When searching for the ideal piece of real estate to buy, properties in foreclosure can be an interesting place to look. Are you an investor looking for a new rental property? Or maybe you’re a buyer looking for a dream home—or at least a property you can turn into your dream home. By considering foreclosures, you open up more options for yourself. Read or listen on to learn more about how timing a foreclosure deal can be tricky. Download the audio file HERE.
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Issues with Buying a Foreclosed Property In Canada (and jurisdictions with similar laws), foreclosure is when someone defaults on their mortgage payments, and the lender takes control of the property. Lenders will try to sell the property to recuperate the mortgage money. Foreclosures are regulated differently by each Canadian province. These comments are on Alberta foreclosures, so make sure you check to see how it actually works in the area where you are buying.
Here in Alberta, a Judicial Foreclosure is most common, which is when the Court gets involved with selling the property. So, there are foreclosure properties to be had, and they might fit your requirements. Sometimes you are searching the bargain bin for badly treated properties without many redeeming qualities. Sometimes a foreclosure property is in great shape; the seller just can’t make the payments. But, here’s the thing. Generally, the buying public has a rosy view of foreclosure purchases. Somehow, they think that foreclosures are a bargain or will be easier to buy. The reality is there is lots of demand for properties in foreclosure and prices are competitive, so it’s not as easy as it might seem. Judicial Foreclosures add another layer of complication. Buyers can’t just roll up and convince the judge to sell for a sack of magic beans! Sometimes the issue isn’t winning the foreclosure competition; it’s actually closing the deal once the Court approves your offer to purchase.
Example of Timing in an Alberta Foreclosure Purchase In a very recent foreclosure, my client fought hard, outbid three other buyers, and won the bid for what they thought would be an amazing property. The house had good bones, was in reasonably good shape, and was suitable for a secondary suite. The presiding Master in Chambers approved my clients unconditional offer on February 2 for a March 8 closing. (A Master is effectively a Judge that deals with repetitive, relatively non-controversial Court matters.) Good timing, wouldn’t you think? About five weeks to close. Financing all lined up, let’s just close this deal! Here’s what happened. The Master’s February 2 approval, as usual, took the form of a Court Order. To be effective, that is to be the ‘condition removal’ that every lender needs, the Order has to be signed by the Master and filed at the courthouse. Because of COVID there is an ultra-slow down at the courthouse. It took until March 4 for the Order to be filed and returned to the foreclosing lawyer. The filed Order is required to make the deal unconditional. ‘Unconditional’ is an important point.