31 May

PURCHASE PLUS IMPROVEMENTS – YOU JUST FOUND YOUR DREAM HOME… SORT OF.

General

Posted by: Mike Hattim

In a competitive real estate market or a market that is suffering from a lack of available listings, the Purchase Plus Improvements mortgage could be your saving grace. Regardless of whether you’ve just started your search for a new home or if you’ve been hunting for months, this is something that you should be thinking about each time you walk into a potential house.

Of all the homes that you’ve looked at so far, you have likely walked into at least one home by this point and said to yourself: “Well this house looks great, but if it wasn’t for that incredibly dated _______”. You fill in the blank here… Kitchen, bathroom, flooring, basement, etc. If you have passed up the opportunity to purchase that potentially perfect property because of the costs of required improvements, it’s important that you know there is a solution to your problem. Enter, the Purchase Plus Improvement Mortgage.

In a nutshell, a purchase plus improvements mortgage allows you (the home buyer) to roll the costs of improvements into your mortgage. The new mortgage allows you the ability to finance those much-needed repairs and get you into that home of your dreams! The mortgage comes with a great interest rate and one simple mortgage payment. Had you chosen to purchase the home and not include the renovation costs into the mortgage, then you might end up financing the improvements on a higher interest rate unsecured debt which also give you a second payment to make each month.

The first step to take is a conversation with your Dominion Lending Centres mortgage broker about specifically how that Purchase Plus Improvements Mortgage would apply to your application and specific situation. Understanding the types of improvements that can be included in the financing will help you better understand which potential houses might work great for you.

Working with your Realtor, the mortgage broker will help guide you through the final approval process. The main difference between a Mortgage vs. a Purchase Plus Improvements Mortgage is the need for quotes. As part of the verification process, your mortgage broker and the lender will need to see a quote for the work that is planned for the improvements. The quotes will provide us with the cost and plan details required to secure the final approval. Getting you into a house of your dreams!
If you have questions about how a Purchase Plus Improvements Mortgage could work for you, take the time to connect with our team anytime!!

By Nathan Lawrence

30 May

WHAT IS REFINANCING AND HOW IT WILL CHANGE YOUR CREDIT?

General

Posted by: Mike Hattim

The need to refinance your mortgage can be for many reasons. Whichever the reason you are refinancing, there are a few things to consider. One of the top questions we are asked as a Mortgage Broker is “will refinancing hurt my credit?” The answer to this question brings cause for a closer look at the refinancing process in itself.

First, you need to know that when you refinance there will be consequences outside of affecting your credit. To refinance you are essentially restructuring terms of a contract and therefore a penalty will apply.

Every lender is different in how they calculate penalties, but in general:

• Breaking a fixed mortgage will result in you paying the interest associated determined by the current interest rate for the remainder of your term or three months’ interest. Whichever of the two are greater.
• Breaking a variable mortgage will result in you paying out three months’ interest.

There are also limitations on the amount you can borrow with refinancing against your mortgage or tapping into your home equity line of credit.

• For borrowing or securing a line of credit against your property you will borrow up to 80% of the appraised value of your home, less the mortgage you have.

• For a Home Equity Line of Credit, you can take out a line of credit up to 65 per cent of the value your home, with the total Home Equity Line of Credit and mortgage totaling 80 per cent.

Now that we have covered the penalty and borrowing limitations, we can tackle the true question—will refinancing change my credit?

The answer to that is yes. No matter how you look at it, debt is still debt. Whether you are looking to refinance to gain access to your home’s equity, gain a better rate, or utilize your home’s equity for investment purposes you are still borrowing money thus your credit is going to change.

Let’s take a look at 3 examples to put this into better perspective.

No matter what your reason for refinancing, remember that debt is still debt and you credit may be impacted.

We advise that before you refinance consider the reasons you are doing so. Ensure they are justified. For example, if you are refinancing to do a much needed home renovation, purchase an investment property or pay for your child’s university tuition then those are all wonderful reasons for refinancing. On the flip side, refinancing to take a family vacation—maybe not a good reason. Look at what your reasons are and then decide if this option is the right one for you.
As always, Dominion Lending Centres is here to help! Give us a call and we can help you navigate your refinancing.

