Resources for mortgage brokers · 3 min read
Pyrrhotite and Pyrite: What Lenders Require
In some parts of Québec, a house can't be financed without a clear answer about its foundation. For a mortgage broker, knowing when the question arises, and which documents answer it, avoids many stalled files.
Two different problems, often confused
Pyrrhotite and pyrite are both iron sulphides, but they don't act in the same place. Pyrrhotite is found in the aggregate of some concrete: as it oxidizes, it makes foundation walls, footings and slabs swell and crack. Pyrite is found in the fill placed under the basement slab: as it swells, it lifts the slab and distorts partitions.
The two problems have neither the same geography, nor the same construction years, nor the same test. A mortgage broker who can tell them apart asks the right questions from the start. They're presented in our inspection guide for mortgage brokers.
For the lender, the question isn't theoretical. A foundation that must be replaced can represent a large share of a house's value, and collateral whose value depends on a test nobody has done is uncertain collateral. Understanding that logic helps the broker anticipate requests instead of reacting to them.
Pyrrhotite: the areas and years to watch
According to the victims' coalition, the problem mainly affects homes built from 1996 to 2008 in Trois-Rivières, Shawinigan, Bécancour, Nicolet and some municipalities in the Maskinongé and Des Chenaux RCMs, with Trois-Rivières accounting for about 70% of cases. For a property from that period in those areas, the pyrrhotite question is part of the file.
Some lenders have required buyers to prove no pyrrhotite was detected before granting a loan, even though not every institution has a formal policy on it. Requirements therefore vary between lenders, which makes the choice of lender especially important for these properties. We detail the test in the pyrrhotite test before financing.
Pyrite: the slab and the fill
In greater Montréal, on the South Shore, in Laval and on the north shore, buildings from the 1970s to the 2000s may have pyrite-bearing fill under the slab. Typical signs are a heaved or star-cracked slab, partitions rubbing on the ceiling and distorted door frames.
Confirmation requires lab analysis of fill samples, which assesses the swelling potential. Many properties have already been corrected: in that case, the expert report, invoices, warranties and proof that the new fill complies are the essential documents in the file.
Keep in mind that a slab can also crack for other reasons, such as concrete shrinkage or frost. The inspector's role is to note the signs and recommend sampling when they point toward pyrite, not to confirm it by eye.
The documents that reassure a lender
For an exposed property, a lender is generally reassured by specific documents rather than general statements. For pyrrhotite: a complete lab report based on cores taken from the foundation's different components. For pyrite: a fill analysis report with sampling locations.
For a property already corrected: the expert report, work plans, invoices, warranties and, for pyrite, proof that the new fill complies. The earlier these documents are gathered, the faster the file moves. The real estate broker's view of these same documents is presented in transactions in high-risk areas.
The effect on assistance and value
Public assistance doesn't always follow the property. In Trois-Rivières, the municipal assistance program doesn't apply to buildings sold after June 22, 2011: the city presumes the buyer knew about the work required and that a discount was applied to the price. For the borrower, this means the cost of any work will have to be financed another way.
This directly affects ability to pay and collateral value. We explain it in detail in pyrrhotite assistance and purchases after 2011. Programs change: always check their current status with the municipality and the Société d'habitation du Québec.
Planning from the offer to purchase
A concrete test or fill sampling takes considerably longer than a visual inspection. If the question is only raised when the lender sends its conditions, it's often too late to meet the financing condition deadline. Best practice is to raise the question when the offer is drafted, with the real estate broker.
We explain this coordination in syncing inspection and financing. To arrange an inspection with a test recommendation when the area and year warrant it, see our page for partner brokers.
When a lender's conditions arrive with a request for a test, don't treat it as an obstacle to argue away. Treat it as information: the lender is telling you which properties it considers risky, and that knowledge will serve your next clients in the same area.
