Recently I worked with a client that put an offer on a house in Lachine down by the water. It was a turn of the century duplex with a crawl space. The roof needed to be done and the foundation needed some work. How much work? No one was sure because a foundation specialist never inspected it and a quote was never obtained for the roof. There were two other offers that fell through due to them not being able to obtain a mortgage because of this property being flagged as high risk. So after 2 banks refused to finance this property, what was the problem?
I have been noticing that over the last couple of years, banks are buckling down on lending out money. More now, than ever. This includes taking extra notice of the state of the building. I have had experiences of a bank evaluator evaluating the value of a property, and then reporting back to the bank having seen some minor cracks in the foundation and basement flooring. The bank immediately asked for a report from a structural engineer! Most of the time, minor cracks that do not have water infiltration are easy to fix for under $500. Calling in a structural engineer is over the top. If it seems necessary, a quote from a foundation company is usually what us realtors will do in situations like this. I have had a lot of inspectors tell me that if you cannot put your hand in the crack and there is not any water infiltration, either fix it for a sound mind, or just keep your eye on it.
It is part of the legal process of listing a residential property, to fill out a 7 page declaration, declaring everything you know about the building and land. This document will end up at the bank, along with the promise to purchase. The banks are flagging any type of problems with the house that could significantly reduce the value of the building and are asking for extra experts to verify these conditions. Some of my more recent experiences have been where the bank has requested to see the inspection report. In the 12 years of doing real estate, this is the first time this is happening.
These processes sound completely normal since the bank is lending you money and they are just covering their ass-ets… however this process is happening on more of a regular basis then in the past. Talking to other realtors in the business, they are noticing it too. The banks are taking more time and effort in their due diligence.
So back to my clients and their purchase of a duplex. By the third attempt, along with a foundation quote and roof quote, over 30 days later, we got the mortgage. Perseverance is the key!… also working with the right mortgage broker who knows what they are doing.