By Geoff Lee

29 May

THINKING OUTSIDE OF THE BOX – BLANKET MORTGAGES

General

Posted by: Mike Hattim

When someone calls me up out of the blue for a mortgage , I often ask them, “Why did you call me?”
Often the reply is that a family member suggested it. I then ask, “Do you know what I do?”
Once again , I will get a reply that they aren’t sure. I will then explain to them that while banks do mortgages, they don’t specialize in them. They also do deposits, GIC’s, RRSP’s , insurance ,car loans etc.
I only do mortgages, day after day. As a result, I have more experience in unusual situations and we are getting more of them all the time. Sometimes you need to think outside of the box.
Here’s an example, Sally and Ted want to buy a home but they don’t have a down payment. A recent study found that 37 per cent of young Canadians count on the Bank of Mom and Dad for their down payment.
Unfortunately in many cases, Mom and Dad would like to help them out but they don’t have the cash.
They own their home or have a low mortgage balance but their savings are tied up . This is where thinking outside of the box comes in handy. A blanket mortgage is a mortgage that covers the subject property and another property that has sufficient equity in it to carry both properties. If the parents are willing, a mortgage can be placed on the parents home and the new home. If the property value for the two homes is more than 80 per cent of the mortgage amount the new home can be purchased without the young couple having to save a down payment and pay expensive CMHC fees.

What risks or down sides are there to this idea? If Mom and Dad want to sell their home and move to Arizona, the children will have to get a new mortgage to cover their home. There may be penalties for breaking the mortgage which will have to be paid. There’s also the risk that the children may fall behind on their mortgage due to layoffs or maternity leaves and that could jeopardize the parent’s home.

Is a blanket mortgage a good idea for everyone? No. Discuss your issues with your mortgage broker and they may find this to be the best solution for you or they may suggest something else is better for you.

By David Cooke

26 May

HOW MORTGAGE RATES WORK

General

Posted by: Mike Hattim

Ever wonder how your mortgage rate is determined? What factors make it jump from percentage to percentage? We are getting down to the nitty gritty today and giving you the facts on what impacts mortgage rates.

What affects a Mortgage Rate?

There are 10 factors that affect a mortgage rate:

1. Location
Depending on which province your home is located in, this will have an overall effect on your mortgage rate. Generally speaking, provinces with more competitive markets will have lower rates.

2. Rate Hold
A rate hold is a guarantee on a rate for 90-120 days. If your closing dates do not fall within this timeframe, then your hold will be re-assessed. If your rate hold is re-assessed and the lender’s rates at that time of re-assessment are higher than your initial rate, then your rates will go up accordingly. We always follow up with all of our clients on a regular basis to avoid this situation whenever possible!

3. Refinancing
Movement on your mortgage of any form can affect your rate typically when you are working with your existing lender. New buyers will have lower rates than refinances, but refinances will have lower rates than mortgage transfers. Mortgage Brokers can access multiple lenders to find the most suitable product for their client’s unique needs.

4. Home Type
Lender’s assess the risk associated with your home type. Some properties are viewed as higher risk than others. If the subject property is considered higher risk, the lender may require higher rates.

5. Income Property/ Vacation Home
As previously mentioned, lenders assess the risk on your property. If you are buying an income property or a vacation home than the lender can assess at a higher risk and a higher rate may apply. This is one of the major benefits to having a mortgage broker on your team! They have access to a variety of lenders that can offer you a rate lower than others as they can compare a large variety.

6. Credit Score
We have talked a lot about credit on our blog, and there is a reason for that. Your credit score is a large determining factor for your rate. Lenders want to see that you have a history of managing your credit well and that you will be able to pay back the lender overtime. For more information on fixing your credit, check out our free e-book, Credit Medic.

7. Insured or uninsured
With the changes that the federal government made back in October 2016 this has had a significant impact on mortgage rates if your mortgage is insured or not. Read our Change of Space guide to find out the full impact of these changes.

8. Fixed/Variable Rate
The type of rate you are wanting to get will also affect your rate. Fixed rates are based on the bond market and variable rates are based on the Bank of Canada (economy).

9. Loan to Value (LVT)
The higher the Loan to Value the higher the risk. You can have someone who has a $1 million mortgage but has $2 million in equity in that property and they would be viewed as a lower risk than someone who has a $200,000 mortgage and their property is only worth $220,000. To boot with the federal changes, the person with the higher risk mortgage (insured) is likely to get a more competitive interest rate than the client with $2 million in equity.

10. Income level
The final part in this rather large equation is your income level. Although this does not necessarily impact the rate itself, it does impact your purchasing power and the amount you are able to put down on a home. Essentially indirectly impacting the rate.

