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A lot of Buyers read about the foreclosure crisis in the United States and presume that a similar problem exists here in Canada and that British Columbia foreclosure homes can be picked up for the price of a cup of coffee as is the case in some US areas today. Although foreclosures in British Columbia can be picked up at a discount, the discount is no where near the perceived expectation that most buyers have.
Foreclosures, or as we call them here in British Columbia, Court Ordered Sales always exist whether or not the economy is good or bad. They exist in times of low interest rates and in times of high interest rates. They are triggered by all manner of circumstances ranging from loss of a owner's job to their death.
When a homeowner defaults on their mortgage here in Canada the lendor will commence the process that will result in a Court Ordered Sale.
Foreclosure proceedings must be commenced by a petition, the petition sets out the relief sought and then sets out the factual basis for the relief. Once the petition is served on all parties whose interests may be affected by the foreclosure proceedings. This would mean the registered owners, any co-signers, 2nd mortgage holders etc.
The lendor then requests an Order Nisi (Court Ordered Sale) from the Court , this order when granted commences a time-frame where the owners can payout the mortgage and retain ownership of the real estate in question. This is called the Redemption Period, the Supreme Court of BC has consistently stated that the usual redemption period is six months and the shortening of that period is a matter of sound judicial discretion. During the Redemption period the owner may continue to live in the property and can not be made to leave except in exceptional circumstances which are rare indeed. The property could technically be sold during this period but the foreclosed upon owners could still payout the mortgage and regain control so this is generally not done.
Upon expiry of the Redemption Period the lendor will usually put the property up for sale with a Real Estate company via a Law Firm handling the foreclosure although some smaller lendors handle this process themselves. This is the time when the Real Estate is made available to the Public for court ordered sale.
Foreclosure listings in British Columbia carry some very important cautions that all Buyers need to know and understand. It is very important to have a REALTOR® that understands these differences and isn't learning on the job. A lot of Agents have never been through the foreclosure process and it is important for a Buyer to ask their agent to detail their experience with Court Ordered Sales.
All Court Ordered Sales append a schedule to the standard Contract of Purchase & Sale called the 'Schedule A'. This addendum limits the Buyer's rights, negates some clauses in the standard contract and sets out the terms and conditions under which offers will be received by the lendor. Although there is no standard 'Schedule A' the following is a list of many of the items that will be included.
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Offer 'Subject to Court Approval'
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The amount of time offer must be left open for
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The amount of the Deposit and to whom it is paid, ie. lendor's law firm
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Deposit money non-refundable if the Buyer does not complete the transaction
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The time allowed for Buyer Subject's to be Removed
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The time required for completion
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Buyer must accept that their Accepted Offer is made public
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Buyer must accept that they can be outbid in Court by other Buyers
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No guarantee as to condition on Possession Date
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All appliances and other such chattels are not included
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If occupants do not vacate the property by Possession Date it is the Buyer's problem
This daunting list precludes many from buying Foreclosures in British Columbia and for good reason. You can not make a Subject to Sale offer, your financing must be sound or you risk losing your deposit money if you are unable to complete. If you have sold your home and need to move into this foreclosure property you have no guarantee as to possession day or condition there on. If the occupants are uncooperative the Buyer suffers. Therefore foreclosures are extremely popular with investors and first time buyers who have flexibility with their possession dates.
If your Offer to Purchase is accepted by the lendor the full details are now Public Information and must be disclosed to any interested parties. The lendor will then apply for a Court Date for the Hearing granting the Order Absolute finalizing the sale to the Buyer. At this hearing other interested parties may submit competing bids.
The bidding process in court for British Columbia foreclosure properties is a sealed bid, best offer process. It is not uncommon for a Buyer who has an extremely low offer accepted by the lendor to find themselves in a competitive siutation on the hearing day. The original Buyer may increase their offer and would be advised to do so as other acceptable bids can only be higher then the original Accepted Price. Generally only bids with the same Completion, Possession & Adjustment dates will be acceptable.
The Judge or Master at the hearing is there to protect the interests of the foreclosed upon owners. They make sure that resonable marketing efforts have been made and that the owners are not being taken advantage of. The Judge or Master will open the sealed competing bids (if any) and review them revealing the amounts offered and declaring the successful bidder. It is after this occurs that the Order Absolute is granted which allows the transfer of title to occur on Completion Day.
I can not emphasize enough how important it is to have a foreclosure experienced REALTOR®guide you through this process, the courts can be a cold and daunting place and the hearing lawyer is working for the lendor, not you. I have been to foreclosure court representing the Buyers, the Sellers and myself! I know first hand the good and the bad of buying foreclosure properties.
Let my experience with British Columbia Real Estate foreclosure properties work for you!
GIVE ME FORECLOSURE HOMES! http://bchome-foreclosures.ca/
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