Must-Sell Homes: Foreclosures

(December 17, 2013 )

      The first thing to note is that our foreclosure process, also known as the Court Ordered Sale, is much different than that of our American counterparts. Many Canadians hear about the sort of foreclosure bargains available over the past number of years in the United States with individuals picking up homes for 50 cents on the dollar, or buying properties in distressed areas for only a few thousand dollars.

      Vancouver is fortunate to be a part of a very thriving Real Estate market, fueled in large part to foreign investment, immigration (both international and national), and the high desirability of living in this beautiful city. Voted consistently among the top cities in the world to live, it’s no wonder that so many people end up in the Greater Vancouver area and that Surrey is considered one of the fastest growing cities in the country.

      Unfortunately though circumstances can still change for an individual or a family leaving them in a position where they can no longer afford mortgage payments. When this happens, Bank’s apply through the courts to sell the property in order to recuperate their investment and this leads us to the court ordered sale.

      The process is not a particularly complicated one but there are some factors that any buyer needs to take into consideration before going this route. The factors to take into consideration are: inherent risk, uncertainty, non-refundable costs, and an extended closing process.

      Firstly, foreclosure properties are sold without representation or warranty as to the state or condition of the property in an “As Is, Where Is” situation. The Bank cannot make any guarantee about the property having likely never even seen the home nor resided within.

      As such, it is imperative that all prospective buyers of foreclosure properties take proper steps to ensure that they’re well aware and fully satisfied with the property that they are buying as well as understand what it means when they sign off on the Bank’s Schedule ‘A’ document which releases the Bank from many liabilities of the standard contract of purchase and sale.

      Home buyers are advised to seek independent legal advice with regards to the purchase of any foreclosure property. The Schedule ‘A’ is a legal document written by the Bank’s lawyers to protect the Bank, just as a Developer’s contract is written by its lawyers to protect the Developer. It’s important to have your own legal representation when dealing with a legal document, especially during such a significant financial purchase.

      Inspections are a very important aspect of the home buying process, but are exponentially more vital with regard to a foreclosure property. A professional inspector will be able to identify many potential issues and hazards within the house that a prospective buyer needs to be well aware of, however they are not able to see everything in a home such as what’s going on behind the walls and this is where the inherent risk of a foreclosure can come into play.

      Furthermore there is some uncertainty surrounding foreclosures inherent to the nature of the bidding process. Multiple parties are able to bid on the property on the court date, and it’s imperative that home buyers be made aware that there is no guarantee that they will win at court. A prospective buyer can do their due diligence and hire the services of an inspector, lawyer and whoever else they deem necessary only to lose at court to a higher bid. Any deposit monies that form part of the contract are of course released back to the buyer; however you will forfeit any debts incurred by professional services. The exception to this rule is of course the buyer’s Realtor who is paid by the Bank after court approval. 

      Lastly, the home buying process surrounding a foreclosure is a much longer process than that surrounding the purchase of a regularly-listed property. This is the result of the need for approval by the court of the sale, and the length of time required to book a court date once a firm offer is in place. The length added to the process is variable but a prospective buyer should anticipate an additional 4-8 weeks longer than a non-foreclosure purchase.

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