***Blacklisted Condos: For Buyers and For Sellers***
Being on the blacklist means that CMHC feels that your condo corporation is at risk of losing value so it will not insure a mortgage for the units in that corporation. So instead of needing only 5% down to get a mortgage, buyers will need a 20% down payment. For some condos, even with 20% down payment, lenders will still not approve for mortgage.
***How do condos get on the list?
A condo will get put on the blacklist when:
1. A property has a number of foreclosures. (Power of Sales.)
2. The Reserve Funds are depleted.
3. There are Operating Fund deficits.
4. The corporation has taken out special assessments or loans.
5. The city issues work orders against the corporation.
6. Property values have dropped.
***How many condos on the blacklist?
More than you would suspect. Some new glass-wall condos in the downtown that are suing their builders are on the same list as many of the older thirty to forty-year-old corporations in the Etobicoke, North York and Scarborough suburbs that surrounds the downtown.
If you own a condo with a CMHC backed mortgage and then the corporation runs into financial troubles and gets blacklisted, you may find out that you cannot get your bank mortgage renewed when it come due for renewal.
When it’s time to sell, existing owners may have trouble finding qualified buyers for their units. Units in these buildings do sell but the prices may take a hit and it will take longer to close a deal.
Even if you have your pre-approval in place, it is always good practice to speak to them about buildings you are going to be offering on to see if they have any red flags to raise ahead of time. How do you protect yourself: Always have a real estate lawyer review the status certificate and ask your mortgage lender if the condo you want to offer on is blacklisted.