The developer behind the 65-storey Trump tower in downtown Toronto has yet to collect payment from 201 out of 265 hotel-suite investors, reports The Toronto Star, pointing in large part to difficulty securing mortgages. The dilemma begs the question: What if anything could a mortgage broker do?
The fact is hotel-condos are technically a commercial designation as no long-term tenants will really be staying in those units, and the suites will be subject to uniquely different tax laws.
So banks are reluctant to lend on them, say brokers. For one, they do not fit into the lender’s guidelines; for another, if someone defaults how do you really sell that property?”
But what can a broker do to help a client who has committed to closing on the purchase of a Trump suite?
“From the mortgage broker’s standpoint, some (clients) get so emotionally invested in it,” Drew Donaldson of Verico SafeBridge Financial told MortgageBrokerNews.ca. But “they didn’t create the problem; they should look to make short-term solutions in the meantime and then look for a long-term solution."
The options may be limited but they do exist.
“We’re here to provide solutions; we would get them closed and then from there we would look at options, such as re-financing,” Donaldson said. “Once you put private financing on a place it gives you time to look for an institution to finance it.”
Investors are now dealing with the reality that sometimes plagues real estate: expectations aren’t being met and would rather walk away on a deal that has gone sour.
“Most of the investors have deep pockets, they just want out of the deal. They put a big deposit down – some are international investors and from all over Canada – they thought they could flip it quickly,” Donaldson said. “With all the financing problems, delays, it’s been more difficult for them. The units I have seen haven’t appreciated and it’s so hard to get financing for the properties.”
However, those looking to wash their hands of the project and receive their deposit back would have to look for help outside the broker’s area of expertise.
“A lawyer might be needed to get someone out of the deal and get the money back. That’s not in our realm,” Donaldson said.
What would be your action plan for a client?