by Eva van Loon
Being a realtor is not much fun now. The new rules–10% down, no 35-year amortisations, etc.–have cut a lot of first-time buyers out of home-ownership. Notcie how those For Sale signs are hanging around so long they’re growing roots of their own?
There’s another way. Think person-to-person, private deal, old-fashioned. The once common Agreement for Sale is being dusted off by vendors and purchasers who want to do their own thing.
How does it work? The parties agree on what’s most important to each of them: price, interest rate, amount of monthly payment, amount of down payment, no-early-payment penalty—you name it. The Agreement for Sale puts all that into writing; the parties sign (in black ink only, to please the Land Title Office), and money changes hands as agreed. The Vendor stays on title; the Purchaser registers the Agreement for Sale on title.
The Agreement runs much like a mortgage, and the Purchaser has possession of the property except that, for large changes to the property, the seller’s consent must be obtained. Or whatever—the parties can tweak the agreement as they like.
Typically these arrangements run for one to five years, until the purchaser builds up enough equity to get a more permanent mortgage with a bank. Theoretically, however, an Agreement for Sale can be renewed over and over until the property is paid for. The Agreement provides for its own termination, of course, and also for the Vendor’s remedies if the Purchaser messes up. The remedies are simpler and quicker than foreclosure.
Caveat emptor and caveat vendor, especially sellers. If your purchaser bails and leaves the property in a mess, you’ll be tearing out your hair. Be sure you can handle the terms of your unique Agreement for Sale and that the purchaser has a good reputation as a tenant and business person. On the purchasing side, the same precautions apply as for buying any property: check it out first. An Agreement for Sale is just as serious as a mortgage.
Don’t try this at home: you need a lawyer brain to create the document. And not just any lawyer brain, either. It’s a challenge to find a lawyer who has ever seen one of these things since they last flourished about 30 years ago. This may change rapidly as people who yearn for their own home shift away from the banks to a more personal and flexible way to become property owners. Mortgage brokers may scream bloody murder, but the shift away from banks is happening. Back to personal deals and trust!