Many buyers are not familiar with the foreclosure procedure and therefore feel uncomfortable to put in an offer on a foreclosure listing. I hope the following will provide a better insight in the judicial procedure and why it is important to deal with an experienced realtor who understands foreclosures.
- 1. The whole process starts with a Demand Letter from the lender accelerating the loan and giving the borrower a short period of time to pay out the mortgage or else facing foreclosure.
- 2. After, a Petition is filed in the BC Supreme Court Registry where the petitioner is the lender and the borrower and other lower in priority ranked lenders are the respondents.
- 3. Order Nisi ordered; this is the first order of the Court that fixes the time for redemption. Redemption period is usually 6 months, this is the time period given to the borrower to redeem the mortgage with accrued interest charges.
- 4. Second order, the Conduct of Sale by the Master (called Judge in foreclosure procedures) will be ordered. Usually after redemption period expires. The lender act now in the role of the Vendor and can list the property for sale with a realtor.
The assigned listing realtor has to provide to the lender’s lawyer: a Comparable Market Analysis report (CMA), suggested list price and what the property likely will sell for. The lender’s lawyer will provide amended listing documents, guidelines for listing and the Schedule A.
The Schedule A is very important and will be part of the contract of purchase and sale and therefore the offer. It amends or null and void certain clauses in the Contract of Purchase and Sale form. For example, it always states that buyer will obtain the property “as is where is”. Make sure you deal with a realtor who understands and review with you this Schedule A. Once an offer has been accepted the listing realtor needs to prepare a marketing report that will be used as affidavit in Court. Once the realtor receives an offer, the listing realtor has to provide guidelines of the offer if available and the Schedule A to the Selling realtor, also called the buyers agent. Important is that the buyers agent provide the full legal name on the contract.
Once the offer is accepted and all subjects are removed there will always be one subject left in contract: “Subject to Court Approval”
This subject removal will trigger a court date, typically within 10-21 days after removal of all conditions. The Buyers agent should always contact the listing agent a day before the court date to see if there is a possibility of competing offers in Court and should write a back up offer.
The accepted purchase price is public, so any potential buyer can either call the realtor and if the realtor doesn’t want to disclose, the buyer can go to court and find out what the purchase price is.
Any party can present an offer to the court and they will give the offer in a sealed envelope to the listing agent. Please note, all these competing offers should be subject free other than “subject to Court Approval”.
Procedure In Kelowna Court:
Vendors Lawyer presents the offer to the Master and the Master asks if any party would like to submit an offer.
- 1. The Master will approve the sale based on considerations such as: appropriate marketing efforts have been taken place by the realtor (aforementioned affidavit from the listing agent), there is a substantial deposit either by draft or certified check, and the purchase is above or at appraised value. If not, it is still at the discretion of the Master to approve the sale.
- 2. In the event that there are competing offers in Court, the Master asks the Vendors Lawyer if he or she has received all offers in sealed envelope and besides the considerations mentioned above, the Master will accept the highest offer. Sometimes the difference could be as little as $500.00. It is important to work with an experienced realtor to work out an offer strategy.
In some cases the Master order to have all parties leave the Courtroom and resubmit all final offers. At the end, it is at the Master’s discretion what offer he or she will approve.
Important: always deal with a realtor who has experience with foreclosures. Rom would be happy to help you when you are thinking of buying a foreclosure property.
Phone: 250.317.6405 or Email: Rom@RomRealty.com