Humber/Ontario Real Estate Course 2 Exam Practice

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What should Salesperson Chou include when preparing an offer with an existing, assumable first mortgage and a seller take-back mortgage?

  1. A prepayment clause for the first mortgage.

  2. A renewal provision, so that the first mortgage can be renewed without disrupting the second mortgage.

  3. A postponement clause that pertains to the seller take back mortgage.

  4. A postponement clause that pertains to the first mortgage.

  5. Both a postponement clause and a prepayment clause that pertain to the existing first mortgage.

  6. A demand clause related to the seller take-back mortgage.

The correct answer is: A postponement clause that pertains to the seller take back mortgage.

When preparing an offer with an existing, assumable first mortgage and a seller take-back mortgage, Salesperson Chou should include a postponement clause that pertains to the seller take-back mortgage. A postponement clause for the seller take-back mortgage would ensure that in the event of default or foreclosure, the seller take-back mortgage would be subordinated to the existing first mortgage, allowing the first mortgage to take priority in the repayment process. This protects the interests of the lender holding the first mortgage and provides clarity on the priority of debts in case of default. The other options are not necessary in this scenario: - A prepayment clause for the first mortgage is not relevant because it does not pertain to the situation of having two mortgages with different priorities. - A renewal provision for the first mortgage is not needed for the same reason as the prepayment clause. - A postponement clause for the first mortgage is not required as the focus should be on subordinating the seller take-back mortgage. - Including both a postponement clause and a prepayment clause for the existing first mortgage is not necessary, as the key consideration is ensuring the priority of the two mortgages. - A demand clause related to the seller take-back mortgage is not as important as a postponement clause in this context.

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