Humber/Ontario Real Estate Course 4 Exam Practice

In a seller take-back mortgage, the seller agrees to:

1. Allow the buyer to assume an existing mortgage.

2. Become the lender and finance the sale themselves.

3. Follow the same qualification steps required by a bank.

4. Initiate a buyer-financed condition for sale.

5. Offer a mortgage contingent upon market conditions.

6. Provide a second mortgage to the buyer.

The correct answer is: Become the lender and finance the sale themselves.

In a seller take-back mortgage, the seller effectively steps into the role of the lender by financing a portion of the purchase price for the buyer. This arrangement allows the seller to support the sale directly, often making it easier for the buyer to secure the necessary funds to complete the transaction, especially if they may not qualify for a traditional mortgage from a bank or financial institution. The seller will agree to lend the buyer a specific amount, which is typically secured by a mortgage on the property itself. This type of financing can be beneficial for both parties: the buyer gains access to the property while often requiring less upfront capital than traditional financing would necessitate, and the seller can potentially facilitate a quicker sale, sometimes obtaining a better price or terms. Other options presented do not accurately describe the essence of a seller take-back mortgage. For example, allowing a buyer to assume an existing mortgage is unrelated to the seller financing a part of the purchase price. Similarly, following bank qualification steps or setting conditions based on market factors does not embody the direct lending nature of a seller take-back arrangement. Thus, the seller take-back mortgage distinctly characterizes the seller becoming a lender in the transaction.