When a homeowner in distress approaches me as a mortgage broker, their goal is to find a solution. I listen to their concerns, understand their situation and connect them with an expert to provide a free comprehensive market study called a “comparative market analysis” to determine the value of their home.
Are You Worried About Debt?
As a professional, my job is to give my clients the best advice and guidance I can based on my experience and education. In other words, my goal is not to tell someone what they want to hear but rather the best actionable advice. One of the toughest situations I see in this industry is when a homeowner finds themselves in a situation where selling their home will not solve their debt problem.
Whether it is due to credit card debt, a bad divorce or a major market shift some owners can get stuck.
Imagine someone has $50,000 in credit card debt and the interest payments are pushing them to the edge. They reach out to me to investigate selling their home and we run some numbers.
After they pay off the mortgage, the mortgage penalty, realtor fees, taxes etc. they are left over with $13,000.
Selling their home will leave them with no home and $37,000 in credit card debt… not a solution.
There is another way they could potentially solve their problem.
The Agreement for Sale Strategy
There is a real estate strategy called “Agreement For Sale” that can allow homeowners to avoid mortgage penalties, realtor fees and to get cash quickly.
This is not a solution for everyone but can work for those who have their back to the wall.
An agreement for sale does not transfer title the day the property is sold but rather transfers the “beneficial interest”. The buyer takes legal control of the property (often with a limited power of attorney), assumes all responsibility for mortgage payments, property taxes, maintenance, insurance etc.
A date will be set in the future, often at the renewal date of the mortgage where the buyer will pay out the existing mortgage and take over legal title of the property.
The seller gets released from all costs of the property, may get a cheque within days to relieve their financial stress and walks away from the property.
A less than perfect solution for some, but an unconventional lifeline for others.
Key Notes on The Agreement for Sale Strategy
1) This is a real and legal way to buy/sell a home. There are very experienced real estate lawyers who specialize in this if you have legal questions.
2) The title of the home and mortgage stay in the seller’s name after the buyer takes control. At a future date set in the contract the buyer pays off the seller’s mortgage and takes over the title.
3) A legal agreement is put in place to protect the buyer and seller. Often limited power of attorney is setup on the property so the buyer can pay property taxes, manage insurance, and pay the mortgage.
4) The buyer often gives a cheque to the seller within 2-4 weeks.
If you have any questions about this strategy or need help solving a problem, you are facing let me know! We are hosting an event on October 5th where we will be discussing a different strategy but offering lots of free resources as well as taking questions on a variety of topics. Get your complimentary tickets here!