need some help with forms and structure of quickturn deal in ontario

[MichaelDunbar]

hello fellow quick-turners,



I'm in need of some advice. I have a typical quick turn deal on the go, where seller has agreed to sell their house for what they owe on it. i would take over the payments and turn around and lease option it to an end buyer. (probably a 4 year term). the maths work, but i'm just not sure how to proceed with which forms to use and if i purchase with AFS OR do a lease agreement with seller with an accompanying option to purchase document. it seems that quickturn is much more complicated in ontario than those out west who are successfully doing the same. The real issue is that seller needs to have a document that provides sufficient proof that their mortgage payments are "taken care of" and this won't affect them getting a mortgage on their new home. What are the advantages /disadvantages with purchasing via AFS or doing lease long term with option to buy? If you have done something like this in ontario, maybe you could be kind enough to share which lease option docs you used and option docs. or which AFS docs you used? i've gone through the rein documents and i'm uncertain which ones are appropriate here.



would appreciate some advice,



regards,

mike

michael.dbar@gmail.com

 

[MichaelDunbar]

was it something i said? not a peep? it would really help if someone had some advice..



mike

 

[RonNoblett]

Mike

There is a lawyer in Burlington familar with QT, a number of QT'ers use him. Peter Cass 905 632 7744 x 3818.

Good Luck and keep us posted

Ron

 

[AndreaW]

Mike,



Doing an AFS means the house is sold with seller financing and you are legally obligated to make the payments and cash him out when it comes to closing time.



Doing a sandwich lease means less security for the seller as you are not obligated to exercise your option to purchase. Sandwich lease gives you less responsibilty if your tenant buyer never buys, neither do you.



It is in the Seller's best interests to do an AFS. I prefer an AFS over sandwich. The paper work for an AFS is the purchase and sale agreement with an extra page to cover financing details. Your lawyer will write up a formal Agreement For sale doc which basics is similar to a mortgage document and lays out what happens if you don't make the payments.

 

[Thomas Beyer]

[quote user=mughals]What are the advantages /disadvantages with purchasing via AFS or doing lease long term with option to buy?


AfS is an agreement FOR (future) sale. It is quite secure for the seller, as you agree to pay him a certain amount monthly, usually higher than his mortgage payment. You wrap your interest in the proeprty around the mortgage, via caveat. hence it is also referred to as a "wrap mortgage". Essentially you act like the owner, as you are now the beneficial owner, although legally the seller still owns it legally and stays on title. It is far more certain than a lease and an option, as with a lease you are a tenant, with all benefits and legal obligatioon staying with owner/seller, until you exercise the option to buy.



A lease plus option is more flexible for the buyer, but it is less certain for the seller. Kind of like getting engaged, but not married.



To break an AfS is more costly, like a marriage. Possible, but higher cost !



So: it depends what you and seller want and can agree on !

 

[MichaelDunbar]

thanks for the replies. thomas, i like the analogy comparable to a marriage!! i'm definitely catering more towards the afs route as it seems to be more certain than a lease option. has anyone had experience with a seller where an afs agreement was enough for them to go and qualify for a loan to purchase another home?



one of the other concerns i have/had was this: if you purchase via afs, you are actually purchasing at a later date(in the future) and taking possession now. the goal is to find a buyer to rent-2-own with a closing date ideally that corresponds to the maturity of the sellers mortgage...let's just say 3 years. in those 3 years buyer "qualifies" and you aim to do a single transfer of land to end buyer. this seemed to me like a simultaneous close. the reason this scares me is because we purchased a property for really cheap, found a buyer no problem and attempted to do a simultaneous close. Which didn't work, flat out! seller's lawyer would under no circumstances issue the title redirection for the increased consideration amount. we were able to save the deal(just barely) by doing a conventional close and close again in a few days to buyer. but with a property worth more, this is probably not possible if you cant come up with that amount of money. so would you have a problem in ontario closing to buyer in the end after you've purchased via AFS? (drawing on the similarities between the above mentioned simultaneous close and the completion of an AFS). is this countered by the registratino of notice on title? does this give you more control to "re-direct" the title in the end?



lot of thoughts here, i hope it makes sense.....



mike

 

[AndreaW]

Mike,



I have done and AFS where the Seller used it to help them qualify for a mortgage on their next home. Now these people were also using the line of credit as their down payment and they had excellent credit. I'm in the process of doing another one where the seller can keep his current residence and still qualify for another mortgage on his next house. I think the key here is for the seller to have excellent credit and good household income.



In Alberta at least, the analogy that has been given to me by my lawyer is that a simultaneous close from the seller to you to your tenant buyer is similar to a developer who sells the land to a builder (whose name is NOT on the title) to the purchaser of a new home. What my lawyer does is fill out a document called an intervening transfer document that shows the title going from the seller to me to the buyer and all closing on the same day. Maybe you need to find a lawyer who understands simultaneous closes and is willing to work with the situation.

 

[MichaelDunbar]

thanks andrea for your input. that's comforting that your seller was able to obtain financing for another property with the AFS agreement.

i like the analogy of the builder/developer/end buyer and i'm aware of that one. i guess i'll have to search around and try to find a lawyer who thinks he can pull this one off in ontario. i think i'll repost this topic and see if i can fish for some responses from anybody who has done this in ontario..



cheers,

mike