Contract Purchase Addendums
Navigating Contract Addendums in BC’s Mortgage Market: A Guide for Realtors
Welcome to this week's roundup, where we delve into the essentials of contract addendums and their impact on mortgage proceedings in British Columbia.
Immediate Communication Is Key
First and foremost, any amendments made to contracts should be communicated immediately to the buyer's broker. Failing to do so could lead to a bottleneck at the notary or lawyer's desk, jeopardizing timely resolutions and potentially disrupting financing.
Consult Before You Negotiate
Post-inspection negotiations are a delicate part of the property-buying process. It's critical to involve the mortgage broker before renegotiating terms based on inspection discoveries. For example, lenders will undoubtedly require proof of asbestos or vermiculite remediation prior to completion and will stipulate this in the mortgage conditions.
Understanding Financial Implications
When it comes to renegotiating after an inspection, remember that a credit to the buyer for repairs is tantamount to a price reduction. The distinction is particularly important for clients with a down payment of 20% or less. A reduced price doesn't translate into instant cash for the client, as the mortgage amount may also need recalibration.
Red Flags and Price Adjustments
Credits to the buyer can raise red flags for lenders, prompting a barrage of inquiries. It's crucial to craft any addenda with care and consult with your mortgage and managing brokers to find the most suitable language for the situation.
Significant price adjustments post-inspection will lead lenders to request a copy of the inspection report. Keep this in mind to avoid any hiccups in the process.
The 120-Day Rule
A crucial point to note is the impact of date changes in contracts. Should a completion date be extended beyond 120 days from the original acceptance, this necessitates new credit checks and could lead to different rate offerings.
A Rule of Thumb
The takeaway here is clear: communication is paramount. Before drafting any addenda, discussing potential ramifications with the client's mortgage broker is not just recommended, it’s essential for the financial wellbeing of your client and the success of the transaction.
Stay informed and stay ahead in the ever-evolving realm of real estate. Until next time, continue leading with excellence in the mortgage industry.
Please feel free to email or call me with any questions.