Does buying foreclosed properties pay in Canada?
In the US properties can sell for rock-bottom prices meaning you can buy homes for insanley good prices, flip them and make a tone of money. Amazing right? Who hasn't watch one of those flipper shows on TV and watched people make huges amounts of money off of foreclosed properties after they flip them and said I want to do that. What people in Canada don't usually know is that there are a whole different set of rules and laws that prevent those steep discounts.
First off let's talk about what a foreclosure is. A foreclosure is the worst-case scenario in home ownership. Having a mortgage on a home is essentially living in a home that is owned by the bank and if you fail to make your payments the lender has the right to gain ownership of the property and sell it to clear the debt.
In the US banks sell foreclosure homes to get back the outstanding loan on the property. Foreclosure rules change from state to state but they are often sold at auction to the highest bidder and usually only for as much as is outstanding on the loan. The problem with this is the amount is usually way below fair market value for the home leaving the home owner out to dry. The great news is that anyone purchasing these homes are getting amazing deals.
In Canada however, these types deals do not happen. Lenders are required to sell all foreclosed properties for "fair market value", and must follow strict procedures to prove they are selling them at a fair and reasonable price.
Another thing to note is that a For Sale sign is not always a sure thing. During most foreclosures, the court gives the borrower time to repay the loan in full and reclaim the home. This period is usually about six months long and sometimes the home will be listed during this time. What this means for a buyer is that if the homeowner can come up with the cash and pay off their debt, they will get their home back leaving the buyer with nothing.
If a good deal is what you are looking for, it's best to talk to an agent and go after properties that have been on the market for awhile. These sellers will have more leeway on price. There are also times when great deals pop up around the city, agents often keep a list of hot deals but keep in mind those deals won't last long so you will need to be quick in making an offer!