fundamental principle of justice: that you're innocent until prove guilty. From June 23rd on, your guilt is going to be presumed until you can prove otherwise!
Did I say "more complications"?

Corporations and the commercial sector
Conditions are worse if a buyer or seller is a corporation (or similar entity) rather than an individual. Verification that the company/firm exists and that its purpose is a legitimate one calls for much more information than hitherto, and again real estate brokerages are responsible for obtaining and retaining it. One reason, of course, is that a commercial transaction often runs into the millions, a factor that can attract people looking for a way to transfer large sums of ill-gotten (or intended) gains.
An added complication, too, is the fact that both buyers and sellers -- and sometimes the subject properties -- may not be in Canada itself even though the agent(s) involved may be. The responsibility then extends to appropriate checks with the overseas authorities.
Did I say "buying and selling property is a simple process"?

Nothing personal
Despite the ramifications, the overwhelming majority of buyers and sellers, particularly in the residential field, have nothing to worry about. They will have to let their agents see and record the likes of a passport, a driver's licence, or some other acceptable form of photo-ID. They also need to accept that the information will be held securely and kept confidential unless FINTRAC chooses to raise questions -- which is considered to be highly unlikely.
But it all comes down to the U.S. Homeland Security belief that the ceaseless machinations of the Bad Guys place all of us at some risk.
Whatever we think of the wars against drugs, terrorism, or other criminal pursuits, we do need to realize that Being Safe Rather Than Sorry is an understandable and justifiable approach. In fact, recent acts of terrorism in London, England, as well the aborted plans on our own Toronto doorstep, tell us that America isn't alone in the fight against those who see nothing wrong in being wrong.

Meantime, however, let me extend my best wishes to you for the summer. I hope you'll find some time to relax and enjoy the good whether -- although, of course, you shouldn't forget to cut the grass.
After all, like the real estate business, it has a way of growing under your feet!