Cross-posted from r/realEstateCanada. Is there any catch on this deal?
For background, I am in the market for a house. The town I am in has a booming population and has new housing developments. I am able to save enough 20% down payment for a $300,000 house – so $60,000 liquid cash. I have went to showings of a couple older houses but did not really liked them so I looked into new builds.
There was a new 4br 2bath semi-detached house in the process of being built – asking price was $291,000 (GST included). This is through a private seller that has hired a general contractor to build the duplex. I eventually liked this new build and have signed a contract with the seller with a $5,000 reservation fee (completion date approximately for March 2022).
Now here’s the catch, seller is asking for approximately the rest of my 20% down payment ($55,000) as a promissory note. This is the letter drafted by the seller’s lawyer. Per this note, I get a 10% rate of return that I can basically use as a credit for the purchase price of the house (in addition to the reservation fee). Is there any catch on this? Anyone have done this with a seller when they were buying for a new build? Should I pursue this?
I’ll be calling a real estate tomorrow and inquire about this but maybe the internet has some advice too. This $55,000 will basically sit on my EQ Bank savings account until the house is built so I don’t mind getting an extra $1-$2,000 from the interest as a credit to the purchase price. I already have an emergency fund set aside, as well as a mortgage pre-approval.
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