Humber/Ontario Real Estate Course 4 Exam Practice

Which is NOT a benefit of a seller take back mortgage?

1. It improves the marketability of a property, particularly in a sluggish market or when selling an unusual property.

2. Flexible interest rates and mortgage terms compared to a traditional lender.

3. Buyers can save on fees normally associated with arranging mortgages through conventional lenders.

4. The seller can always sell the mortgage at its face value.

The correct answer is: The seller can always sell the mortgage at its face value.

A seller take-back mortgage (STBM) is a financing arrangement where the seller provides a loan to the buyer to help them purchase the property. This type of mortgage can yield various benefits. The option indicating that the seller can always sell the mortgage at its face value is not a benefit of a seller take-back mortgage because it implies a guaranteed liquidity and return that does not reflect the reality of such transactions. When a seller take-back mortgage is created, it remains tied to the buyer’s obligation; the seller may have to sell this mortgage at a discount if market conditions or the buyer's creditworthiness necessitate it. Therefore, while sellers might have an option to sell their mortgage, the assertion that they can always do so at face value is misleading. The other benefits highlight the advantages offered to buyers in terms of marketability, flexibility, and cost savings, making them appealing attributes of seller financing strategies in real estate transactions.