Thursday's Ask The Broker Foreclosures

With the change in the economy and employment we've unfortunately have seen an increase in the number of foreclosed properties on the market.  While foreclosures are not new, the increase in the number of foreclosed homes has made them more and more common place.  Due to this increase we've had a number of questions pertaining to foreclosures and the process such as:

  • Can I still negotiate price?
  • Can I get an home inspection?
  • Who looks after the property?
  • What can I expect on closing?

With respect to price and inspecting a property the answer is a definitive "YES". 

There is always an opportunity to inspect the property and negotiate price and terms of the offer to purchase contract.  The owner is a foreclosed property is either the bank or the mortgage insurance company CMHC or Genworth.  While they will not offer warranties or make representations tot he property you can negotiate other aspects of the offer to purchase such as price and of course inspect the property prior to proceeding.

Who looks after the property?

The owner of the property is still responsible for the property.  So if the bank owns the house now, then yes they are responsible for the maintenance and upkeep as required by the area or municipality.  To do this they typically hire a property management company to assist them with the properties and to "winterize the property".  The water is turned off, sometimes utilities are turned off and they make arrangements to mow the lawn to meet the minimum standard for the municipality.

What can I expect on closing?

The best answer is you never know.  The bank will cross out on the offer to purchase phrases such as:

6.1 The Seller represents and warrants to the Buyer that:

  • (b) the Attached Goods and included Unattached Goods are in normal working order and are free and clear of all encumbrances;


  • (d) the current use of the Land and Buildings complies with the existing municipal land use bylaw;
  • (e) the Buildings and other improvements on the Land are not placed partly or wholly on any easement or utility right-of-way and are entirely on the Land and do not encroach on neighbouring lands, except where an encroachment agreement is registered on title, or in the case of an encroachment into municipal lands or a right-of-way, the municipality has endorsed encroachment approval directly on the real property report;
  • (f) the location of Buildings and other improvements on the Land complies with all relevant municipal bylaws, regulations or relaxations granted by the appropriate municipality prior to the Completion Day, or the Buildings and other improvements on the Land are “non-conforming buildings” as that term is defined in the Municipal Government Act (Alberta);
  • (g) the current use of the Land and Buildings and the location of the Buildings and other improvements on the Land comply with any restrictive covenant on title;
  • (h) except as otherwise disclosed, the Seller is not aware of any defects that are not visible and that may render the Property dangerous or potentially dangerous to occupants or unfit for habitation.
  • 6.2 All of the warranties contained in this Contract and any attached Schedules are made as of and will be true at the Completion Day, unless otherwise agreed in writing.

While often the house you saw, and made an offer on will be exactly as you saw it, it is possible that the home can be further damaged or even the occupancy changed.  It is best to consult with your re4al estate agent and lawyer about what can happen on possession day and whether or not that day is actually a moving target.  You may not be able to move in on closing day if the previous owner hasn't moved out.  If that is the case then you will need to involve your lawyer and a Sheriff to remove them.

While foreclosures can appear to be a great deal financially they are not without risks.  Those risks could involve great expense and that deal is no longer as great as you thought.  Remember the phrase "Buyer Beware" it is always true and you should act accordingly.

Make sure that you read the clauses that are being stricken from the contract as they could impact your financing, the ability to obtain title insurance or the extent of insurance coverage.

Lastly, court ordered sales are similar but the process and procedures are vastly different.  You should have a detailed consultation with your real estate agent on the proceedings and the possible outcomes when buying a property that is a "Court Ordered Sale".


The Broker,

Patrick Galesloot.


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