Financing Implications of the Property Disclosure Statement: A Guide for Realtors
I want to dive into a crucial aspect of real estate transactions: the Property Disclosure Statement (PDS) and its impact on financing. As we navigate through the complexities of mortgage approvals, understanding the PDS's role is key to successful transactions.
Understanding Mortgage Approval Conditions:
When a client's offer is accepted, our journey towards securing a mortgage approval begins. Lenders issue mortgage commitments with conditions categorized into four segments: Credit, Down Payment, Income, and Property. While the first three are often straightforward, the 'Property' aspect can be unpredictable.
The Importance of the Property Disclosure Statement:
Lenders, investing significantly in the property, scrutinize its condition thoroughly. Part of our role involves submitting essential documents for their review, including the PDS. This document demands our keen attention – both as brokers and Realtors.
Key Problematic Disclosures on the PDS:
Leak and Membrane Problems: A major red flag.
Mobile Home Classification: Requires special consideration.
History of Drug Manufacturing: Treat with caution - Can be a deal killer.
Foundation Issues: These need immediate attention.
Litigation Issues: Lenders insist on resolving these before funding.
In-Ground Oil Tanks: Could lead to financial hurdles. Likely they will need to be removed and the soil remediated prior to completion.
Envelope Remediation Process: Approval unlikely until projects full completion with certificate.
Insufficient Contingency Reserve Funds: A financial red flag for lenders.
Non-Municipal Water Sources: Lenders may demand extra evaluations for water potability.
Self-Managed Strata in Large Complexes: Often seen as problematic.
Presence of Asbestos or Vermiculite: Lenders require proof of remediation.
Unoccupied Owner Properties:
When dealing with rental properties, lenders might ask for title insurance due to a blank PDS, covering many potential defects but not all.
Market Dynamics and the PDS:
In a balanced market, we often have the luxury of time to address PDS issues or withdraw from problematic deals. However, in a subject-free offer scenario, detailed reviews and collaboration between mortgage brokers and Realtors are essential.
As Realtors, your vigilance with the PDS can make or break a deal. Understanding its implications on financing is not just beneficial – it's essential. Let's continue to collaborate and navigate these challenges together for the success of our clients.
If you have any questions please feel free to reach out.