Trust account required on RTO option payments?
- Thread starter neill
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Some brokers like to complicate things. You need not hold option payments in a trust account. Once the tenant has been approved for a mortgage to purchase the property from you, the bank will likely require the purchase deposit (formerly option payment) to be put in your lawyer's trust account. That has always worked for us.
We also provide a ledger to the bank showing when all option payments were received. The bank is then able to cross-reference with the original option agreement and the tenant's bank statements to ensure the option payments were paid as agreed. This serves to prove down payment. The money being placed in the lawyer's trust account shows the money exists in reality rather than only on paper.
We also provide a ledger to the bank showing when all option payments were received. The bank is then able to cross-reference with the original option agreement and the tenant's bank statements to ensure the option payments were paid as agreed. This serves to prove down payment. The money being placed in the lawyer's trust account shows the money exists in reality rather than only on paper.
- Joined
- Oct 22, 2007
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- 2,803
It doesn't say so on the requirement list I have, but things can change.
Keep in mind many brokers want you to do (or to have done) everything they can possibly think of that may be required (such as a caveat registering the option on title or having a market rent appraisal from the outset of the option), and they try to claim CMHC won't approve the deal without it. However, none of my clients have registered caveats and they get approved without hassle through my banker.
Perhaps these brokers figure they will demand you submit everything just in case it is required because they don't want to risk the mortgage being declined. This plan backfires when the client cannot provide all the items on the list. The result is there are a lot of brokers scaring RTO clients by saying the deal can't be done, and making people think they "made the worst mistake of their lives by getting into an RTO."
Keep in mind many brokers want you to do (or to have done) everything they can possibly think of that may be required (such as a caveat registering the option on title or having a market rent appraisal from the outset of the option), and they try to claim CMHC won't approve the deal without it. However, none of my clients have registered caveats and they get approved without hassle through my banker.
Perhaps these brokers figure they will demand you submit everything just in case it is required because they don't want to risk the mortgage being declined. This plan backfires when the client cannot provide all the items on the list. The result is there are a lot of brokers scaring RTO clients by saying the deal can't be done, and making people think they "made the worst mistake of their lives by getting into an RTO."