It’s no secret that foreclosures have rocked the American real estate market over the past five years, but what about the Canadian real estate scene? While our major housing markets have faired better than that of our neighbor, there are still many foreclosed properties available across the country. First time home buyers and investors alike are jumping at the chance to take advantage of this surge of inventory thanks to affordable investment opportunities. But you can’t reap the rewards until your experience the risks. If you’re considering bidding on a foreclosed home it is important that you first understand the pros and cons of purchasing a property that’s in financial limbo.
Foreclosure in Canada
The United States and Canada have somewhat similar foreclosure procedures, however there are a number of slight differences that will impact your purchase. In Canada, there are two different procedures that dictate the way foreclosures are processed: Power of Sale and Judicial Sale.
Power of Sale is an arrangement in which the owner is allowed to sell the property in order to make back the money that is owed to the lender. This method is done outside of the courts. Judicial Sale refers to the procedure where the lender must petition the court for permission to sell the defaulted property. In this case, the lender sells the house in order to recover the money that is owed.
The chosen method differs based on your province: British Columbia, Alberta, Saskatchewan, Manitoba and Quebec all follow the Judicial Sale procedure. Nova Scotia also abides by this procedure, however it is referred to as Mortgage Foreclosure. The provinces of Newfoundland, Ontario, New Brunswick and Prince Edward Island follow the Power of Sale procedure.
Be Careful When You Buy
It’s important that you carefully inspect the house prior to submitting an offer for purchase. In order for a home to go into foreclosure, the owner must be having problems making their mortgage payments. Normally, this is due to some kind of financial hardship. It goes without saying that these financial struggles have likely affected other responsibilities, including regular maintenance to the home. As such, the home that you’re hoping to purchase could be in disrepair or need renovations in order to make it habitable. While you might receive a great deal on the purchase price, there could be the potential for many costly repairs.
Another factor to consider is the property’s location. If the neighborhood is experiencing a downward trend, you might have a hard time recouping your investment when it comes time to sell.
Seek Help From a Professional
Purchasing a home that is in foreclosure can be tricky. The purchase process can be long and drawn out, so patience is a must. A professional real estate agent and mortgage broker will help prepare you for the challenges of negotiating a purchase price. When the process of buying a foreclosed property is handled correctly, the opportunities are endless.