Foreclosures or court ordered sales, are when a bank repossess or take hold of the property because the owner or borrower fails to make the payments according to the terms of mortgage or loan.
Here are 12 things you should know when thinking of buying a foreclosure.
- The Seller (the bank) wants as much money as possible for the foreclosed property. Unlike in the US where the laws protect the banks, when you are buying a foreclosure in BC the courts always will ensure the homeowner is protected and their property is marketed and sold for an amount as close to market value as possible. So while there is always a chance that buying a foreclosure in BC could get you a deal, rarely does a property ever sell less than 20% of market value. Often foreclosures are first listed at higher than market value, and the price is reduced over time.
- Most properties will be listed on the MLS. The banks hire a Realtor to market the property just like any other, in order to get as much interest and possible multiple offers. So find a Realtor like me, and start your search. Your Realtor will know if it is a foreclosure as it will say ‘court ordered sale’ in the Realtor notes.
- Many foreclosures are still occupied by the owner. This often makes properties difficult to view, as typically the owner is not interested in cooperating.
- Foreclosures are sold “AS IS” meaning the Seller is not responsible for the condition of the property, and you agree to buy it in the condition it is in on possession date, not the date you viewed the property.
- Find a property you are interested in and have your Realtor write an offer to submit to the listing agent. Generally you would start with a low offer then negotiations commence, like in any other offer.
- If your offer is subject to financing, inspection etc. You will have a small window of opportunity to get everything in order before removing subjects. If you are satisfied with the home inspection and other conditions you included in your offer have been met, then you remove your subjects and give your deposit. Once you do this then the offer is considered a firm subject fee offer and it goes to the courts for approval.
- When you have a firm deal then the bank will request a court date to approve the sale. Usually takes 2-4 weeks to get a court date. Here is where the catch is; the listing Realtor will continue to market the property and your offer becomes public record, so the Realtor will disclose the price of the accepted offer. If another Buyer is willing to pay more than what you have offered then they can come to the court date and submit an offer.
- Your court day is here!
- No one else has shown up to submit an offer, the judge will then accept your offer and hurray, you own a new piece of property!
- There are other people interested and have submitted offers in sealed envelopes to the listing agent. These Buyers will have taken care of financing, inspections and anything else before the court date, as all other offers submitted must be subject free and include a copy of the deposit check. You will then have an opportunity to increase your original offer if you choose.
- As with most multiple offers usually the highest bid will win, but judge will also consider other factors such as completion dates, as it costs the bank every day that they own the home, and size of deposit.
- The judge will take about one minute to look at all offers, and make a decision. It is important that you and your agent be there during the court proceedings in case there are any initials or changes the judge wants made. The judge will not read out the offers, only disclose who has the best offer. Once the judge has ruled, the decision is final and the Buyer must close on the property.
- You cannot change the name of the Buyer or assign the contract to another party, as the court will issue a court order with the Buyers name on it.
- The property upon completion is transferred with a clear title. A foreclosure will usually have liens and outstanding property taxes and strata fees on title, which are cleared before the property is transferred at the Land Titles Office.
For more information about buying a foreclosed, or any other property don’t hesitate to contact me.