Buying a foreclosure property is a tempting proposition – one that offers the possibility of stepping into the pricey real estate market at a lower cost. However, buying a foreclosure property throws up some unique challenges and it is pertinent for every buyer to understand the risks as well as benefits associated with the process to make an educated choice – after all, it could be one of your major financial investments.
Here’s what you need to know before venturing into the world of foreclosure properties in Vancouver, BC:
- Understand the foreclosure process and risks
- Understanding the costs involved
- Take expert help
The foreclosure process in Canada mainly occurs in two ways – judicial sale or power of sale. In the former, the mortgaged property is sold under the supervision of the court after the lender initiates proceedings against the borrower in a court of law. In the latter, the mortgage holder sells the property without any involvement of the court, making the process of foreclosure much faster. Lets see the process of sales:
A foreclosure property is listed with a Realtor like any other property. When a Realtor receives an offer on a foreclosure property, it is passed on to the lender’s representative to consider. What a buyer needs to understand is that even though the negotiation for the deal is happening between the buyer and the vendor (the lender, in this case), even after the deal is agreed upon, in the case of a judicial sale, the vendor will take the offer to the court where others in the courtroom may be given a chance to bid before the court finalises the agreement.
Further, all offers on foreclosure properties must include a Schedule that limits the lender’s liability to bringing the offer before the courtroom for consideration; meaning, as you wait, there is a possibility of another offer being accepted by the court on the property.
You must also remember that foreclosure properties are sold on ‘as is where is’ basis, and the lender is not responsible for the condition in which you receive the property, even if it is different from what you saw last. In short, you accept the property in the exact condition as it stands on the closing date of the sale, without any representation or warranties.
Getting insurance for foreclosed properties is another challenge, as most insurance companies will not give insurance on a foreclosed property until it is transferred in your name. Tenants can also pose a problem, as unless the tenants are made party to the foreclosure proceedings, the court cannot ask them to vacate. Further, insurance coverage for foreclosure properties may exclude damage caused by tenant.
Foreclosure properties often come with a lower price tag that makes them quite attractive to buyers. However, unless you are in the business of flipping houses, renovating or simply fixing up the house could cost you a pretty penny and stretch your budget to a great extent. Especially because the property is bought on ‘as is where is’ basis without any disclosures, you never know what you are getting into unless you have viewed the property at least once and had it surveyed by an expert before putting an offer on it.
The location of a property plays an important role in determining its value. The same applies for a foreclosure property as well. Apart from looking at the historical performance of the area in terms of capital appreciation, look for family friendly amenities in the vicinity such as schools, parks and public transportation, especially if you have children or intend to rent out the property in the future. Additionally, look for a safe neighbourhood and don’t buy in areas with too many foreclosure properties in the vicinity that could drive down the value of your house. Some upcoming areas to buy a foreclosed property in Vancouver, BC include New Westminster, Burnaby and Coquitlam.
Buying a foreclosure property is different from a regular property purchase, and it always helps to seek guidance from an expert to save on time and avoid ending up with a bad deal on your hands. Updating your knowledge through latest blogs, industry reports and knowledge resources compiled by experts will help you understand the process better. Online and app based listing services such as Foreclosuresearch.ca not only feature latest foreclosures in Vancouver, BC, and the rest of Canada, but also bring you regular industry information to brush up your knowledge.