Protecting new home buyers against builders’ errors

You get a manufacturer’s warranty when buying an electrical appliance, such as a toaster, and you can purchase an extended warranty from the retailer. All this for a product that costs as little as $30 to $50.

So, when you buy a newly-built house or condo that costs $150,000 to $1+ million, you assume you will receive as much protection as when you buy an appliance.

But there’s a group of dissatisfied homeowners who write to me almost daily, complaining about problems they have experienced with Tarion Warranty Corp.

Tarion was set up by the Ontario government in 1976 to administer a statutory warranty for homes built by registered builders.

Burned buyers want to see the Ontario government set up an independent value-for-money audit of Tarion’s operations. Here is what they say:

Tarion is too close to the builders it’s supposed to regulate and doesn’t have a clear consumer mandate.

When consumers try to appeal Tarion’s decisions at a tribunal, they often find Tarion sends its own lawyers to testify against them.

Tarion has a monopoly on home warranties. It reports to the Ontario consumer ministry, but it can’t be investigated by the Auditor General or the Ontario Ombudsman.

Last week, I did a Toronto Star column about being invited to a media breakfast at Tarion’s office to be told of a major repair (more than $5 million) done to 23 homes that had cracked foundations as a result of land settling and sinking.

Some Tarion dissidents wanted to comment on this story, but didn’t get a chance because the Star closed off comments quickly. They can do so here.

P.S. Here’s an update on my blog post about hiring a roofer. After getting four or five estimates, I hired a company that a reader recommended.

The work took several weeks because of rain delays and cost more than $10,000. They removed several layers of flat roof installed in the past, making my roof six inches lower than my neighbour’s on the other side.

It’s not an easy process to manage and it’s not finished yet. My neighbour found a spot the roofers had missed, which was visible from his back yard. They’re coming back tomorrow to finish the job.

Using videos to teach young people about money

Many people will never read a book about personal finances. The Wealthy Barber did well because it was about friends hanging out together, talking about things like baseball and cutting hair, as well as money.

For those who find books a slog, watching a video may appeal in a way the printed word does not. The whole world is on YouTube. Now I am too.

On April 15, I was the master of ceremonies at a news conference to launch a series of free online videos, based on the Financial Basics workshop I helped develop with the Financial Consumer Agency of Canada and the Investor Education Fund.

Since 2010, I’ve hosted the four-hour Financial Basics workshop at the Chang School of Continuing Education at Ryerson University, reaching about 100 people at a time. (The next one is Tuesday, May 13, 5.30 p.m.)

Ryerson is committed to financial literacy. It insists on keeping these workshops free to the public. Anyone can attend. No solicitations allowed.

Former Chang School dean Gervan Fearon decided to produce videos to reach a wider audience. The FCAC agreed to subsidize the costs. I appear in the English version. Stephane Veron, a Ryerson professor, appears in the French version.

We knew there had to be something to lighten the mood. Money lessons can be tedious.

Since there was no budget to hire actors, the producers decided to tell stories using Twitter and text chats among friends.

Hope you like the results. There’s a two-minute preview at the top of the page, letting you know about the objectives for the video project.

Searching for a reliable roofer

Our home insurance company called to cancel our coverage for leaks coming through the roof. The reason? We hadn’t replaced the roof since 1986.

If we sprung for a new roof, we were told, the insurance company would consider reinstating our coverage.

Of course, this would save money for the insurer, since it would lower the risk of roof leaks and costly claims.

The idea of getting roof repairs scares me. I often hear stories from readers about defective shingles and worthless warranties. CBC Marketplace did a story on this in 2010.

Nevertheless, I’m looking for quotes from companies I find online. Not an easy job with a proliferation of firms.

First, I went to Homestars,which is well known for customer reviews of contractors. With hundreds of Toronto roofers listed, I looked for those with ratings of 9.5 to 10 (out of 10) and the owner’s name clearly visible.

I also went to Trusted Pros, which lets you search for contractors and find what their customers think of them. But there weren’t many reviews of Toronto roofers. Most were not yet rated.

What I did like was the site’s helpful articles, such as, “How to avoid a libel lawsuit when critiquing your contractor.”

Then, I ran across something called Smart Reno, which acts as a matchmaker for customers and contractors. I described the job and left my email address and phone number. Now I’m getting contractors calling me to see if they can inspect the roof and give quotes.

The final stop was the Better Business Bureau, which lists helps you screen out contractors to avoid (those with ratings of D or F). I checked out City Wide Roofing, which called me after I went to Smart Reno. They had an A+ rating.

