The *Promesse d’Achat* and Financing in Quebec Real Estate

In Quebec, the *promesse d’achat* (offer to purchase) is a crucial document in the real estate transaction process. It’s a legally binding agreement that outlines the terms and conditions under which a buyer is willing to purchase a property. One of the most important clauses within this document is the financing condition.

The financing condition, often referred to as the mortgage contingency, protects the buyer by allowing them to withdraw from the purchase if they are unable to secure the necessary financing from a lending institution. This safeguard is vital because most buyers rely on a mortgage to fund a significant portion of the property’s price.

When drafting a *promesse d’achat*, the buyer must specify the details of the financing they require. This includes:

• The amount of the mortgage: This is the loan amount the buyer needs to borrow.
• The interest rate: While not always possible to specify precisely, the buyer should include a maximum acceptable interest rate. This protects them from being locked into an unfavorable rate.
• The amortization period: This refers to the length of time the buyer has to repay the mortgage (e.g., 25 years).
• The deadline for obtaining financing: This is a critical date. The buyer must secure mortgage approval by this date, or they can invoke the financing condition.

Once the *promesse d’achat* is accepted by the seller, the buyer begins the process of obtaining mortgage approval. This typically involves providing financial documentation (income statements, tax returns, bank statements) to a lending institution (bank, credit union, mortgage broker). The lender will then assess the buyer’s creditworthiness and the property’s value to determine if they are willing to grant the mortgage.

If the buyer is unable to secure financing by the specified deadline, they must notify the seller in writing that they are invoking the financing condition. This notification must be accompanied by proof of their efforts to obtain financing, such as a rejection letter from a lending institution. Upon receiving this notification, the *promesse d’achat* becomes null and void, and the buyer is entitled to a full refund of their deposit.

However, it’s important to understand that the buyer must make a genuine effort to obtain financing. They cannot simply decide they no longer want to buy the property and use the financing condition as an easy out. If the seller believes the buyer did not act in good faith, they may take legal action.

The financing condition is a double-edged sword. While it protects the buyer, it also introduces uncertainty for the seller. Therefore, buyers should obtain pre-approval for a mortgage before making an offer to strengthen their *promesse d’achat* and demonstrate their serious intent. Pre-approval provides a higher degree of confidence that the buyer will be able to secure financing, making the offer more attractive to the seller.

In conclusion, the financing condition within the *promesse d’achat* is a crucial element of the Quebec real estate process. It provides buyers with necessary protection while also requiring them to act in good faith throughout the financing process. Understanding the nuances of this clause is essential for both buyers and sellers to navigate the transaction successfully.