HelloWe are selling our home and have accepted an offer,

Hello

The most important thing about all of your questions is that this transaction should not take place unless you have a lawyer working for you and you alone.

My first instinct is that this deal may not be able to happen at all. The bank probably does not even allow a vendor take back or a second position on a mortgage at all. That means the purchaser has to deceive the 1st mortgagee at the outset and if so, is in violation of his mortgage agreement. That means a bank can foreclose as soon as they learn of it.

What is happening is that the purchaser does not have a down payment especially with the new regulations that came into force yesterday. So, he/she is trying to fool the bank that there is invested equity when there is not.

So, my first concern is whether he is starting out placing the property at risk.

Yes, a second mortgage is generally at a higher rate. That is up to negotiation. A couple of percent more is not uncommon if not more. Yes, if your position was also secured against other properties... so much the better. But, that is a mortgage as well and not a lien.

I will continue typing and you can respond later :)

As a lawyer, my concern would be why he needs a vendor take back. He is asking you to take risk while his other properties are not remortgaged to make your deal clean.

Lets start with the offer first of all. You accepted so he is bound and can be sued if he does not complete. This is a completely new offer that you can reject and hold him to the first deal. If you accept this amendment, then this is a totally different deal.

His broker could be a liar. Take nothing he says as truth until it can be proven. This is a leveraging deal in my opinion where he uses one property to buy another. If his cash flow fails, then someone is going to lose and you are behind the first charges.

You are at risk by my experience and intuition.

A mortgage is two things. It is an ability to foreclose on land and also a contract you can sue upon. However, if the former does not work, the latter probably will not either.

You need due diligence and preferably with a lawyer. I would ask the broker the name of the bank person who has approved a vendor take back and I would call that person and ask for a letter to that effect. Then, I would do a land titles search on every property he "owns" and look for mortgages and other charges on their title. I would also ask him for permission to get a credit report on his activities.

Google his name and see what comes up. You can go to most court registries and look for any law suits he may be involved in.

He is asking you to be a bank so you have to act like a bank.

Believe nothing until you have proof. This person leverages other people's money to buy more and more. If he had the money, he would have perhaps paid off a mortgage and used his own equity. In my opinion, house values will fall soon because of an over supply of houses for sale and the increased mortgage requirements. I am concerned as well but I am not a speculator. If the value of my home falls, then it can be assumed that the value of my next house will also have fallen. No harm done :(

But, in a down turning market, speculators have to have increases or the house of cards falls. Increases for the next year is not in the cards and you have no idea whether any of his other properties have any equity at all.

So, if he was prepared to give mortgages over other properties, you would want a search on them and then an acceptable appraisal by your appointed and licensed real estate appraiser. You need to know at least today what your risk is. No one can assure the future but you cannot know he has any equity in the other properties without a title search and an appraisal.

Think like a bank! Do not accept any verbal promises to induce you to sign a written document that you will be stuck with.

You have my concerns. Please let me know if you need more information or clarification.

Be careful.

Tom