Now I know why I waited so long to replace the roof. It’s an expensive job and requires an informed decision. Any advice is welcome. Wish me luck.

How to improve quality of financial advice

CBC Marketplace recently tested advice given by 10 banks and investment firms. Using hidden cameras, it showed what happened when a potential client walked into each firm and said she had a $50,000 inheritance to invest.

While some firms performed well, others gave advice that Marketplace’s expert Preet Banerjee described as atrocious. Here are highlights:

In some cases, information was incorrect or misleading — even in response to direct questions, such as how fees are calculated.

Some gave unrealistic promises about returns, including one adviser who said that a $50,000 investment should increase by $10,000, $15,000 or $20,000 in one year.

Others failed to adequately assess the customer’s risk profile, which advisers are supposed to use to ascertain the suitability of investment products they recommend to a person.

I have my own story to tell about Maddy (not her real name), who works at the Toronto Star and told me of her dilemma.

Nine years ago, she met a friend of a friend who sold mutual funds. At the adviser’s urging, she took out a $50,000 line of credit to invest.

She was losing sleep because she hadn’t repaid any of the $50,000 — and she hadn’t gained much ground with the mutual funds purchased on her behalf.

Maddy didn’t understand the strategy, but did trust the adviser. She only started questioning things when her adviser quit the firm.

She decided to pay off the line of credit. But this wasn’t easy to do.

The adviser had invested the money in a dividend mutual fund. Each distribution was used to buy more mutual funds inside her RRSP.

Maddy had to pay deferred sales charges (DSCs) on the dividend fund. While DSCs disappear after seven years and she held the fund for nine years, each distribution started the clock running again.

Since she couldn’t sell her RRSP funds without incurring a big tax bill, she decided to transfer the portfolio to another adviser.

As a result, she could repay the line of credit only by contributing more money. The DSCs reduced her initial capital and the modest growth didn’t offset them. Meanwhile, she spent thousands on interest over the years.

Borrowing to invest rarely makes sense, except for sophisticated investors who can hold securities for years without being tempted to sell. Maddy was inexperienced and agreed to a leverage strategy when pushed to do so by her adviser.

The Investment Industry Regulatory Organization of Canada recently put out an investor bulletin on borrowing to invest. I don’t think it goes far enough.

Here’s a comment by Lindsay Speed, legal counsel and corporate secretary of FAIR Canada, an investor advocacy group. (I’m chair of the board.)

In my view, the warning language should be stronger. We have been advocating for regulators to take the position that leverage is only suitable for the most sophisticated investors.

This seems to suggest that the suitability onus is on the investor, not the adviser. And there is no mention of why an adviser would be motivated to recommend leverage.

FAIR’s recent work on leverage is shown here and here. It believes borrowing to invest is promoted by advisers hoping to increase their assets and earn more commissions and trailer fees.

If you pay for advice separately from products, you get better recommendations. Look for a fee-based adviser if you want a plan suited to your needs.

Otherwise, you can become a victim of incentives that put the advisers’ interests ahead of your own.

How does this appliance repair firm stay in business?

Has your fridge stopped working? Has your dishwasher broken down?

Appliance Repair Guys. Service4Appliances. If you see these names, think twice about making an appointment.

Both names are used by a Toronto-area company with a reputation for unreliable repairs, high prices and unfriendly, even rude, customer service.

Check my Star column for links to the Better Business Bureau’s consumer alerts, plus Homestar’s low ratings by customers.

When I contacted owner Dan Vidoser, he refused to let me quote him because he didn’t like a previous article in the Hamilton Spectator.

Here’s a story from Marsha, who paid Appliance Repair Guys to fix her dryer, which was making a squeaky noise. The technician “fixed” it and charged $320. Two days later, the machine was making a different noise.

The technician came back, did something else and charged $80 for the service call (after saying there would be no charge because she’d filled out a warranty form).

The machine sounded even worse afterward. But all she got was a runaround.

“At the end of multiple calls, the company refused to do anything,” Marsha says. “I’m out $400 and I can’t get my money back.”

She initially paid with a debit card after being told no credit cards were allowed. She was allowed to use a credit card for the second visit, since she was out of town.

However, CIBC Visa would not give her a refund for the $80 service call, telling her she had to pursue her dispute directly with the company.

After posting a review at Yelp, where you can also find other customer laments, she tells me she’s shocked to see what happened.

“This company has ZERO accountability. How can they get away with this, other than saying that we seem to be stupid consumers?”

Here’s what I’d say. When you can’t wash or dry your laundry, keep your food cold or cook it at high heat, you’re anxious to get your appliances working again.

