I would extend with an amendment.
This will also give you the chance to clean up any issues there may have been with the original contract. For example, there are many RTO contract templates out there that show option deposits and monthly credits as non-refundable. CMHC will not finance these deals. They require a portion of the deposit and monthly credits to be listed as refundable.
I would consider increasing the rent portion of the contract if it makes sense with the market.
I would also consider increasing the purchase price if it makes sense with the market. I do this monthly so they can close at any time. For example, increase by .4% per month (or 4.8%) annually. Give your tenant/buyer incentive to close.
This will also give you the chance to clean up any issues there may have been with the original contract. For example, there are many RTO contract templates out there that show option deposits and monthly credits as non-refundable. CMHC will not finance these deals. They require a portion of the deposit and monthly credits to be listed as refundable.
I would consider increasing the rent portion of the contract if it makes sense with the market.
I would also consider increasing the purchase price if it makes sense with the market. I do this monthly so they can close at any time. For example, increase by .4% per month (or 4.8%) annually. Give your tenant/buyer incentive to close.
Hi;
Related to RTO option payments....what are people suggesting as their target downpayment these days? Counting on unchanged CMHC rules at minimum 5% down or suggesting a target of 10% down? I guess we've been seeing many doors being closed recently regarding mortgages...and in less time than the typical RTO term of 12-36 months. I'd hate for the buyer to get a surprise at the end of the term with their 5% accumulated, only to find out the CMHC rules changed on them. Am I worrying about nothing?
For the refundable option payment issue, until recently it seems, every or at least most RTO operators specified non-refundable option deposits. CMHC is forcing people to add wording to make them "partially" refundable. Is there getting to be a consensus on what is an acceptable wording and refund quantity for this? I'd still prefer 100% non-refundable! But I would guess that despite additional wording about a partial refund in the RTO contract....CMHC could still turn around anytime and say "nice try but it's not enough". So what's a believable number or percentage for CMHC? What's the minimum you can safely get away with?
Can someone post the exact wording that has worked for them recently?
Thanks;
John
Related to RTO option payments....what are people suggesting as their target downpayment these days? Counting on unchanged CMHC rules at minimum 5% down or suggesting a target of 10% down? I guess we've been seeing many doors being closed recently regarding mortgages...and in less time than the typical RTO term of 12-36 months. I'd hate for the buyer to get a surprise at the end of the term with their 5% accumulated, only to find out the CMHC rules changed on them. Am I worrying about nothing?
For the refundable option payment issue, until recently it seems, every or at least most RTO operators specified non-refundable option deposits. CMHC is forcing people to add wording to make them "partially" refundable. Is there getting to be a consensus on what is an acceptable wording and refund quantity for this? I'd still prefer 100% non-refundable! But I would guess that despite additional wording about a partial refund in the RTO contract....CMHC could still turn around anytime and say "nice try but it's not enough". So what's a believable number or percentage for CMHC? What's the minimum you can safely get away with?
Can someone post the exact wording that has worked for them recently?
Thanks;
John
[quote user=JohnSoucie]Hi;
Related to RTO option payments....what are people suggesting as their target downpayment these days? Can someone post the exact wording that has worked for them recently?
I try to structure the contract so that the tenant/buyer has at least a 10% deposit towards down payment. We have found that 5% simply isn't enough and will often require you to extend the contract. This may require a larger up front "option deposit".
[quote user=JohnSoucie]Hi;
For the refundable option payment issue, until recently it seems, every or at least most RTO operators specified non-refundable option deposits. CMHC is forcing people to add wording to make them "partially" refundable. Is there getting to be a consensus on what is an acceptable wording and refund quantity for this? I'd still prefer 100% non-refundable! But I would guess that despite additional wording about a partial refund in the RTO contract....CMHC could still turn around anytime and say "nice try but it's not enough". So what's a believable number or percentage for CMHC? What's the minimum you can safely get away with?
It is difficult to say for sure what CMHC will require in the future. For now, they require "a reasonable portion" to be made refundable. This leaves much to interpretation but they seem to be trying to find their way in all of this as well. I suggest that 25% refundable would be reasonable.
Can someone post the exact wording that has worked for them recently?
"If the option is not exercised, 75% of the option payment and monthly credits paid by the tenant to the owner shall become the sole property of the owner, plus any accrued costs to clean up."
Related to RTO option payments....what are people suggesting as their target downpayment these days? Can someone post the exact wording that has worked for them recently?
I try to structure the contract so that the tenant/buyer has at least a 10% deposit towards down payment. We have found that 5% simply isn't enough and will often require you to extend the contract. This may require a larger up front "option deposit".
[quote user=JohnSoucie]Hi;
For the refundable option payment issue, until recently it seems, every or at least most RTO operators specified non-refundable option deposits. CMHC is forcing people to add wording to make them "partially" refundable. Is there getting to be a consensus on what is an acceptable wording and refund quantity for this? I'd still prefer 100% non-refundable! But I would guess that despite additional wording about a partial refund in the RTO contract....CMHC could still turn around anytime and say "nice try but it's not enough". So what's a believable number or percentage for CMHC? What's the minimum you can safely get away with?
It is difficult to say for sure what CMHC will require in the future. For now, they require "a reasonable portion" to be made refundable. This leaves much to interpretation but they seem to be trying to find their way in all of this as well. I suggest that 25% refundable would be reasonable.
Can someone post the exact wording that has worked for them recently?
"If the option is not exercised, 75% of the option payment and monthly credits paid by the tenant to the owner shall become the sole property of the owner, plus any accrued costs to clean up."