Each of these factors plays a factor in the rate you will be able to get through a lender. The easiest way to get the lowest rate is to work with a dedicated mortgage professional. They will put together a fail-proof plan to get you the sharpest rate. They also have access to a variety of lenders which saves you the time and trouble of shopping for your mortgage on your own. As a final point, mortgage brokers can also assess your unique situation and find the right mortgage for you. Their goal is to see you successfully find and afford the home of your dreams and set you up for future success.

By Geoff Lee
25 May

THIS VS THAT 8: RENEW OR SWITCH LENDERS

General

Posted by: Mike Hattim

Renew (the mortgage industry meaning): to remain with the current lender by simply signing the renewal letter that comes in the (e)mail.

Switch (again, the mortgage industry meaning): to move from the existing lender to a different lender without leveraging any additional funds/equity; the outstanding balance remains the same.

Is renewing your mortgage with the current lender the best option, or should you consider switching to a new lender? The answer is provided with some simple math. As mortgage consumers, we want to save as much money as possible, plain and simple.

Seventy percent of borrowers that currently hold a mortgage simply sign the renewal letter they get. Most of the time they are leaving 20 – 40 basis points or 0.20% – 0.40% on the table. This puts millions of dollars back into the pockets of the lenders and their shareholders.

There are times when the current lender does not offer the best market rate or product for your situation. How will you know you are getting the best rate for your scenario? By contacting Dominion Lending Centres Mortgage Professional who works for you… not the lender.

So first things first: contact your DLC Mortgage Broker four months before the term matures to discuss the next term’s strategy. What do the next two, three or even five years look like? This will then lead to an interest-rate discussion. Can there be some money saved?

I have been working with a client over the past couple of weeks as her current mortgage is coming to maturity. Had she just signed at the bottom of the renewal letter she would have been overpaying by 30 basis points.

Current lender offered 2.84% for a 5-year Fixed term (Renew)

New lender offered 2.54% for a 5-year Fixed term (Switch)

Here’s what that looks like. Note the mortgage balance used was $330,000 (25-year amortization). This just happens to be the average mortgage amount in British Columbia.

Monthly Payment Annual Payment Payments Over 5 Yrs O/S Balance After 5 Yrs Interest Paid
2.84% $1,534.74 $18,416.88 $92,084.40 $281,194.12 $43,278.52
2.54% $1,484.87 $17,818.44 $89,092.20 $279,529.82 $38,622.02
Total Savings $49.87 $598.44 $2,992.20 $1,664.30 $4,656.50

The biggest saving is in the total interest saved over 5 years. At the end of the day this borrower saved $4,656.50. Guess what she decided to do? Yes, SWITCH lenders.

In this scenario, it will cost the borrower $0 to make a switch. Would you put four 1000-dollar bills, six 100-hundred-dollar bills, one 50-dollar bill, one five-dollar bill, one loonie and two quarters in the fire? No, you would not.

Bottom line, make sure you have a discussion with your independent Mortgage Broker before (potentially) burning thousands of dollars.

By Michael Hallett
24 May

SELF EMPLOYED? 8 TIPS TO HELP YOU QUALIFY FOR A MORTGAGE

General

Posted by: Mike Hattim

Since 2012, it’s become the wild west of mortgage options out there for those folks who are living the Canadian dream of being Self Employed (also known as BFS, Business for Self). 

In 2012, the Office of the Superintendent of Financial Institutions introduced Guideline B-20, which required federally regulated banks to tighten the rules for approving mortgages. Without boring you with what that mortgage jargon translates to you, the bottom line means you “generally” have to qualify now from your Line 150 of your tax return. That’s NET income, not GROSS income.

Don’t freak out yet! There is good new below…

As BFS folks, one of the perks of being self-employed is we don’t pay as much in taxes as we have business write offs we can use to lower our GROSS income. We are now being penalized with many lenders with higher rates and fees with these new rules.

I wish there was a simple book with straight up rules for the BFS mortgages, but there really isn’t.
Why?
• It depends on your credit
• It depends on where your income is coming from and how long. Is it commissioned, contract, invoiced, under the table or under your mattress?
• It depends on your down payment.
• It depends on so many factors…hence you really need a mortgage consultant who really understands BFS mortgage programs.
There are a few programs you may fit under: Stated Income, BFS Conventional, or Alternative or Private lender. All of them are slightly different, but you will fit somewhere with someone.

