Court Ordered Sale Process in Victoria, BC

Court ordered sales are often a misunderstood topic for home buyers in BC.  Watch enough late night TV and you get the idea that there's money in foreclosures, where you can get a million dollar home for just pennies on the dollar!  Everyone wants a deal.  There's nothing wrong with that, but if you don't understand the process you can be tied up for weeks while the deal that makes the most sense for you walks by.

Here's how the process works.  You find a property you want to buy, you make an offer.  The offer is accompanied by a schedule "A" that is provided by the entity that is in control of the sale.  This can be a bank, another mortgage holder, a strata corporation or any other  person or company that has obtained the court order for the sale of the property.  The schedule "A" modifies the standard contract of purchase and sale.  These modifications will typically include an "as is - where is" clause, a clause that allows the debtor to redeem the mortgage and nullify any contract prior to court approval and a condition for the seller that makes the contract subject to the approval of the court. The schedule "A" can have all sorts of things in it so be sure to read and understand it's contents!

So lets say you've put in you offer on a court ordered sale in Victoria.  It's been accepted with the schedule "A", you do your due diligence and remove any conditions that you may have had in the offer.  Now the fun starts.  Once the seller is in possession of an unconditional offer on a buyer's part, they make application to the court for a hearing seeking the court's approval of the sale.  Why do they need the court's approval you may wonder?  To protect the actual owner.  You see if someone owes $200k on a $300k condo, a bank can't force a sale for $200k to get their debt paid off if the mortgage payments have stopped.  The bank must sell at market value.  Appraisals are obtained and provide a guideline for what the court will find to be a reasonable offer for the property.  So there goes the pennies on the dollar hope, as a court will never approve the sale.  

Back to the fun.  Now you wait for the hearing.  If you're lucky it will be in a couple of weeks or so.  If you're unlucky it could be a few months.  I had one that took 3 months to get to the hearing.  Remember, your offer is unconditional and you have started a process.  You can't retract your offer, it's too late for that.  So if during that time something else comes along that fits, you can't do anything about it.  Unless you want to buy more than one place.  Have I mentioned my number is (250) 858-5575 direct :)

OK, so you get to the hearing.  Guess what, there are other people there with offers, and they know what your offer is worth.  What!?  That's right.  The application for the hearing is accompanied by the offer that you wrote.  As such it becomes a court document and consequently, a public document.  At the hearing the court will ask if there are any other offers to be presented, at which point anyone can put forward an offer for the court's consideration.  You can change the value of your offer if you so wish if the situation has become a multiple offer situation.  Everyone puts their offers in envelopes, they are handed to the judge, (or master - similar but paid less).  The one with the highest number is picked and the winner named in court.  Sometimes.  

What!?  Yes, I said sometimes.  Court is a funny place and sometimes decisions are funny.  Sometimes the offer picked is the first one written if they match the highest offer given.  I have seen this first hand.  Could it be appealed?  Sure, if you have a few months and 10K to spend on a lawyer.  We did go through an appeal on another case where the highest offer wasn't picked.  The buyers working with our company got the original order overturned and then got to go through the whole process again several months later.  They got the house, but the whole process took more than 6 months and cost a whole lot extra in legal fees.

So that's the process.  It takes a long time, you're tied up the whole way and you may end up without the property as you get outbid in the end.  I know that I advise my buyers not to be the first in to trigger the hearing, but rather show up at the hearing and try to gt it that way - at least that way their not tied to the property through the whole process.  You also aren't going to get a screaming good deal as the court won't approve a below market offer.  If you have any questions about buying a court ordered sale in Victoria, give me a call.