Here we are in the middle of the summer. Was this supposed to be the year you were going to buy a home? The interest rates have climbed so fast!! Should we wait until they come back down again?

I think that any realtor will attest to the fact that now is the time to buy! Because rates have escalated so quickly, vendors have resigned themselves to granting special deals just to get rid of their houses. While vendors are in a precarious position, purchasers are seeing great opportunities. Let's look at some ingenious ways to purchase with vendor assistance. Never negotiate on price! Negotiate on terms! Let's take an example...Bob is asking $150,000 for his bungalow in the south end of town. If I were to negotiate on price, I may be prone to offer $140,000, given the market situation. If I were able to buy this property for $140,000, I have just managed to lower the value of the whole neighbourhood. If I were to offer Bob $150,000 for his property, and get Bob to grant a credit on closing of $10,000 to help me "freshen" the home before moving in, pay for my closing costs, and even pay for the move, the net result remains the same.... I, the purchaser, have only spent $140,000 for the home. The value is in the registered sale price, $150K versus $140K. The whole neighbourhood goes up in value rather than down. There are also some psychological advantages to this type of offer. The Vendor always reads the purchase price prior to the conditions of the offer. If he (the Vendor) sees that you have only offered $140,000 for his $150,000 house, he starts off by feeling cheated. If he first reads $150,000 as the offered price he feels honoured. To you, the Purchaser, it really makes no difference.

Using the Vendor-Take-Back advantage during a recession can be very interesting. Vendors are much more prone to accepting "weird" (creative) offers during a recession than otherwise. Let's look at an example... Bob is selling his home for $150,000! You, the Purchaser, knows that unless you have $37500 as a down payment (25%), you must pay the CMHC high ratio insurance cost (up to 2.5% of the amount of the mortgage). Alas you only have $15,000 down (10% of the purchase price). Don't negotiate on price! Ask Bob, the Vendor of the property, to grant you a second mortgage of $22,500 (that's the difference between the amount you need down and the amount you have down). Ask Bob to give you a second mortgage at the same rate or less than the first mortgage, for a period of three years or longer. When you refinance in three years to pay Bob the amount owing, the house will have gone up in value. This being the case, the loan to value ratio may be below 75% therefore, you will not have to pay the CMHC high ratio insurance premium. For the Vendor, he got full price for the house. For you, the Purchaser, saving the high ratio insurance premium is probably worth $10,000 to $15,000 over the life of your mortgage and your property value remains high. Everybody wins!

Due to the complexity of dealing with the Vendor-Take-Back product, any perspective purchaser would be well advised to seek the assistance of a knowledgeable Real Estate Agent.