Did you know your chances of getting a mortgage plummet as soon as they find out that the condo is a suspected 'leaker'.
In most cases, the majority of well established lenders will not lend on properties which are suspected to be 'leaky condo's' or that are only partially fixed if previously identified. In order for most lenders to advance funds on a unit in a building determined as a 'leaker;' they want to see a full remediation plan laid out and approved by the Strata. They further want to see that the repairs will be covered or are covered by a 3rd party warranty.
Most lenders will request the following documents, prior to lending on a building identified by the home inspection as a 'leaky condo':
1) Strata Form B documents
2) Last 2 years AGM minutes
3) Building Envelope Engineer's report identifying scope and budget for fix
4) Minutes of Special General meeting where at least 75% of the strata voted in favor of the special assessment, or other funding formula, needed to finance the complete restoration of the building, per the engineer's recommendations.
5) Three contractor quotations
6) If work is already complete - Completion Certificate/Inspection Report from Building Envelope Engineer
It is important that we, as home inspector's, correctly identify the risk on multi-family condominium style dwellings and that you our clients are made aware of the difficulty in obtaining a mortgage on these units if plans are not already in place to repair.
I am grateful to Alan Brown - Mortgage Professional www.mypowermortgage.com/alan for providing the body of this information.
Friday, September 17, 2010
Re-Sale of Leaky Condos: Did the Buyer Know?
This CMHC sponsored article from 2002 is still very much valid today. There is still a significant portion of leaky condos out there that have either not been fixed or not even discovered yet.
The CMHC article identifies that many home inspection reports are of a check list nature with "
buried significant information; and written comments by an inspector may appear benign but closer examination by a person knowledgeable about building envelope failure would
reveal ominous warnings couched in soft language" The report also states "It was found that the extent to which the exterior of a building is inspected varies greatly;"
The task of buying a condo is stressful enough without worrying if your inspector is going to even look at the building envelope, and then if they do, whether they will protect themselves more than the try to protect you by hiding behind vague unremarkable language, or will they present the defects in a clear, concise and understandable manner.
The Real Estate Council of BC back in 2000 sent this advisory to its members:
Some property inspections are restricted to the strata lot; others will include a limited investigation of the common property. Licensees should advise buyers to clarify with the inspector what services will be provided. An inspection that includes the common property is preferable, although more expensive than one that only includes the particular strata lot. Buyers may wish to confer with their property inspector about matters arising from the buyers’ review of the documentation they have received or from the inspection itself.
Much of the hesitation by home inspectors to look at what is termed the 'common areas' (which include the building envelope) is the fact that no inspection association group has standards of inspection that include common area inspections. As a result no home inspector can get insurance for such areas. As a result the vast majority go out of their way to avoid such areas and instead focus their inspection on the purchased unit only. This shedding of responsibility by the entire industry, leaves the home buyer vulnerable to extreme levels of liability, as the problems are very seldom truthfully and completely reported in the minutes or Form D's.
The report goes on to look into why more people who bought 'leaky condo's" did not get an inspection. Out of the 40 persons studied, 29 did not get an inspection with 9 of those citing that their Realtor encouraged them to not get an inspection citing the following reasons:
• “We are trying to make this purchase affordable for you”
• “It’s never been lived in. You don’t need one.”
• “No point. They only look at your suite – not the rest of building”
• “It’s all been repaired.”
• “You have the CMHC full package deal and they will appraise the building.”
SENWI feels this is an unacceptable situation and so even though the inspection body we have received our certification through does not include common area inspections in its Standard of Practice and as a result we are unable to get insurance for such areas - we still go out of our way to inspect, analyze, report, and then clearly explain defects we feel are present or likely on a particular building envelope. We take on average an extra 2 hours to look at the building exterior, roof, common mechanical rooms and parkade. We look to see if the Strata is managing the building well or consistently deferring required maintenance. We will insist you receive building envelope engineers reports and help interpret the report findings to you in a clear and understandable way.
This will all result in you being able to make an informed purchasing decision. Look to Realtor Independent SENWI inspector for your condo inspection needs. We will go the extra mile so that you do not have to.
The CMHC article identifies that many home inspection reports are of a check list nature with "
buried significant information; and written comments by an inspector may appear benign but closer examination by a person knowledgeable about building envelope failure would
reveal ominous warnings couched in soft language" The report also states "It was found that the extent to which the exterior of a building is inspected varies greatly;"
The task of buying a condo is stressful enough without worrying if your inspector is going to even look at the building envelope, and then if they do, whether they will protect themselves more than the try to protect you by hiding behind vague unremarkable language, or will they present the defects in a clear, concise and understandable manner.
The Real Estate Council of BC back in 2000 sent this advisory to its members:
Some property inspections are restricted to the strata lot; others will include a limited investigation of the common property. Licensees should advise buyers to clarify with the inspector what services will be provided. An inspection that includes the common property is preferable, although more expensive than one that only includes the particular strata lot. Buyers may wish to confer with their property inspector about matters arising from the buyers’ review of the documentation they have received or from the inspection itself.
Much of the hesitation by home inspectors to look at what is termed the 'common areas' (which include the building envelope) is the fact that no inspection association group has standards of inspection that include common area inspections. As a result no home inspector can get insurance for such areas. As a result the vast majority go out of their way to avoid such areas and instead focus their inspection on the purchased unit only. This shedding of responsibility by the entire industry, leaves the home buyer vulnerable to extreme levels of liability, as the problems are very seldom truthfully and completely reported in the minutes or Form D's.
The report goes on to look into why more people who bought 'leaky condo's" did not get an inspection. Out of the 40 persons studied, 29 did not get an inspection with 9 of those citing that their Realtor encouraged them to not get an inspection citing the following reasons:
• “We are trying to make this purchase affordable for you”
• “It’s never been lived in. You don’t need one.”
• “No point. They only look at your suite – not the rest of building”
• “It’s all been repaired.”
• “You have the CMHC full package deal and they will appraise the building.”
SENWI feels this is an unacceptable situation and so even though the inspection body we have received our certification through does not include common area inspections in its Standard of Practice and as a result we are unable to get insurance for such areas - we still go out of our way to inspect, analyze, report, and then clearly explain defects we feel are present or likely on a particular building envelope. We take on average an extra 2 hours to look at the building exterior, roof, common mechanical rooms and parkade. We look to see if the Strata is managing the building well or consistently deferring required maintenance. We will insist you receive building envelope engineers reports and help interpret the report findings to you in a clear and understandable way.
This will all result in you being able to make an informed purchasing decision. Look to Realtor Independent SENWI inspector for your condo inspection needs. We will go the extra mile so that you do not have to.
Subscribe to:
Posts (Atom)