What is the deal with Foreclosures?

One option to look at when considering buying real estate is a foreclosed property. These properties can present a great opportunity, and experienced real estate investors like them.

There are however a few issues that you should be aware of when considering investing in a foreclosed property. For one, your offer must first be accepted by the bank that holds the mortgage. Then the bank’s lawyers will get a date to present your offer in Court. At this point your offer becomes part of the public Court filing, and other parties will be able to ascertain what your offer is. The judge will look at the interests of all parties (home owners, bank) involved and either approve your offer or not. And to make things a bit more interesting, your offer might not be the only one, there may be more parties interested in the property. So prepare your best offer to give yourself a good chance of obtaining the property. And even after having done all that, the Court might refuse all bids if they are deemed too low.

Make sure that you have all your financing in place prior to going to Court! Unlike regular offers, there can be no subjects. If you want the property to undergo a professional home inspection, you have to do so before the lender’s lawyers seek a date to submit your offer for Court approval. In other words, you have to do all your due diligence with no guarantee that you will actually end up owning the property, unlike regular real estate transactions where maintenance issues can become part of the negotiations.

Another thing to keep in mind is there is no Property Disclosure Statement, you buy the property “as is where is”, there is no recourse after the fact when you find something wrong with the property. For instance, it is possible that the kitchen appliances have been taken out of the home after you did a home inspection. Nothing you can do about that once you own it. The principle of buyer beware (Caveat Emptor) definitely comes into play!

If after all this you end up being the successful bidder it is time to talk to your lawyer again, as there is no regular transfer of title in the Land Title Office. Instead the Order Approving Sale is reviewed and used by the Land Title Office. So it is important to get all your personal information correct on the documents filed with the Court.

Finally possession of your new property is not guaranteed, as there might be a tenant on the premises. Once again you might have to use Court in order to force these people out of your home, but such proceedings will take time.

And that is the last piece of advise I can give you, dealing with foreclosed properties is a time consuming affair. Be prepared to spend months on getting the deal done.

Blog Archives