Certain precautions are required for a cash purchase
Sometimes, the buyer of an immovable does not take out a mortgage loan, preferring to pay cash for his purchase. Whether you are a buyer or seller, your real estate broker will take certain measures to ensure a smooth transaction and protect the parties.
You are the seller? The broker should advise you to ask for a reasonable deposit and to draft a counter-proposal to this effect if the deposit received is insufficient.
You are the buyer? The broker should advise you to make a reasonable deposit when presenting a promise to purchase, to assure the seller of your good faith. This will demonstrate to the seller that you are really in earnest, because a promise to purchase in cash without a reasonable deposit exposes the seller to serious risks.
Documenting the availability of funds
When a transaction is financed by a mortgage loan, the availability of funds is confirmed by the financial institution. But in a cash transaction, a financial institution will not – or at least not easily – provide a bank guarantee or confirmation. You are therefore advised to prepare a well-documented file on the availability of funds with your real estate broker. For your protection, the broker shall include a clause requiring the buyer to provide the seller with proof showing the availability of funds. Where necessary, the broker will have to use clause F2.1 of the mandatory form Annex F – Financing.
Once this is successfully done, the real estate broker will recommend to his clients to sign the deed of sale as quickly as possible, especially to make sure that the seller, if he needs it, gets the money before making other commitments.
Funds conditional upon the sale of another immovable
If the money used to purchase a property must come from the sale of an immovable that is not yet sold, the seller should, with the help of his broker, ask the buyer to obtain a mortgage loan. When fulfilling clause R 2.1 of the Annex R form entitled “Sale of the buyer’s immovable”, the buyer must provide proof of the mortgage lender's unconditional undertaking.
If the sum used to purchase a property comes from an immovable that is the subject of an already accepted promise to purchase, the buyer will have to check the second box of clause F2.1 with the help of his broker. According to this clause, the buyer must show the seller that he accepted a promise to purchase on his immovable. This can be through a written declaration from the buyer, in which he confirms that his promise to purchase was accepted and that the purchase price and all conditions are fulfilled, except the signing of the deed of sale at the notary. This written declaration shall be forwarded to the original seller.
The broker will be of great help in managing receipt or transmission of these documents, the timelines provided or to be provided in clauses, and in performing the cancellation mechanisms of the promise to purchase, where appropriate.
Confidential information line
If you believe you have witnessed a questionable real estate transaction, the OACIQ provides you with a fully confidential information line: 1-866-533-6363 or by visiting https://intranet.e-signalement.com