Even though rare, foreclosure properties are always in demand. Afterall, who wouldn’t want to purchase a house at a fraction of the cost, especially in a seller’s market like GTA. In Canada, you can purchase a foreclosure property using either of the two methods – judicial sale or power of sale. In a judicial sale in Ontario, the lender appeals or petitions the court to sell the property that has been defaulted. On the other hand, a power of sale doesn’t need any petitions to approve the sale.
What should you expect when you find a foreclosure property?
Buying a foreclosure property is different from a regular property in GTA. There are so many things that could go wrong like exterior damage, squatters not wanting to leave the house, or the homeowner trying to take possession after they were forced to leave.
Foreclosure properties are sold as-is
The bank or mortgage lender owns the house. They haven’t lived in the house, so they aren’t aware of any problems. It could be something as small as a leaky sink or big as rotten floors. When a house is marked as-is, you also need to get a mortgage from a non-traditional lender, which can cost you thousands of dollars extra. Getting a title insurance policy will also be difficult, which means you’ll likely pay higher closing costs and higher chances of title fraud.
The agent and bank have fiduciary duties
The bank cannot sell the property for lower than the buying price. The bank is only entitled to the money that is owed and the remaining has to go to the homeowner. If an agent sells the property at a lower cost, they can face legal action from the homeowner.
Are there any perks of buying a foreclosed property?
When a foreclosed property is listed on the market, it isn’t priced as one of those American home renovation TV shows. As a real estate agent in Brampton, I have seen two kinds of foreclosure properties. A normal-sized house on a popular street at a slightly lower cost or a massive estate away from the city on a decently-sized plot at a lower cost.
Think of a foreclosed property as an investment. Fix it up and sell the house on MLS for a higher price. The amount of money you make depends on the current market, location of the property, and size of the house. Bigger houses take longer compared to average-sized homes.
Another perk of a foreclosed property is that the mortgage lender will let go of the leins and payment backlogs because they want to sell the house quickly. If you can make a cash offer, they’ll likely choose you over someone who wants to go through a mortgage.
Is a foreclosure property right for me?
Before you choose to go ahead with a foreclosure property, ask yourself these questions:
1. Do you have somewhere else to live until the move-in date?
2. Do you have quotes on how much the renovation will cost you?
3. Are your closing and renovation timelines flexible?
4. Are you financially stable to pay off penalties or fees you find out later?
While there are benefits to buying a foreclosed property, as a buyer you should research if it’s good for you, have a sustainable cash flow, and plan out the process at the very beginning.