So You’ve Got an Accepted Offer on a Leaky Condo, Can you get a Mortgage?
Chad Watts, a Vancouver Mortgage Broker and I recently worked on a file were a first time Buyer fell in love with a gorgeous suite in a condo building in Vancouver with the classic Leaky Condo Syndrome. Fun!
The accepted offer on the suite in the leaky condo was of course subject to financing, documents (ESPECIALLY the Engineering Report), and inspection among others. To make a long story short, the Buyer could not get a mortgage on the property. And here’s why:
What Mortgage Lenders Like to See, When Giving a Mortgage on a Leaky Condo
- Mortgage lenders will want to see a copy of an Engineering Report on the building with leaky condo syndrome. This Engineers Report will prepared by a qualified and reputable Envelope Engineering Firm after they have conducted a full invasive survey (ie cutting holes in walls, roofs, and other surfaces to see exactly how the building envelope is performing) of the leaky condo building. This Report will lay out what the problem is, what caused it, how to fix it, how to avoid the same problem in future, and most importantly how much it will cost to fix the problem.
- Mortgage lenders want to see (get it in writing) that the Strata Council of the leaky condo has had a Special General Meeting (SGM) to review the Engineering Report and most importantly that the Strata has voted on and passed the special levy that will raise the funds to pay for the repairs recommended in the Engineering Report.
- Mortgage lenders will want to have evidence in writing when the repairs to the leaky condo building will commence.
Even if all of these events occur and the Mortgage lender gets a copy of all the above documents, ITS NOT GUARANTEED a mortgage will be granted to the Buyer!
Why won’t they give me a mortgage on a leaky condo?
People who lend large sums of money tend to worry and like certainty. Mortgage lenders want certainty the Buyer will be able to pay the mortgage reliably for the time period agreed upon. The mortgage lenders also want certainty the leaky condo will be repaired correctly and the problems will not return and that there are not more problems than anticipated. If lenders do not have certainty on any of these concerns they won’t lend.
The mortgage lender is also investing money in a property by granting a mortgage on it and want to ensure that its repaired correctly so that it maintains its value. If mortgage lenders are not confident the leaky condo will be repaired correctly or in a timely manner to maintain the value of the property, they will not grant a mortgage.
Bottom Line on Leaky Condos and Mortgages
Avoid a leaky condo if possible, but there is a requirement to write an offer on a leaky condo there is a far better chance of getting a mortgage on the property if the above three conditions are in effect. BUT remember, there are no guarantees that you will get a mortgage on leaky building!
Buying a condo and want to avoid a leaky condo? Check out my First Time Home Buyer Videos! The series will take you through the home buying process from start to finish.
I strongly welcome questions and comments!