Not to pick favourites, but here are a few lenders and their programs (through your Dominion Lending Centres mortgage professional):
B2B Bank has a fantastic BFS Expanded Program (actually nine in total) that allows 12 months of bank statements showing income vs those Notice of Assessments. They also don’t charge any mortgage premiums or fees!
Street Capital has an insured Stated Income to 90% (i.e. 10% down payment) program. You have to be two years in business filed, 5% of your down payment has to come from your own savings, and no “commissioned sales” folks here.

Common Questions I get:

Q: I was working with a company as a computer systems analyst for the past three years. Now I am self employed as a computer systems analyst. Can I still qualify for a mortgage with less than two years as filed self employed?
A: Yes, as long as you are in the same job role, you should have no issues.

Q: I heard you need 20% down to qualify for Self Employed Mortgage.
A: There are a few lenders that allow for 10% down now.

Q: I am a waitress and make most of my money in tips. How can I use this to qualify for a mortgage.
A: If you’re not declaring your tips on your taxes, then some lenders will look at 6 months deposits into your account.

Q: Can I refinance to pay off my Canada Revenue debt I owe:
A: Yes, very common practice.

Kiki’s Korner of Self Employed mortgage tips:
1. Keep your business money deposited in one account. Separate your expenses and your income accounts.
2. Leases or Loans on vehicles for business should come out of your BUSINESS account.
3. If your company is paying you a “stipend” or “allowance” for you vehicle, make sure it’s taxable income. You will need two years to use this as income.
4. Make sure your invoices match your deposits.
5. When depositing “other monies” i.e.: tips, tag it on your deposit slip so it shows up online with your deposit.
6. Keep important documents such as articles of incorporation, GST/HST registration or business licence in one folder with all your tax returns. Keep records for three years from the date you filed your original return or two years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return. Keep records for seven years if you file a claim for a loss from worthless securities or bad debt deduction. Be organized.
7. If you’re not filing business financials, file T2’s if you are incorporated. Filing business financials may be more expensive, but worth it for mortgage qualifying with more lenders.
8. If you pay yourself dividend income, you will need two years of this form of income.

If you’re in business for yourself, congratulations! Keep up the good work. There are many moving parts to planning and qualifying for a self-employed mortgage, so if you’re just starting to look at the idea of a mortgage – plan NOW!

I too am self-employed and work with many professionals such as lawyers, doctors, pharmacists, management consultants and self-employed folks such as truck drivers and waitresses. You’re all important and have different incomes we can use to make your dream come true.

By Kiki Berg
23 May

MORTGAGE FACTS TO KNOW BEFORE YOU BUY THIS SPRING

General

Posted by: Mike Hattim

Buying a home can be a really exciting time, so the last thing we want is for you to be hit by any surprises. Let’s take a look at five things to keep in mind before you write an offer.

  1. Get your mortgage in place before you write an offer. Meeting or speaking to an actual person who will take your application and pull your credit is the best strategy. You will get a firm amount of how much of a mortgage you may qualify for. This is also a great time to make some decisions like if you want a fixed rate or variable rate, if you want a monthly or biweekly payment. You are far removed from stress of meeting any condition of financing dates at this time so you have the luxury of time to ask your questions.
  2.  Be ready to provide the necessary paperwork. If I was lending someone $300,000 I would want to know that they could pay me back and so would you I’m sure. You are going to be required to provide a lot of paperwork. Getting a complete list ahead of time and starting to gather it really makes it less stressful for you once the offer is accepted.
  3.  There are extra costs. It is not just a matter of having the down payment. You will also have to pay for legal fees, title insurance, property tax adjustment if necessary, mortgage default premiums and on and on. That is why you have to have at least five per cent down and an additional 1.5 per cent of the purchase price in your account to cover these costs. The banks also really like to see that you have a fallback position of extra cash in case you get sick or downsized.
  4.  You can get extra funds for improvements to the new home added to your mortgage. Most lenders allow up to $40,000 for upgrades. These have to be things such as flooring, windows, exterior, kitchen, bathroom or any other manner of upgrade which will stay with the property. The funds are held at the lawyer’s office until an appraiser verifies the work is complete so you will have to be able to cover any costs in the short term.
  5.  Here is how the process goes.