You find an attractive website for a repair firm that promises same-day service and has a few testimonials from anonymous customers. You’re too rushed to do any research and assume you’ll be treated fairly if your appliance can’t be fixed.

Next time, ask your friends for referrals. Check with the manufacturer to find authorized repair firms. Go to the BBB, Homestars and Yelp to find consumer complaints.

When you let technicians into your home, you’re at their mercy. They can take your machines apart and quote outrageous prices to put them back together again.

Don’t let up your guard, since the consequences can be costly.

How to be taken seriously when you complain

I get emails every day from people who have been wronged. They want an apology, a refund, compensation — and sometimes, they want revenge.

I help them reach the right executives at a company who will listen, take action and find answers. This usually ends in a settlement.

Here’s my frustration. Some people aren’t good at advocating for themselves. They commit self-sabotage.

I have some tips on how to get better results.

Be professional and businesslike.

You’re talking to busy executives, so don’t waste their time. Cut to the chase. Summarize the problem and say what you want the company to do for you.

Many of the complaints I receive are WAY TOO LONG. People spend a lot of time talking about what happened and when. That’s tedious.

You’re not writing a book. One to two pages is enough.

Don’t get angry or use insults.

Be calm and courteous. Start by saying how much you like doing business with the company. Get the executives on your side and they’ll pay more attention.

Even when you’re frustrated, try not to let it show. Never use threats. Don’t swear.

Finally, accusations aren’t helpful. Avoid using words like fraud, theft and deception. You may end up with a legal letter telling you to cease and desist.

Focus on your priorities.

Don’t talk about every little thing that went wrong during a bad trip or home renovation. Edit yourself. Pick the top two or three issues and ignore the rest.

I’ve seen some people write lists, pinpointing as many as 15 things they want fixed. That’s overkill. Five should be the absolute maximum.

Make sure to give your contact information.

If you send an email, don’t just give your email address. Companies want to see your home address and phone number, with details on how to reach you during the day. They often prefer to call you back, rather than write to you.

Use short paragraphs.

When I forward emails from readers to companies, I break them up, using a sentence or two at a time. That’s easier to read than long paragraphs.

Bullet points work well in making your points. So does bold print. Always leave some white space on the page.

This advice will improve your chances of getting what you want. I wish you success in your communication campaigns.

Protect your car from diminished value after accident

I wrote a Toronto Star column about problems getting the full resale value for a car that has been repaired after an accident.

In the column, I said that Viraf Baliwalla of the Automall Network in Toronto had come up with a diminished value calculator that could help you decide whether to sue the other driver for your loss.

Until now, there have been no court cases in Ontario to test this approach. But Baliwalla told me about one of my readers, for whom he acted as expert witness in court. Here’s how he described it in his blog.

Mary bought a demo SUV in 2010 from a new car dealer. The vehicle was a manufacturer’s executive-driven vehicle for approximately 15,434 km before the dealer bought it for sale. Since then, the dealer added about 1,300 km.

Mary used her vehicle for work, as well as carting her kids from place to place. She was adamant the vehicle be accident-free. The salesperson assured her it was.

She didn’t feel the need to have the salesperson’s assurance put in writing, nor have it inspected independently. The bill of sale said the balance of factory warranty was in place.

After driving it for two years, Mary noticed rust developing on one of the body panels. When she took it in for repair at a different dealer, she was told the warranty would not apply because the vehicle had been in a previous accident.

She contacted the original dealer to lodge a complaint, but felt she was not getting much satisfaction. She took the vehicle to a body shop to identify the damage and started a small claims court claim against the dealer.

The dealer said the accident must have happened while the car was in Mary’s possession. Mary said neither she nor her husband had ever been involved in an accident.

Further, the vehicle’s history report showed no claims, estimates or accident repairs against the vehicle, meaning it would have been fixed “on the sly” without reporting it to the insurance company or police.

The judge felt both sides were genuine in their belief they did not cause the accident. He suggested the dealer repair it at an estimated cost of $2,239.

The dealer obliged and fixed the car. Mary attempted to settle with the dealer for diminished value as well, but the dealer was not willing to entertain her request.

At the hearing on diminished value, Mary had a paralegal representing her. I was her expert witness to discuss how much less the vehicle was actually worth when she purchased it.

The judge said Mary had sustained diminished value. He felt both sides were innocent and the vehicle was probably involved in an accident before the dealership received it.

He awarded Mary $2,750 in diminished value and $600 in costs. But when her legal fees were factored in, she more or less broke even.

Mary pushed this issue to the limit out of principle. Thanks to her efforts, there is now a court case in Ontario where a judge has accepted the notion of diminished value and awarded accordingly.

