Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials HomePersonal FinanceReal EstateCommercial Real EstateMortgagesGarry Marr: Some homeowners are turning to this commercial property strategy to get reluctant buyers to take the plungeFinancing the sale through a vendor take-back mortgage can allow the seller to step up when other lenders hesitateLast updated 47 minutes ago You can save this article by registering for free here. Or sign-in if you have an account.Vendor take back mortgages are not the norm, but are an alternative in a slow housing market where financing can be hard to come by. Photo by Indysystem/Getty ImagesWe independently select everything we recommend. Buying through us may earn us a commission, which supports our work.In a housing market where many buyers continue to sit on the sidelines, can home owners take a page out of the commercial property playbook to get deals over the line?Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorThe vendor take-back mortgage (VTB) is a financing deal in which the seller acts as the lender and takes payments from the buyer over a specified period of time.The loan could cover the full amount of the sale price, but more commonly it is used as second mortgage to get a buyer over the finish line.The unusual transaction is not taking over the market, but Daniel Foch, chief real estate officer at Valery.ca, said he is seeing an increasing number of VTB deals to get transactions done.SUBSCRIBER EXCLUSIVE: FP West: Energy Insider brings you behind the oilpatch’s closed doors with exclusive insights from insiders every Wednesday morning.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of FP West: Energy Insider will soon be in your inbox.We encountered an issue signing you up. Please try again“If you go back to the (housing downturn in the) 1990s, what happened was lenders were the ones that were obstructing deals,” said Foch. “That is kind of what is happening right now.”When there is that type of credit crunch, Foch said the onus is on buyers and sellers to try to make deals work.“This was super common in the 1990s because you had the trust companies going under and the banks trying to absorb them, and the only deals getting done were super triple-A deals,” said Foch.One reason sellers agree to a take-back loan is to secure the price they want, even though it likely carries more risk and is not as clean as simply being clear of the property after a deal closes.Ron Butler, a Toronto mortgage broker, said one major obstacle is that banks are reluctant to accept them, even if the seller is second in line in the event of a default.“Banks have gotten out of the business of allowing second mortgages,” said Butler, adding they will “never go behind the vendor” on such a deal.So why would you want to do a VTB? Butler says it happens in the commercial sector when there is a need to spur interest in a property.“The guy selling says, if you give me $200,000 for this $800,000 property I had no (purchaser) interest in, I will give you a reasonable $600,000 mortgage for three years,” said Butler. “It’s a system to allow for a higher-price sale.”If the buyer eventually defaults? The logic is that the seller would have received two years of interest payments, and by the time they retake possession of the property, the price has hopefully risen.This logic might make some sense to a beleaguered condo seller who can’t find a buyer, but Butler estimates that only about 1 in 800 residential sales involves the vendor taking back some form of mortgage to close the deal.“I wouldn’t want to be the buyer because in every vendor take-back I have ever seen, the seller got a higher price than they normally would have otherwise in a competitive market,” said Butler, adding that the buyer making the deal is often just making a mistake most of the time on price.As a seller, it’s clear you need to be more sophisticated and consider the credit of the person you are loaning money to and that is likely going to create more legal headaches and costs. All of which is why a VTB is not for everyone.Mark Goodman, a principal broker at Vancouver-based Goodman Commercial Inc., said vendor take-backs can bridge the gap between buyers and sellers, but said he still doesn’t see them happen much.“We try to bring it up, but either the buyer or seller doesn’t want to do it. In theory, it is an elegant way to solve a problem when lending has tightened up,” he said. “In the last 200 deals, we have not done one or an assumed mortgage.”Sellers like the deals because they can still get their price, they get some interest from the mortgage and their capital gains are spread out over a long period since they are not realizing the full price due to the mortgage at the time of sale.Goodman, who sells land and multifamily buildings, said buyers who think they can turn around a property but can’t get a loan from a bank that focuses on current income can be motivated to do a deal.“But that type of buyer is gone now,” he said, adding that restrictions on the rental market just have people shying away from any purchase.Phil Soper, chief executive of Royal LePage, one of the country’s largest brokerages, said he sees an increase in alternative financing arrangements.His company launched a new business line in some cheaper secondary markets, including Winnipeg and Edmonton, called Requity Homes, a rent-to-own business.“It tries to do the same thing essentially (as a VTB). Take someone who is self-employed and doesn’t have traditional T4 income or a first-time home buyer, and allow them to get into ownership over time,” said Soper.The idea is that a certain percentage of the rental payment goes to equity, and eventually, there is enough equity in the home for a traditional mortgage.Soper said ultimately, sellers are really mostly repositioning their property either through a price or a cheaper interest rate, but it’s all money at the end of the day.“A realtor can say one way to make your condo stand out is to offer below-market financing,” he said, noting it’s not a lot different than a car company offering financing deals. “You are moving the purchase price of the car onto the financing.”If none of this sounds like the ideal way to sell your house that has been sitting on the market too long, you are probably right. But the problem is, this isn’t an ideal time to sell your house. 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