• You get the mortgage pre-approval
• Find a home and place an offer with a condition of financing date and likely a home inspection one as well
• The application is sent off for approval based on both you and the property and you provide all the necessary paperwork
• The bank says they are 100% happy with you and you say you are 100% happy with the offer of financing and you remove the financing condition. Do not make any changes to your financial picture after you remove the condition. It can be cancelled if you leave your job, take on more debt or rack up the credit cards.
• You meet with the lawyer to provide the balance of the down payment, cover the other costs
• Day of possession you are given the keys once it is confirmed that the funds have transferred to the seller
• Congrats! You own an home

This has been a crash course in buying a home, but there are so many resources online or available to you for free over the phone that it shouldn’t be too awful. Happy house hunting and we look forward to helping you at Dominion Lending Centres!

By Pam Pikkert
19 May

STUCK IN A HIGH RATE 10 YEAR FIXED MORTGAGE?

General

Posted by: Mike Hattim

With low rate offerings over the past several years and a struggling economy, some homeowners chose to lock into a longer term mortgage even if the interest rate was a bit higher. If you are one of those people who feel stuck in a high rate 10 year fixed mortgage you may be wondering if you have options. The answer is YES.

Let’s consider the case of Dan and Anita who own a home and refinanced their mortgage 8 years ago into a 10 year term. They wanted to consolidate their high interest credit cards and their mortgage into one lower monthly payment and be secure with that monthly payment for as long as possible.

The news was painting a picture of doom and they wanted to take advantage of the “record low” rate of 5.25% for 10 years. Over the past few years they have watched the shorter term rates for 5 year term mortgages continue to drop to under 3% and they feel they may have made a poor decision. But since they feel they are stuck in a high rate 10 year fixed mortgage with the potential of a high penalty to get out of the mortgage they have chosen to stick it out. The monthly payments are $1,644 which they can afford but the potential of payments at under 3% for the remaining 5 years would be $1,304 (based on the remaining amortization) which is hard to pass on.

A friend told them to talk to her mortgage broker to see what real options they had. After talking to the broker they learned the penalty for terminating a 10 year mortgage after 5 years is only 3 months interest or $1,200 in their case (and legal fee of about $600). Dan and Anita were stunned they had missed this in the fine print of their mortgage agreement. And to top if off this policy is determined by law and not by the lender. This was great news for the happy couple. The broker also ran numbers to show them how they could further take advantage of the lower interest rate and increase their monthly payments to pay off their mortgage faster.

By increasing the payment by 20% – which was still lower than what they were paying before and paying bi-weekly instead of monthly, they lowered their interest costs by $20,000 over the next 5 years and reduced their amortization from 25 years to 12 years!

The morale of this story is, if you are stuck in a high rate 10 year fixed mortgage and you are close to the 5 year mark, you should talk with your Dominion Lending Centres mortgage broker (I and see what options you have to save yourself some money on your mortgage. What would you do with a savings of over $20,000?

By Pauline Tonkin

18 May

PREPARE, PREPARE, PREPARE

General

Posted by: Mike Hattim

Every year since October 2008 it’s become more and more difficult to obtain a mortgage. The government claims to be casting a safety net over the Canadian housing industry via stiffer mortgage regulations. What do you need to know to help prepare yourself for a home purchase, refinance, debt consolidation, or even a simple renewal? Well the biggest item I cover on a daily basis is preparation.

It can take a client weeks or months to find the confidence to connect with a Mortgage Professional once they feel confident that they ready to obtain that next mortgage. Any Mortgage Professional worth their salt will be able to guide their clientele to prepare them properly for the mortgage.

Typically most people think they need to prepare themselves most for their first purchase, however preparing for each mortgage these days is more critical today than ever before. When Canadians finally make that call, they want a step by step process to solve their solutions in an easy manner, but are seldom prepared to proceed.

During my regular daily routine, I follow up with my clients with gentle reminders to send me the requested documentation list. Having done this for ten years, the process is quite similar for almost each individual even though the main list of documentation remains the same.

We all want to take short cuts to get to the finished product, but in the end, the banks and lenders have become governed so much so that the short cuts are almost non-existent therefore, preparing the proper document package is essential to an essential mortgage. As Arnold Schwarzenegger said recently in an interview I watched on Facebook, we need to stop taking and thinking about short cuts. There aren’t any to success.

What I’m getting at here is that when your Dominion Lending Centres Mortgage Professional provides you with a mortgage document checklist, please don’t take it for granted, please follow each and every step carefully.