After a long break, I’m back

I gave a speech last September to a group of personal finance bloggers. I said having a blog was like feeding a hungry bear that never got satiated. Then, I took a rest from feeding the bear.

Though I stopped posting new material, I never stopped moderating comments at my blog. I want to let readers know they’re not alone with their complaints.

I’ll try to keep the momentum going in the future. Meanwhile, you can always send messages through my website and get a response.

February is a busy time. I’ll be speaking at four Toronto libraries this month, so please drop by if you can.

There’s the Barbara Frum branch on Feb. 19 (at 2 pm), Richview on Feb. 20 (7 pm), Don Mills on Feb. 26 (6.30 pm) and St. Lawrence on March 1 (2 pm).

How NOT to sell a car or get a free credit report

In my job, I’m always hearing cautionary stories about consumers falling into traps they didn’t expect. It’s hard to do research about every pitfall that might exist.

John Pettitt, for example, ignored one vital step when selling his car privately. He didn’t insist on proof that the new owner had changed the ownership papers.

As a result, he was hit with towing and storage charges for the vehicle long after the sale. The bill he was asked to pay ($798) was equal to the sale proceeds.

I wrote about his dilemma and followed up with a second column after the towing company agreed to waive the bill.

Automotive writer Jil McIntosh covered this issue here. She added a warning about personal safety when selling a car privately.

Earlier this year, an Ontario man was murdered when he advertised his truck online and took it to a potential buyer.

If you agree to meet someone, make sure you’re going to a busy public place and never go alone. Ask for the person’s name and phone number beforehand and then call back to see if the number is accurate.

It’s not ideal to have a buyer come to your house, but if it must happen, don’t be on your own. Have a friend or family member there with you.

Close your garage door so no one can see inside, and if possible, find another place to park other cars you own.

Ask to see identification when you meet the person and look at his driver’s license, including the expiry date, if you’re going to let him test-drive the car. Honest buyers shouldn’t have any issues with proving they’re legitimate.

As for credit reports, readers often think they have to pay to get one. While Equifax and TransUnion sell instant online access to credit reports, mail delivery is always free.

Access to credit scores, however, is never free. The credit score is a profit centre for the reporting agencies, as is the sale of monthly credit monitoring services.

A reader named Ian signed up for Equifax’s Complete Advantage credit monitoring plan at $15 a month, since he could get his credit report and credit score included at no charge.

More than 18 months after trying to cancel, he’s still paying for the service and asked me for help getting rid of it. I’m sure that Equifax will release him shortly.

You can find Ian’s story below. It’s a compelling yarn about the company’s bureaucratic practices and disdain for personal privacy in a dispute.

How about a course on Investing for Beginners?

You’re unhappy with the investing advice you get from your bank or broker, but you don’t feel confident about your knowledge and skills. Maybe it’s time to take an introductory course.

Learning about investing can help you become a do-it-yourself investor with an online brokerage account. You can start buying individual stocks and signing up for dividend reinvestment plans.

When you know more about investing, you can also have better conversations with financial advisers. It helps to understand the lingo and be able to describe exactly what you want.

My nine-week course at the University of Toronto campus starts on Sept. 12. Here’s a link for those who want to register or recommend it to others.

It’s the eighth year I’ve taught the course. We had more than 80 students enrolled last fall, a record number, in a big theatre-style classroom. There’s always room for more people.

You’ll learn about markets, products, advisers and regulators with me and interesting guest speakers. Mary Anne Wiley, head of iShares Canada, is booked for this fall. Doug Melville, head of OBSI (Ombudsman for Banking Services and Investments), may appear again as he has in recent years.

Each week, I prepare detailed handouts for students and send emails with interesting links. And I’m always ready to answer your questions.

There are no exams or written essays, but a few hands-on learning projects are assigned each week for those who want to try them.

Here’s what John, a student in last year’s class, had to say at the end:

Ellen, I’ve enjoyed your lectures very much; I know I’ll miss my Thursday evenings learning about investing and taking control of my investment portfolio.

I’ve expected my broker to look after my stuff. Truth is, they care more about their MERs.

It is somewhat scary to take over the portfolio, but certainly I think that I, like any interested and responsible investor, must overcome “the fear” and start looking at the portfolio on a regular basis and ask questions.

And those MERs? Oh yes, they are in my cross-hairs! I’ve got a meeting
with my broker next week.

John is referring to the Management-Expense Ratio, a shorthand term for the cost of investing in mutual funds. MERs are fairly high in Canada, attracting the attention of regulators.

Here’s a link to a discussion paper on mutual fund fees. And here’s my column on the need for change.