AGREEMENT OF SALE
Although provincial legislation dictates that Alberta mortgages are assumable without qualifying, banks have effectively figured out a way to stop this from happening. When the deal goes to the lawyers for conveyancing, the banks just refuse to send the statement of adjustments, which indicates to the buyer exactly how much the cash to close is.
With deep pockets and a sophisticated legal staff, banks effectively ignore the legislation. And, this being the case, buyers are reluctant to challenge them.
Enter the agreement of sale. This complex agreement can be used to circumvent this. Let's say a house is listed for $350000 and it has a mortgage of $330000. The buyer can buy the property under an agreement of sale. Simply put, the way it works is as follows: The seller stays on title and on the mortgage. The buyer has his/her ownership interest registered on the title in the form of a caveat. For a specified period the buyer pays the mortgage, house insurance, and property taxes to the seller until such time as the buyer can qualify to obtain financing. When this happens, the seller is removed from the title and the buyer becomes the only party on title to the property.
These agreements can be very complicated and many variables must be considered in their implementation. They do not work in all cases, but in some cases end up being the only viable way for a person to buy a home. To work, the buyer must have good credit or at least the ability to restore his/her credit within, for example, a two year period.
One of the biggest obstacles is getting both parties to agree on the details contained in the agreement of sale. This is where lawyers get involved. Typically these deals contain buyer and seller conditions specifying buyer and seller lawyers must review and approve agreement of sale.
Although complicated, sometimes the agreement of sale will allow a person to buy a home when they never dreamed that this could ever be possible.
Feel free to contact me for more information.