In general, the most common documents required are dependent on what you do for work. So if you are an employee, then the most recent paystub, and an updated employment letter along with the most recent two years of T-Slips (whether they are T4’s from employer’s, T5’s and pension slips), T1 Generals -the entire document (the documents your accountant prepares to submit to Canada Revenue Agency), Notice of Assessments (the form you receive back from CRA after your file is completed). Then there will be the verification of down payment via 90 days of bank statements, any mortgage statements, property tax assessments and the list can go one. The most common mistake is providing a mix and match of the above documents to try and piece together your income story. Depending on how your income is structured, we may be able to provide you with a near pre-qualification but lenders are being more adamant of having the documentation upfront, so that they are using their time, along with the mortgage insurer’s time. As a rule of thumb, the cleaner the file, the easier it is to underwrite and make a proper decision.

Common mistakes include, missing pages from tax documents, poorly written, unsigned, undated, missing info on employment letters (handwritten ones draw huge red flags), cut off pages from documents, out dated items(paystubs and employment letters over 30-60 days is pretty much null and void these days).

You may not know how to prepare yourself, but that’s also what we are for. We are essentially mortgage guidance counsellors to help prepare you for mortgage success, but if we are trying to obtain a mortgage via shortcuts, you’ll be upset with how the process goes.

We all used to have more leeway with mortgage documentation, but it’s clear the government is having banks and lenders scrutinize every mortgage more carefully now than ever before. And the banks and lenders have to oblige as they will be audited, if they don’t pass audits, then they lose out. And if they lose out, we lose competition. Yes this is the new normal, yes it’s tiring, no we don’t like it either, but it’s our new reality. And realistically, is gathering a few extra documents really that bad? Mortgages are not a given right and earned more so than ever before in our recent history.

Our job is to help you prepare for the mortgage, sometimes it will take one meeting, sometimes it’ll take weeks or months, even years depending on your own personal financial situation. But we can provide the recipe to help you prepare, but it’s up to you to do the cooking.

By Jean-Guy Turcotte
17 May

WHAT HAPPENS WHEN A HOME SALE FALLS THROUGH?

General

Posted by: Mike Hattim

Every homebuyer eagerly anticipates closing day. With the home purchase process completed, ownership of the property transfers from the seller to the buyer – you!

Closing date is negotiated as a condition of sale. You’ll typically have several weeks between the date that your agreement to purchase (sales contract) is signed and your closing date.

During that time, you and your real estate team will work to ensure that all the conditions of the sale are met so you can take possession on the agreed-upon date.

But what happens if a home sale falls through and you are unable to close?

Reasons why a home sale could fall through

It’s worth noting that the vast majority of purchase agreements close as expected. But the most common reasons why a sale may fall through are the following:

  • The homebuyer fails to qualify for a mortgage.
  • The homebuyer makes an offer to purchase a home based on the condition that they can sell their existing property first – and fails to do so.
  • The homebuyer’s lender appraises the property at a value significantly lower than the agreed-upon purchase price. If the buyer can’t make up the shortfall from savings or the seller won’t lower the price, the buyer can no longer afford the property.
  • There are title insurance or home inspection surprises. If a title report shows claims against the property or if a home inspection reveals serious flaws, it will jeopardize the sale.
  • The homebuyer gets cold feet, changing his or her mind for any reason.

TIP: The best way to reduce the odds of failing to close on a home you want is to get mortgage pre-approval from the mortgage professionals at Dominion Lending Centres before you start house hunting.

Avoid making an offer on a potential money pit by scheduling a pre-sale inspection.

Your home sale falls through. Now what?

If you ever experience a sobering “it’s just not gonna happen” moment, contact your REALTOR® immediately.

If appropriate, they will send the seller’s agent a mutual release form, which releases both parties from the purchase agreement. As the buyer, you will endeavor to get your sales deposit back, and the seller is free to sell the home to someone else.

Problems arise if the seller refuses to sign the mutual release form.

Who gets the deposit?

If the seller refuses to sign the mutual release form, your deposit, which is held in a trust account, remains in trust until it is released by court order.

A disgruntled seller may decide to sue for damages that result from the failed purchase agreement. For example, they may end up selling the property to another buyer for less, resulting in a financial loss.

Or let’s say they purchased a home conditional on the sale of their existing home, and because you backed out, they either fail to close on that home or they must take out bridge financing to save the sale. They’ll probably want compensation for the extra costs and hassle.

While failure to close is an uncommon occurrence, it causes headaches for both buyers and sellers. Try avoiding it by getting mortgage pre-approval before you start house hunting, and by booking a pre-sale home inspection.

Most important, hire a real estate team. These experts can use their experience and professionalism to guide you through your sale, managing any bumps along the way.

By Marc Shendale