Toronto’s housing market is as diverse as its people: ranging in price, size, and location. I pick a Toronto listing or trend to focus on each week and review it with a professional's eye. What makes a house a great pick - and what makes it a pass?
In this hot real estate market submitting offers sans conditions has become the norm, which can be generally safe for the buyer as long as they have completed their due diligence ahead of time. But what happens when completing your due diligence no longer becomes enough? Such can be the case with many blacklisted condos – where you have reviewed the status certificate ahead of time and gotten your financing pre-approval in place, only to find out you can’t get a mortgage or Canadian Mortgage and Housing Corporation (CMHC) insurance on the property you purchased.
When a condo has been blacklisted, it means that either lenders or mortgage insurers have deemed a property as high risk due to various factors. Some of the more common ones are:
- The condo corporation has taken out loans to top up the deficit from common expenses
- There are a large number of foreclosures at the condo
- The condo corporation is running a deficit
- There are liens against the property
- The values of the properties have depreciated
- The condo corporation is being sued
Most of this information will be available through the status certificate, but ultimately it is up to your lender or mortgage insurer (if you have less than 20% as a down payment) to determine if they are comfortable moving ahead with your purchase.
Although there is no publicly available “list” of properties that have been blacklisted by lenders and insurers, you can be sure that they have their own record of properties that they have deemed as high risk that they will not get involved with. What this means for condo buyers is that they need to be extra vigilant during the purchasing process to avoid getting into a situation where they have a deal they are legally bound to honour, but cannot get a mortgage for.
How does this happen? Let’s take a look at some examples:
EXAMPLE ONE: Not Completing Your Due Diligence
Safely removing conditions from your offer is one thing, but removing conditions without completing your due diligence is a detrimental mistake. When you hear “blacklisted condo” most people do not think of the big, beautiful, new skyscrapers in the downtown core – they’re imagining those old brown buildings on the outskirts of Toronto constructed in the 1970s with unit maintenance fees in the thousands - but this is wrong. Just because your building is new and in the downtown core does not mean that it is automatically safe – there are many prestigious buildings in Toronto going through liens and legal battles, all which could impact your ability to finance your purchase.
For example, let’s take a look at the sales history of a particular unit in a building that has been blacklisted by some mortgage lenders and insurers in the St. James neighbourhood: