Humber/Ontario Real Estate Course 4 Exam Practice

Which action should a real estate agent take if a financing clause involves an assumable mortgage?

1. Ensure the clause is written as a condition subsequent

2. Ignore lender's approval requirements

3. Specify terms meeting lender’s approval as a true condition precedent

4. Provide alternative financing options

5. Confirm the mortgagee's legal standing

6. Rely on lender’s discretion for terms

The correct answer is: Specify terms meeting lender’s approval as a true condition precedent

When dealing with an assumable mortgage, it is crucial for a real estate agent to ensure that the financing clause specifies terms that meet the lender's approval as a true condition precedent. This is because an assumable mortgage allows a buyer to take over the seller's existing mortgage under the original terms, which usually requires the lender's consent. By framing it as a true condition precedent, it clearly outlines that the transaction's success depends on obtaining the lender's approval for the assumption. This approach not only protects the buyer and seller but also aligns with legal standards and safeguards involved in real estate transactions. The importance of properly addressing this aspect lies in the necessity of adhering to lender requirements, which may include credit checks and income verification. Such a designation also ensures that all parties involved understand that the purchase is contingent upon the lender's approval, providing clarity and avoiding potential disputes later in the process.