Ralph Waldo Emerson wisely observed that “A man in debt is so far a slave.” I have regularly pointed out that those reaching for dramatically over-valued assets using debt are risking financial suicide. The two go hand in hand: for it is only with credit that prices can levitate so far beyond fair value, savings and income levels. When credit is maxed out, prices inevitably retreat and the tide of irrational exuberance turns to wipe out the highly levered. But also, even those who were using cash savings and not leverage to buy, experience evaporating net worth as prices fall and contagion spreads. This story reminds of the real life costs. I’m afraid that Canadians have earned an extended period of painful revelation. See Couple ordered to pay $470,000 after reneging on Stouffville home deal:
“David Lea and Yixing Hu submitted an offer of $2.25 million in April 2017 after being told there were multiple competing offers for the property, originally listed at $2 million, according to court documents. The bid was accepted, but not long after the market cooled and the Newmarket couple had second thoughts.
Feeling they’d overpaid for the property and having trouble making the down payment, the couple pulled their offer. In the summer of 2017, the market value of the home had dropped to about $1.8 million. The homeowners sued, and in a court decision this month, the judge ruled Lea and Hu had to pay the difference…
We’re probably going to have to rent somewhere. We’re trying to figure that out. I’m going to see what I can afford every month, and pack up the kids’ stuff,” Lea said, who is a father of four. “I have no choice. It’s the worst of the worst because you take the hit on their property and get these big damages, but at the same time (the value of) my house has dropped. I can barely sell it for $1 million.”
…Lea said the Stouffville property would have been the last home he and his wife bought — a place to retire in. “I’m trying to be as positive as possible. This stuff can just destroy your health,” he said.
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